Paff: Middletown taxpayers must reimburse teachers pension fund $3.8 million.

From time to time I've posted press releases from the NJ Foundation for Open Government (NJFOG) and when appropriate I've reposted from the John Paff blogs, "Random notes on NJ government" and "NJ Open Government Notes".  John Paff and NJFOG advocate for open and transparent government and work to ensure that government agencies are following OPRA and OPMA laws.

Besides being an advocate for open government, John Paff also writes about noteworthy issues and recent court cases on his blogs, that bring to light issues that may normally be overlooked.

One such case that might have gone over overlooked if it weren't for John Paff writing about last week was a December 22, 2016, decision of the NJ Appellate Court, that stated the Middletown Board of Education must reimburse its pension fund  $3.8 million for passing out unapproved "illegal" early retirement incentives to school district employees in 2007.

Last week, during the rush leading up to Christmas, a time when a story like this can be easily missed, the Middletown Patch picked-up on it and word began to spread.

I first saw the Patch article posted on Facebook a December 23rd and made a mental note to myself to go back later and read any comments.  I later shared John Paff's blog post to the Middletown New Jersey Facebook page. It has since been shared 17 times and has dozens of reactions and comments.

Reprinted here is John Paff's original posting from his blog "Random notes on NJ government":

An appeals court today affirmed a ruling requiring the Middletown Board of Education (Monmouth County) to reimburse its pension fund $3,815,600 for offering Board employees an "illegal" early retirement incentive.

According to the Appellate Division's December 22, 2016 opinion, the Middletown school board approved a "sidebar agreement" with the local teachers union on October 22, 2007 that offered tenured teachers who retired or resigned prior to June 30, 2008 $225 for each unused sick day up to a maximum of $40,000. The agreement similarly offered non-certified union members $125 per sick day up to a maximum of $20,000.

The next day, an Audit Supervisor with the Division of Pensions and Benefits, who had heard about the offering, said that the offering needed to be reviewed by the Division and asked the Board for specific information which the Board provided on November 5, 2007. By then, five teachers and a secretary had exercised their rights under the sidebar agreement.

On August 1, 2008, the Division informed the Board that the early retirement benefit was "impermissible" and directed the Board to "provide a final list of all individuals" that had taken advantage of it so that a Division actuary could "develop the acceleration cost of this incentive which in turn will be billed to [the Board]." Although the Board responded to the Division on August 11, 2008, the Division did not get back to the Board until February 6, 2014. On that date, the Division informed the Board that it was "responsible for the additional pension liabilities created" by its unauthorized early retirement incentive. The Division calculated the present value of those pension liabilities at $5,429,900 and invoiced the Board for that amount.

The Board appealed the Division's decision and invoice to Teachers' Pension and Annuity Fund (TPFA) Board of Trustees. On December 14, 2014, the TPFA affirmed the Division's ruling that the early retirement incentive was illegal but reduced the assessment to $3,815,600 and allowed the Board to pay that amount over a five year period at no interest.

The Board filed another appeal which was resolved by the TPFA's March 13, 2015 written decision. That decision held that 41 employees ultimately took advantage of the sidebar agreement's early retirement incentive and that those early retirements burdened the pension fund.

The Appellate Division rejected the Board's appeal of the TPFA's ruling. The court found that the Board "approved the Sidebar Agreement without consulting the Division or obtaining approval and then implemented the Sidebar Agreement after receiving a letter from the Division stating approval was required before such a plan could be implemented." The court also noted that the Board failed to provide any actuarial evidence to contest the findings of the Division's actuary.

Keep in mind that this case is nearly 10 years old. Other than Joan Minnuies, no other current BOE member was there at the time, that of course, will change when Lenora Caminiti rejoins the BOE when it reorganizes next month. She was there as well back in 2007 and her and Joan Minnuies have some explaining to do.

Now the questions are; What does the newly constituted 2017 Middletown Board of Education do about this issue and what will the plan for reimbursing the pension fund be? At this time it's anyone's guess. I'm sure there are or will be intense discussions going on.

I would hope that whatever decision is made, it will be the least disruptive to taxpayers and repayment spread out over a reasonable amount of time. The last thing I'd like to see however would be some sort of bond issue to repay the pension fund. That would only cost taxpayers more in the long run with fees and interest.

NJ Watchdog: $100K Pension Club

For immediate release:

 $100K NEW JERSEY PENSIONS 'CLUB' STATE RETIREMENT FUNDS

Call it the $100K Club – an elite corps of retired public employees that's growing bigger, younger and richer at the expense of the New Jersey retirement system.

