One day when it all adds up - or it doesn't

2004: A bit of cosmic fine-tuning gives February a 29th day, the year a 366th and some workers an extra paycheck.

February 28, 2004|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

What difference does a day make?

Tomorrow - Feb. 29, which comes only once every four years - people have a bonus 24 hours in which to shop, to work and to earn interest, weaving a tangled web of upsides and hidden downsides.

Leap year will likely send an extra $20 million in sales and personal income tax into Maryland's coffers, though what state agencies will have to spend is anyone's guess. Baltimore County government alone calculates the bill for a 366th day at $2.6 million.

If it's a typical day, the nation's gross domestic product will rise by $30 billion. The public debt will swell by $2 billion. Income earned by individuals and corporations will produce nearly $3 billion in federal taxes.

And because this single day is partly responsible for the 53rd Friday that will bring 2004 to a close, many workers will end up getting - joy of joys - an extra paycheck this year. (Some employers have massaged the payroll so they're not actually handing out more money, however.)

"One day turns into an extra week," joked John A. Challenger, chief executive officer of Challenger, Gray & Christmas Inc., a global outplacement firm.

Challenger figures companies' numbers will look better this month than they did last February, to the benefit of stock prices - even though the reason could simply be 3.5 percent more hours for production and sales.

"It can make a difference psychologically," added Jason Taylor, an assistant professor in Central Michigan University's department of economics.

No one makes the case that Feb. 29 is an economic windfall, since it's neither free time nor money. Brian P. Simpson, an assistant professor of economics at National University in California, calls it "a transfer of consumption and production" because the country is just catching up the hours that - according to the solar cycle - were lost in dribs and drabs over the previous three years.

Better bottom line

But the sheer number of dollars that will be earned and spent due to a 366th day is "quite amazing," said Anirban Basu, head of the Baltimore economic consulting firm Optimal Solutions Group.

"An extra working day probably improves the bottom line, all things being equal, at the state and local level," he said. "It actually means one more day of deficits at the federal level."

The average daily cost of operating state government in Maryland is about $63 million, though economists say Feb. 29 won't actually add that much more because some charges are calculated by the month.

Patrick Lester, a senior policy analyst at the Maryland Budget and Tax Policy Institute, doesn't think anyone should worry that leap year will break the budget because it comes with revenues as well as expenses.

"Its net effect on the finances of the state should really be negligible," Lester said. "Kind of a pimple on a hiccup."

Still, planning for the day was a headache for human resources officials. They flooded the American Payroll Association with calls last fall for guidance in dealing with 53 paychecks instead of 52 - or 27 biweekly checks instead of 26, if the organization was scheduled to pay employees the first week of the year.

Leap year has "exaggerated" the aberration because two days of the week are repeating 53 times instead of the usual one, said Scott Mezistrano, senior manager of government relations for the payroll association.

"In this leap year, those days are Thursday and Friday, which are the two most common paydays," he said. "This won't happen again until 2032."

Same work, less money

Employers can legally reduce each paycheck to keep yearly wages the same for salaried workers. A survey by the payroll association found that 96 percent of members didn't intend to do that, though.

"Honestly, it pays people less money for the same amount of work," said Mezistrano. "You're getting paid less for every pay period, which works out to be less for every day. ... Not a very good morale booster."

The state government is among those adjusting employees' biweekly wages downward this fiscal year. That's why its Department of Corrections expects only a $182,000 leap-year premium to cover food, supplies and overtime costs, unlike Michigan's correctional system, which has to spend nearly $4 million.

Carroll County's school system didn't recalculate biweekly wages but is avoiding an additional pay period by delaying a handful of checks for a day each until the extra week is shaved off.

"Most of the staff, at this point, is used to it," said Chris Hartlove, the Carroll schools' budget director.

Howard County government workers aren't affected because their first pay period fell in the second week of this fiscal year. But every so often the county is hit with a 27-paycheck year - and it pays up, to the tune of roughly $3.8 million in salaries and benefits.

"We put aside about $300,000 a year ... to make that extra payment without the giant impact on the budget," said Raymond S. Wacks, Howard's budget director.

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