Public workers in a majority of New Jersey’s municipalities, school districts, and all but two of its counties are due almost $1.9 billion in pay for unused absences when they retire, with at least one employee slated to receive as much as $500,000.
To put things in perspective: If this obligation were spread throughout the state, every New Jerseyan would have to chip in $207 to cover the public-employee version of Wall Street’s golden parachute — according to an NJ Spotlight analysis of local budgets.
Or think of it this way: In this state with the highest property taxes in the nation, the $929 million owed to municipal workers alone, if it were paid out immediately by property-tax payers, would lead to an increase of 11 percent over last year’s total local levy.
Part of the problem can be traced to the way benefits are typically negotiated by local officials, be it with a union or with individuals. According to Jon Moran, senior legislative analyst with the New Jersey State League of Municipalities, it can be difficult for elected officials to take a hard line when facing the realities of what neighboring towns give and a town’s own precedent.
Follow this link for an interactive table of sick-day payout liabilities for New Jersey’s school districts, towns, and counties.
No improvement in sight
The situation is not getting any better: A bipartisan effort to curb these payouts has stalled since Gov. Chris Christie conditionally vetoed it in 2010. Currently, bills are pending in the Legislature to cap such payments, but these have not received even a hearing, and recent efforts by Republicans to call for votes on their measures were blocked by Democrats.
And to some, it is unacceptable: In its 2009 report “The Beat Goes On,” the NJ State Commission of Investigation wrote, “It simply is unacceptable and intolerable for taxpayers to continue to be burdened by these sorts of gold-plated, sky’s-the-limit payout packages for active and retiring public workers – especially when the cost of such arrangements can seriously erode local budgets, drive up property taxes, and actually coincide with the layoffs of essential personnel, including police officers and firefighters.”
Search by governmental entity to see the amount of uncompensated absence pay owed to employees of counties, municipalities and school districts last year or just click search to enter the database.
Unions, meanwhile, disagree and have long fought against efforts to have the state cap payouts.
“NJEA opposes efforts to limit by legislation items that are currently subject to collective bargaining,” said spokesman Steve Baker. “Payouts for accumulated leave should be subject to collective bargaining.”
The battle of the bills
In 2010, Christie asked for and the Legislature gave him a cap of $15,000 for payouts going to any new school, county, or municipal employee. Payouts to workers hired before that depended on their contracts. (Accrued sick days have long been capped for state employees.)
But Christie’s bill only capped new hires at $15,000. Anyone who was already employed before the bill was signed could continue to rack up pay for unused absences. The Legislature then passed a bill that would cap all employees at $15,000 (not counting any sick-leave pay they had already accrued). Christie wanted more; he wanted to put a stop to all accruals. The bill went nowhere.
The effort still appears to be stalled: A Republican move to eventually eliminate these payments, led by Assemblywoman Nancy Munoz (R-Union), was blocked by Democrats earlier this month. Her bill A-653 would prevent employees from accruing any further sick-day payouts. Money owed to employees would be paid, but her measure bill would stop the clock on further accruals.
Munoz wanted her bill to bypass the usual process and be brought to the floor for a vote. All Assembly Democrats voted against her request, voting instead to table her motion. The result was the same as voting against the bill, but the maneuver let them say they didn’t vote against the bill and might support it but wanted to go through proper channels.
The Assembly tabled Munoz’s motion 49-24
“Unused sick-day payouts drive our state’s nation-high property taxes, and place an undue and unsustainable burden on struggling taxpayers,” said Munoz.“ They (Democrats) are not interested in looking at that issue.”
Tom Hester, a spokesman for the Assembly Democrats, rejected Munoz’s characterization of members’ votes to stop her bill from being considered.
“Democrats moved to restrict sick and vacation leave only to see it vetoed by Gov. Christie,” he said, referring to Christie’s 2010 veto of a $15,000 cap on all new leave accruals. He characterized Munoz’s attempt to bring the bill to a vote on the floor before it had gone through a committee hearing and without any promise the governor would sign it as “showboating.”
Munoz is not the only Republican trying to bring a bill to the floor. She has company in Sen. Jennifer Beck (R-Monmouth), whose measure (S-2140) would cap payouts at a maximum of $10,000 as new contracts are negotiated. Her efforts have met the same fate as Munoz’s, with two party-line votes denying a vote on it.
“Six-figure sick-leave payouts to retiring public employees can destroy town budgets and place an extreme burden on already overwhelmed property taxpayers,” she said.
Because the 2010 law only applied to newly hired employees, there continue to be numerous instances across the state of retired public workers getting six-figure payouts for thousands of hours of unused sick and vacation days. For example:
When he retires, Jersey City’s police chief could set a new record for payout. According to the city’s 2016 User Friendly Budget, the chief had accrued 444 days of sick leave and vacation totaling $503,533 — $1,134 per day. The police department’s website indicates that Philip D. Zacche has been a police officer since December 1979 and was named chief in October 2014.