The number of retirees collecting more than $100,000 a year from state pensions jumped to 1,244 last year – up 28 percent from 2010, according to New Jersey Watchdog's analysis of state data.  For example:·

• New Brunswick Police Director Anthony Caputo, for example, retired at age 47 to draw a $115,019 annual pension. One year later, the city rehired Caputo as police director – the same position – at a $120,000 salary. For one job, he receives two checks, totaling $235,019 a year.
• Robert Mulcahy hit the jackpot when he was fired as Rutgers University's $341,250-a-year athletic director. He received a severance package that cost the state school more than $600,000.  The next month, Mulcahy started collecting a $162,399 annual pension.·      
•  Joseph Blaettler will rake in more than $4.5 million from the Police and Firemen's Retirement Fund if he reaches age 80, his statistical life expectancy. At age 46, Blaettler began pocketing nearly $135,000 a year in retirement checks when he stepped down as Union City deputy police chief.

For the complete story, go to http://newjersey.watchdog.org/.

NOTE – New Jersey Watchdog will release the full list of 1,244 $100K Club members on its web site tomorrow, April 3.  

NJPP Monday Minute 11/1/10: Employee benefit funds in question

With unemployment levels nationwide hovering at just below double digits for more than a year now, the focus on unemployment insurance (UI) benefits has never been more intense.

One of the items at the top of the to-do list when Congress returns for its lame duck session later this month will be consideration of another extension of federal-state UI benefits. Supporters say an extension is necessary because unemployment levels have been so high for so long. Opponents argue that cutting off UI benefits will push the unemployed to find a job, any job. One candidate for the U.S. Senate in Nevada told the Los Angeles Times, "You can make more money on unemployment than you can going down and getting one of those jobs that doesn't pay so much but is an honest job."

Let's be clear: unemployment insurance benefits are not lottery winnings. A UI check is an earned benefit from a trust fund that both workers and employers pay into to protect workers when they are unemployed. UI benefits equal 60 percent of a worker's previous wages up to a maximum weekly payment that varies by state.

In 2009, nationally, UI benefits kept 3.3 million people, including 1 million children, out of poverty. In New Jersey, 414,600 workers are currently receiving benefits. Unemployed workers receive up to 26 weeks of state unemployment payments and then may be eligible to collect federal unemployment benefits for another 90 weeks or more.

According to the New Jersey Department of Labor and Workforce Development, the maximum UI benefit in 2010 in New Jersey is $600 a week but the average benefit is $397 per week. Twelfth District congressional candidate Scott Sipprelle has publicly suggested that benefits are too high and should be lower than minimum wage-about $290 a week for 40 hours of work. At $15,080 a year, that is about $6,000 below what the federal government estimates a family of four needs to live in New Jersey.

The UI benefit was created in 1935 in response to the Great Depression, a time when up to 25 percent of the workforce was unemployed; when people were regularly losing their homes to foreclosures; when Americans were migrating across the country looking for work and shanty towns, called Hoovervilles. Hungry and homeless unemployed people were forced to rely on charities, churches, good-hearted neighbors and strangers to survive.

The circumstances preceding the creation of UI are described In the US Department of Labor's, Beginning the Unemployment Insurance Program - An Oral History: 1935-1985: "In the welfare field the States and local governments, which had been handling the unemployed as well as welfare cases, didn't have any unemployment insurance. There wasn't any kind of help for these people; a lot of them were absolutely helpless. They stayed in their homes; couldn't pay rent. Housing went to pot. The whole economy just went to a disaster. What happened then is that the local authorities began to come to Washington and say, 'Can't you do something down here to help us.'"

In his book, Hard Times: An Oral History of the Great Depression, Studs Terkel reported Roosevelt official Gardiner Means' 1933 account of how UI reflected a change in thinking brought about by the extreme economic crisis faced by millions in the country: "People agreed that old things didn't work. What ran through the whole New Deal was finding a way to make things work. Before that, Hoover would loan money to farmers to keep their mules alive, but wouldn't loan money to keep their children alive. This was perfectly right within the framework of classical thinking. If an individual couldn't get enough to eat, it was because he wasn't on the ball. It was his responsibility. The New Deal said: Anybody who is unemployed isn't necessarily unemployed because he's shiftless."

The present day equivalent of bread lines and shanty towns are homeless shelters and community food banks. The Star-Ledger reported earlier in October that New Jersey food banks are seeing a 46 percent increase in demand.

Unemployment insurance is a vital safety net that supports families and allows them to meet their basic needs. In good times New Jersey and many other states used the program's funds to balance the state budget. These diversions started in 1993 and mostly ended by 2006, but by then much damage had been done. In March 2009, the non-partisan Office of Legislative Services said the state's UI fund was completely depleted. Restoring the funds solvency required the state to either increase contribution rates or borrow from the federal government. New Jersey chose to borrow.

These funding maneuvers have led to a ballot question which tomorrow will allow voters to express their opinion about these practices. Ballot Question #1 asks whether the state constitution should be amended to prohibit the state from using any employee benefits funds (including UI, paid family leave, temporary disability and workers compensation) for purposes other than paying benefits to workers. Both unions and businesses recommend voting "yes"on the question. Voting in favor of the question will provide constitutional protection for these funds but will add further complexity to the constitution and tie public officials' hands in the future. It's a complicated question with no easy answer. Tomorrow voters will provide an answer.