Hoboken Smacked In State Report On Waste In Government

The State of New Jersey Commission of Investigation released a comprehensive report called "The Beat Goes On: Waste and Abuse in Local Government Employee Compensation and Benefits".

The Commission concluded that "aside from incremental steps...there has been no concerted effort to rein in lavish, unreasonable and excessive public-employee benefit costs in a comprehensive fashion. As a consequence, startling amounts of taxpayer-funded booty continue to be dispensed across New Jersey without regard for the common good."

The Star Ledger produced a helpful summary (pasted below) of examples of abuse and waste occurring in Hoboken:

* From 2004 to 2009, retiring Hoboken employees collected $3.87 million worth of terminal leave, including individual payments as high as $97,000; and $3.14 million in accumulated vacation leave. In numerous individual instances, the combined lump-sum payout was identical to or within several thousands of dollars of the recipient's last annual salary.

* Following the infamous SWAT team scandal, Hoboken's former police chief, Carmen LaBruno, received a retirement package of $350,000 -- $125,000 in accrued unused vacation leave, $150,000 in terminal leave and $75,000 in unused accumulated compensatory time. LaBruno's final salary as Police Chief was $210,794.

* Hoboken police and fire personnel, in addition to lump-sum leave redemptions, are entitled by contract to cash stipends at retirement -- $2,000 for rank and-file police officers who retire with less than 28 years of service and $2,000 for firefighters with less than 30 years. Police superiors receive the $2,000 stipend if they retire on Jan. 1of any given year, plus $240 if they are members of the Superior Officers Association.

* Also, uniformed and civilian employees in Hoboken routinely receive longevity raises ranging from 2 percent to as much as 18 percent per year on top of regular salary adjustments. Depending on the employee group, they also qualify variously for a mix of special leave benefits, including days off as an incentive for not taking sick leave, time off for donating blood and personal days off for private events, such as weddings and baptisms.

* Hoboken employees, depending on the bargaining unit to which they belong, receive annual payments of between $700 and $1,500 for perfect attendance.

The full report is worth reading.

Summary of Recommendations by the Commission: (beginning on page 54 of the pdf)

Over the years, the State Commission of Investigation has devoted substantial time and
resources to shedding a spotlight of public disclosure on wasteful and excessive publicemployee
benefit practices. It has made reasonable and practical recommendations which, if
implemented, could save New Jersey taxpayers millions of dollars. It has called for the
establishment of greater fiscal prudence and fairness within the ranks of the public workforce,
and for more accountability, oversight and transparency at all levels. Its core findings and
recommendations have been echoed by other official oversight entities, including the State
Benefits Review Task Force in 2005 and the Special Session Joint Legislative Committee on
Public Benefits in 2006. Moreover, the New Jersey State League of Municipalities, the lead
lobbying and governing assistance association for the State’s municipalities, is generally
supportive of reasonable benefit standards for all public employees, including caps on sick and
vacation leave redemptions.
The results of this latest inquiry constitute yet another solid and undeniable predicate
for action, another opportunity for government decision-makers to pursue effective and
meaningful reform.
Given the severity of current fiscal and economic conditions, the central elements of this
reform agenda are more vital today than they were when first proposed more than a decade
ago, particularly with regard to the need for restrictions on the awarding and cashing-in of
exorbitant amounts of employee leave. 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. Fiscal responsibility demands a change in
direction, and the very fact that a number of communities have taken the initiative on their
own to tighten up benefit practices is both a testament to the common-sense efficacy of such
an approach and proof that it can and should be done.
But piecemeal action by local authorities, encouraging though it may be, is not
sufficient. Meaningful and balanced reform in this area requires a far more comprehensive
response, and the State needs to provide the leadership and guidance necessary to get the job
done. The Commission makes this statement mindful of New Jersey’s strong and deeply
ingrained culture of “home rule.” It is also recognized that many of the enhanced fringe
benefits doled out at the local level are embedded in contracts negotiated by municipal
governing boards and unions through collective bargaining. Neither of those phenomena,
however, should be allowed to impede progress toward greater equity between and among all
public employees in New Jersey and greater sensitivity to the interests of those who ultimately
pay the bill, the taxpayers.