The city’s budget shows three other employees were due more than $100,000 for unused days as of last year: the business administrator, fire chief, and public works director.
In total, Jersey City employees had banked more than 313,000 days of leave worth nearly $118 million, by far the largest of any municipality in the state. The total value of the days accrued by the city’s police, exclusive of the chief, was $68 million, $16 million more than the bill for the entire city of Newark, which had the second largest accumulation.
Largest Liabilities for Unused Leave Time
|Governmental Entity||2016 Liability|
|Jersey City School District||$36,546,294|
|Newark School District||$34,641,711|
Sources: Municipalities’ user friendly budgets and school districts’ comprehensive annual financial reports.
Millions of sick days
An analysis of leave accumulations in every county and nearly every municipality — budgets for 13 towns were not available either from the state or local websites — found that these workers had accrued more than 5.4 million unused sick and vacation days and, as of last year, were due to receive $1.14 billion, or an average of $210 for each day.
That’s a huge liability that most governments are not prepared to pay. Statewide, governments reported having set aside $85.4 million toward the unused days – about 7.5 percent of the total. There is no requirement that towns and counties put any money away for these retirement payouts and, in fact, 239 municipalities and five counties reported no reserves for this purpose. They included Newark, with a $52.5 million leave liability, and Bergen County, whose liability was $50.5 million as of last year.
Moran, of the State League of Municipalities, said that while it would be “good practice” for governing bodies to set aside at least a portion of their liability so it’s available as workers retire, there is no requirement that they do so. And doing so would be hard given that municipal budgeting is subject to a 2-percent state-imposed cap on property tax increases.
When a large payout comes due, it can leave municipalities needing to take some creative steps.
Most, when faced with six-figure leave bills, spread the payments out over a few years. Some, like Teaneck and Parsippany, have turned to emergency appropriations to cover the costs — Parsippany has done this in each of the last five years, with the largest a $1.9 million appropriation in 2014, according to a report in nj.com.
Others, including Jersey City, Newark, East Orange, and Hackensack, have at times borrowed millions to cover payments, with Newark borrowing $7 million in 2010 and Jersey City borrowing $19 million over two years. Munoz said one municipality couldn’t cover a $1 million bill for three retirees and so had to bond for it.
Rules and regulations
Beck’s bill also would require the imposition of a fine of one week’s salary for any violation of the sick-leave policy by a public employee, with a second violation leading to the worker’s termination. While the definition of a violation is not spelled out in the bill, it seems likely that using a sick day simply to take a day off from work could qualify.
Munoz’s bill, meanwhile, would require the verification, in writing, of the medical necessity of the use of six or more consecutive sick days. Those violating this policy would be subject to escalating fines starting at 1.5 times a day’s pay for each day improperly used with an employee subject to being fired for a third offense. Her measure would also have employees convicted of crimes that are grounds for pension forfeiture to also forfeit any banked leave payout.
“When Gov. Christie first took office, he put forth his toolkit of 33 bills to cut property taxes,” Munoz said. “This was one of those bills. It makes so much sense to so many people. If we had done this then, think of how much we would have saved.”
Democrats have supported efforts to cap payouts in the past. In 2010, they co-sponsored bills with Beck and Munoz to cap all future sick leave accruals at $15,000 and limit the carrying over of only one year’s vacation leave. Christie conditionally vetoed that bill, which both houses had passed unanimously, as being too generous and called for an end to payouts for any newly accrued sick days, saying private-sector workers do not get this perk and governmental workers should not either.
“I start with this simple, common sense proposition: Sick leave is to be used when you are sick, not as a supplemental retirement fund paid for by the taxpayers for people who already have taxpayer-funded pensions,” he wrote in his veto message. “While I recognize the sponsors’ efforts to address public employee benefits, this bill does not sufficiently remedy the gaps in current law that require taxpayers to continually fund unreasonable payouts to public employees.”
In December 2011, Christie pushed again for an end to the practice as the legislative session was coming to a close. Democrats at the time said they were willing to cut the value of accrued time to $7,500 and neither side budged. But Christie said that if all 434,000 public workers received a $7,500 payout for unused sick time on retirement, taxpayers would be footing a $3.25 billion tab.
Three years later (S-2318) a bipartisan bill that included Beck and Sen. President Stephen Sweeney as sponsors made it to the floor of the upper house but not to a vote. It was essentially the same bill Christie had conditionally vetoed, imposing a $15,000 cap on payouts. While Christie’s spokesman said the governor still insisted on an end to the practice going forward, Sweeney (D-Gloucester) said at the time that Christie’s continued stubbornness on the issue meant the liabilities would continue to rise.
