Comptroller: NJ towns flout sick-time payout rules, wasting taxpayer dollars

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Comptroller: NJ towns flout sick-time payout rules, wasting taxpayer dollars


Walsh said the most egregious rule-breaking included towns paying employees for unused sick time every year as bonuses, when state law mandates those benefits be paid only at retirement. Towns also offer costly retirement payouts that exceed state caps, his office’s review found.

“This is the tip of the iceberg. It could be hundreds of local governments in New Jersey that are similarly wasting public funds or committing to do so in the future,” Walsh said. “We’ve seen no indication that these laws are confusing. They’re fairly plainly written.”

His office pointed specifically to the example of Palisades Park, where a business administrator’s contract called for him to receive $360,000 alone for “all accrued and accumulated sick, personal, severance and vacation time” as of the end of 2019. That included $160,000 for improper sick and vacation leave, the report said.

Walsh said a pair of reforms passed more than a decade ago had “failed more than succeeded.” He recommended municipalities to review their procedures and come up with corrective action plans that could include recouping taxpayer money from the employees. He also called on the state legislature to task a state agency with enforcement and amend laws to ensure municipal compliance.

A spokesperson for State Senate President Nick Scutari’s office said they would review the report. Assembly Speaker Craig Coughlin hasn’t yet responded to emails sent early Thursday afternoon about whether they would act on the report’s findings. gov. Phil Murphy’s office also hasn’t yet returned a request for comment.

Lawmakers first capped sick and vacation leave payouts for certain high-level public employees in 2007, following recommendations from a governor’s task force, the State Commission of Investigation and a legislative committee, aiming to control runaway costs caused by top officials using unclaimed benefits to pad their salaries. The Legislature limited sick leave for those senior employees to $15,000, payable only at retirement, but allowed those who had accumulated more than that already to keep those benefits.

In 2010, lawmakers expanded payout restrictions to all employees hired from that point on. The laws also bar employees from rolling over more than one year’s worth of vacation leave.

But the report found nearly all of the surveyed towns were ignoring the rules in their ordinances, employee handbooks and contracts. Fifty-six of the 60 towns failed to comply with the 2010 law and 41 were in violation of the 2007 law, it found. In all, 57 of the towns had violated at least one of the two laws.

Among the violations the report flagged: 13 municipalities permit yearly sick leave payments, 22 have no $15,000 sick leave cap and 29 allow payouts when a worker resigns or dies, not just at retirement. Some municipalities also waited years — in one case, five years after the 2010 law went into effect — to make employees subject to sick pay caps.

The comptroller’s office only analyzed municipal governments and did not include school districts or other public bodies, like water commissions or sewer authorities. Walsh predicted those sorts of government entities were also likely making illegal payments.

Walsh said his office didn’t quantify the cost of the violations to taxpayers, but estimated it at hundreds of thousands of dollars, and said the cost could reach into the millions if payment in excess of the state caps were allowed to continue.

He said there was no clear reason for why the law was being ignored, but said municipalities offered a range of responses, ranging “from ‘OK, we’ll take a look at it’ all the way up to, ‘We didn’t know that law was on the books.’”

“There are some municipalities that suggested that they knew that they were unlawful, but they were policies that were put in place by a prior administration,” Walsh said.

His office also released a public dashboard residents can use to track whether their towns were surveyed and found to be violating state law.



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