The Commission, therefore, makes the following recommendations for systemic reform:
1. Establish Standards for Local Government Employment Practices
The nature and scope of questionable and patently excessive public-employee benefits
detailed in this report reveal a significant and persistent gap in New Jersey’s statutory
framework for ensuring responsible and prudent local governance. The State lacks a comprehensive statutory framework that explicitly addresses employment practices at the local
government level. All too often, the broad discretion exercised in setting the terms of
employment, compensation and benefits for local public employees, including vacation and sick
leave and retirement-related payment arrangements, has produced an array of costly and
sometimes inequitable benefit packages.

The Commission urges the Legislature to conduct a thorough review of local
government employment, compensation and benefit practices in order to establish reasonable
systemic standards that will protect both the livelihood of the local public-employee workforce
and the integrity of the public treasury.

2. Establish Uniform Limits on Employee Leave
Participation in any of the various state pension plans, at a minimum, should be
conditioned upon the acceptance by all governmental entities of the basic benefit provisions
and policies maintained for employees at the State level, as follows:
Sick Leave
• Public employees at all levels should be limited to no more than 15 paid sick days
per year. At retirement, payment for accumulated unused sick leave should, at
the very least, be limited to a lump sum representing no more than 50 percent of
an employee’s unused sick leave, calculated at current salary, up to a maximum
50
of $15,000 – unless the Legislature and Governor determine that a lower sickleave
payout, or none altogether, is in order for all government employees.21
• As with State employees, no public employee at any level of government should
be permitted to cash in accumulated unused sick leave at any time prior to
retirement, including in the event of termination or resignation.
Vacation
• Public employees at all levels should adhere to the State limit of a maximum of
25 paid vacation days per year after 20 years of continuous service. No more
than one annual allotment of vacation time should be carried forward by any
public employee from one year to the next. At retirement, public employees at
all levels should be authorized to redeem only that portion of their final year’s
vacation allotment which has actually been earned; no such lump-sum payment
should be greater than the value of one year’s worth of accumulated vacation.
Holidays and Other Leave
• All forms of non-traditional leave, such as paid days off for Christmas shopping,
wedding attendance, etc., should be eliminated. Public employees at all levels of
government should be required to adhere to the established schedule of
holidays and administrative time off authorized for state government personnel.
21 Pending legislation would lower the maximum sick leave payout at retirement to $10,000 for all public
employees, including those at the State level. The measure (A-2583/S-1316) is sponsored in the Assembly by
Assemblyman Declan J. O’Scanlon, Jr., and Assemblywoman Caroline Casagrande, both R-12th District, and in the
Senate by Senator Kevin J. O’Toole, R-40th.

3. Eliminate Terminal Leave
This investigation revealed an elaborate patchwork of local provisions that often enable
public employees to remain on the public payroll at full salary and benefits without showing up
for work in the weeks and months preceding retirement. Typically, this is accomplished by
using up accumulated leave, usually in the form of many sick days banked over the course of a
career. This practice not only forces taxpayers to finance the salaries and benefits of no-show
employees whose absence or sick leave is not corroborated by medical certification but it also
effectively prohibits local governments from hiring permanent replacements since the positions
in question technically are still occupied. In other instances, leave allotments are converted to
cash for payment to employees at retirement. The Commission recommends that terminal
leave, in whatever form it may take, be eliminated for all public employees and expresses its
support for the intent of pending legislation to achieve that goal.22

4. Regulate and Control Severance, Stipends and Related Payouts
As demonstrated by the findings of this investigation, compensation for government
employees in New Jersey, at least at the local level, has come to mean far more than standard
and guaranteed salaries, pensions and fringe benefits. In addition to these run-of-the-mill
personnel costs, taxpayers are picking up the tab for an array of pricey extras, including various
types of employee incentive payments, such as lump sums of cash for not missing work, and
lucrative severance packages guaranteed even under the circumstance of voluntary resignation.
22 A-2581 (O’Scanlon and Casagrande) would prohibit public employees from using six or more days of
accumulated sick leave in the 12 months prior to retirement without medical necessity verified in writing by a
physician.