The fiscal note to that bill stated that the total accumulated absence liabilities in 2010 totaled $1.123 billion, with $864.3 million of that to be paid by municipalities. In his 2014 State of the State address, Christie put the municipal amount at $880 million.
By last year, the municipal absence liability had mushroomed to $929 million, 8 percent more than in 2010, when Christie conditionally vetoed the first reform bill, and 6 percent higher than in 2014. The total liability, though, is up only slightly. The difference is a nearly $44 million reduction in the liability for county workers.
John G. Donnadio, executive director of the New Jersey Association of Counties, said the 17 percent cut is due to a concerted effort by counties to reduce the burden of those payouts on taxpayers.
“I know those numbers have been negotiated down over the years,” he said, adding that county workers are typically capped at between $10,000 and $15,000 in payouts, while some county law enforcement may have slightly higher caps of $20,000 or $25,000.
Donnadio said the association supported, and continues to support, caps on leave payouts and added he “never really understood” why Christie would not have backed at least some cap.
Moran went further, saying the $15,000 cap would have been “better than the sky’s limit.” The league also supports putting a ceiling on payouts.
An unwanted legacy
“While the town may have some control, a mayor and governing body, today, could be stuck with a deal that was struck by a previous administration,” Moran commented. “Once these arrangements are put in place, it’s extremely difficult to negotiate them out of a contract.”
Jennifer Morrill, a spokeswoman for Jersey City Mayor Steven Fulop, said generous contract provisions given by prior administrations are to blame for the city’s large liability, which is fully 10 percent of that of the entire state.
“Jersey City’s accumulated absences liability is something that was set in place by prior administrations that via union contract and policy allowed uniform police and fire employees to receive numerous compensatory days annually that they could bank and cash out at retirement,” said Morrill. “It created a huge expense for taxpayers and was not something that could be sustained, which is why the administration has been aggressive in addressing this issue.”
So far, she said, the administration has won concessions in the new contract negotiated with the firefighters’ union. These include reducing the number days that firefighters can be paid for on retirement and vacation days for new hires, limiting the amount of vacation accrued to a maximum of two years for all employees, and reducing or eliminating compensatory time that they can take off instead of being paid overtime or banking it and cashing in on retirement. In addition, a new policy requires employees who violate the sick leave policy to forfeit comp time.
While currently in negotiations with three other unions – the superior fire officers, police officers and police superior officers – the administration has instituted other policy changes to further curtail comp time that affect all public-safety workers.
“While we cannot project an exact dollar amount for these changes, we believe initially they will reduce the current number 10 percent and should continue to reduce every year,” Morrill said.
Other efforts to cut back
Frank Belluscio, deputy executive director of the New Jersey School Boards Association, said that boards have also been working to cut back on the amount they are required to make in payouts due to accruals and not just for new employees covered by the 2010 law.
“In terms of teacher contracts, many, if not most, school districts have negotiated caps below the $15,000 statutory limit, and those negotiated caps apply to all teaching staff members,” he said.
And while it used to be common for superintendents to get six-figure payouts, those are becoming rarer as chief school administrators hired after June 2007 are also covered by the $15,000 cap.
An analysis of the amounts owed by school districts as reported on their most recent Comprehensive Annual Financial Reports filed with the state Department of Education found the total to be about $715 million as of June 30 of last year. They average $1.2 million per district, but vary widely. A handful of districts did not report any liabilities and only one, Bay Head, specifically stated that it does not pay for unused sick time at retirement. The largest districts – Newark and Jersey City – had liabilities of $34.6 million and $36.5 million, respectively.
Getting rid of large terminal leave bills is not impossible. Some 77 municipalities, as well as Hunterdon and Passaic counties, do not compensate any employees for any unused days.
Donato Nieman, Montgomery’s township administrator, said township employees can accrue sick time and can use it if they have a period of extended illness – Nieman himself became very ill a few years ago and was able to take 100 days off because he had accrued unused sick days. But they don’t expect to get a financial windfall on retirement simply for being healthy.
“This is a policy that was in place when I got here some 18 years ago,” he said. “Sick time is for being sick. If you work in the private sector, there’s nowhere I know of where they do that.” Nieman characterized terminal pay for unused absence days as “a remnant of the days when public-sector workers were not paid well. The world has changed and those perks have become unaffordable.”
Citing reports of police chiefs and others received six-figure payouts on retiring, Nieman said, “That’s just not a reasonable thing to demand these days. Going forward, I think if municipalities have not eliminated them by now, they should. It makes economic sense. You just can’t afford to carry these liabilities on the books.”
So what do public workers get when they retire from Montgomery? Said Nieman, “We thank them and tell them how much we appreciate their loyal service.”