NJPP Monday Minute: 12/7/09 Accountability woes plague local governments

The state and local governments in New Jersey raised nearly $56 billion in tax revenue in 2008. Local property taxes contributed just over 40 percent to that; the other 60 percent came from the state--mainly from income, sales and corporate business tax collections.

While the state raises 60 percent of all of the public money spent in New Jersey, it spends considerably less than that because a certain amount of the money it raises is given to local governments to spend. In 2008, school districts, municipalities and counties collected just over $23 billion in property taxes. In addition to that, the state gave them $13.3 billion in state aid. In total they spent $36.5 billion, or more than 65 percent of all the public money available in the state.

If local governments spend the bulk of the state's public money, they should be accountable to taxpayers and to the state. But they really aren't. Not since 1995, when the Department of Community Affairs printed its last comparison of municipal budgets, have taxpayers been able to compare the spending in one municipality against another.

The State Commission of Investigation's most recent report of December 1, 2009, examined taxpayer-subsidized benefits received by public employees in 75 municipalities, counties and quasi-independent local authorities. For a dose of reality it compared these benefits to those received by state employees. About 80 percent of the 75 local governmental units audited were found to provide questionable benefits including:

• Lump-sum cash payouts to retiring employees for unused accumulated sick leave in amounts exceeding the $15,000 maximum authorized for employees at the State level. In numerous instances, such payouts are not restricted by any cap.
• Annual cash payouts for unused sick or other leave to active employees. In nearly two-thirds of these instances, this occurs even though the same governmental unit maintains some form of cap on sick leave redemption at retirement.
• Paid time off for personal events and other special purposes beyond holidays and vacation.
• Cash payouts pursuant to various forms of severance and bonus provisions for departing employees. A lack of standards and payout limits makes this practice open to abuse, even though the arrangements are sometimes fairly negotiated and aimed at achieving long-term savings. The specific terms of such arrangements, however, can be hidden from public disclosure by confidentiality clauses.

In one of the report's most egregious examples, the Commission found that Camden, one of the poorest cities in the nation with fiscal problems so severe that the city's administration is under State supervision, 20 retiring municipal employees shared in $2.3 million of unused sick days, vacation time and benefits.

Despite a recession that has sapped tax revenues and forced layoffs, "The gravy train continues to roll without impediment for select groups of employees on the public payroll," the report reads. "Startling amounts of taxpayer-funded booty continue to be dispensed across New Jersey without regard for the common good."

Among its recommendations, the Commission suggested payout caps for unused time off and contributions to health care coverage of at least 1.5 percent of an employee's salary. As New Jersey faces an increasing fiscal crisis, this is one area where significant amounts of taxpayer money can be saved.