Although severance and employment-separation arrangements, when properly and fairly
negotiated, can produce savings over the long run – particularly with regard to early retirement
programs and in other cases in which employees receive financial inducements to vacate
positions that will be eliminated – the practice is open to abuse for lack of standards and
payout limits. Local governments simply can no longer afford the unbridled and unregulated
proliferation of such luxuries. Thus, the Legislature should develop a statutory framework to: 1.
Define the narrow circumstances under which bonuses, stipends, separation payouts and other
special compensation can be awarded, 2. Require local government entities to adhere to a
uniform set of caps and restrictions on such payouts, and 3. Require that the terms and
conditions of such compensation are subject to public disclosure.
The Commission also supports the intent of legislation that would deny severance pay
for municipal officials who are fired from their jobs for cause. Under existing law, terminated
local officials are guaranteed severance pay worth up to three months’ salary unless they are
convicted of a crime.23

5. Restrict Allocation and Use of Compensatory Time
The Commission found instances in which public employees are routinely awarded
compensatory leave in advance of having actually earned it. In some cases, they may exchange
it for cash on a yearly basis and/or allow it to accumulate for cash redemption at retirement.
To curtail these unregulated and unnecessarily costly practices, legislation should be enacted
23 Assembly members Dawn Marie Addiego and Scott Rudder, both R-8th, announced in July that they would
introduce legislation restricting such severance eligibility after the arrests of 44 persons on federal corruption
charges, including an assortment of elected and appointed government officials
requiring that compensatory time be allocated strictly based upon hours actually worked
beyond the normally scheduled hours of employment as confirmed by daily attendance
records. Furthermore, public employees should be required to use such time within one year
of its allocation. Under no circumstances should compensatory leave be exchanged for cash
payment.

6. Require Employee Health Insurance Contributions
According to the State Division of Pensions and Benefits, local governments in New
Jersey collectively spend more than $400 million annually to cover the cost of health insurance
for active employees. State employees are required to contribute at least a small share of their
health insurance premiums at a rate of 1.5 percent of current salary, a total contribution
statewide of more than $56 million in FY-2009 alone, thus defraying costs that would otherwise
be borne by the taxpayers. At the local level, the practice is inconsistent. Most governmental
entities require no employee contributions, and those that do have established inconsistent
rates. The Commission recommends that, at a minimum, legislation be enacted to require that
local government employees contribute to the cost of their health insurance at the same rate
as their counterparts in State government.
7. Ensure Public Transparency and Accountability
Beyond the sheer cost of exorbitant public-employee benefit practices, one of the most
troubling findings of this inquiry was the difficulty that awaits average citizens who may be
interested in finding out more about how their tax dollars are spent in this regard. Numerous employment contracts, compensation arrangements and other benefit-related records
examined by Commission staff contained thickets of convoluted technical provisions and arcane
language not readily understood by the untrained observer. The challenge of obtaining and
deciphering this material frequently is compounded by the presence of multiple bargaining-unit
contracts, each of which may contain different iterations of the same general benefit principle.
Some employees, for example, may be subject to a strict monetary cap on leave redemption at
retirement, while others in the same community effectively are allowed to exceed that cap by
cashing in a maximum number of accumulated sick days at a certain percentage of their final
salary. Still others may be prohibited from exchanging sick leave for cash when they retire but
authorized to cash it in while actively employed.
Those responsible for negotiating and administering public-employee compensation and
benefits should never commit themselves to the disbursement of substantial sums of taxpayer
money without, at a minimum, taking steps to ensure that the terms and implications of such
disbursements are clearly and accurately spelled out and made readily available for public
review. Thus, in the interests of fostering greater transparency, oversight and accountability,
the Commission recommends that legislation be enacted requiring local and county
government units in New Jersey to maintain easily accessible and readily understandable
summary sheets delineating all benefits provided to every individual in their employ. They
should also be required to disclose the terms and conditions of all special compensation and
benefit arrangements negotiated with and awarded to select individuals upon resignation,
retirement and/or termination. The need for ensuring the widest possible public disclosure and
transparency in government has been demonstrated repeatedly over years by the SCI’s findings in a wide array of inquiries, ranging from an examination of hidden compensation for public
school administrators to the lack of proper accountability and oversight in the governance of
New Jersey’s institutions of public higher education.