Bloomberg News

N.J. Workers’ $200,000 Retirement Checks Drain Towns

June 10, 2011

(Corrects annual pension value in first paragraph of story originally published June 8.)

June 8 (Bloomberg) -- Raymond Carnevale, former finance chief in Hackensack, New Jersey, didn’t wait for Governor Chris Christie to end payouts for unused sick time and vacation. He cashed in 402 accrued days for $267,573 and retired last May with an annual pension of $68,345.

“To say it’s getting out while the getting’s good is too harsh: It’s more like getting out while it’s safe,” Carnevale, 64, who spent 24 years on Hackensack’s payroll and 41 total in municipal government, said in an interview.

Hackensack, a city of about 43,000 people seven miles (11 kilometers) west of New York City, paid $4.6 million of sick and vacation time to 36 retiring workers including Carnevale this budget year. Eight older workers not subject to a city cap on the payments received checks exceeding $200,000. The rush to retire is attributable to Christie’s proposed clampdown on workers’ benefits, City Manager Stephen Lo Iacono said.

New Jersey municipalities including Hackensack and the two most populous, Newark and Jersey City, had to borrow to make the sick-leave payments after cutting jobs to balance their budgets. The higher costs are swamping local governments from New Jersey to California as states grapple with pension-funding deficits of as much as $479.5 billion, according to data compiled by Bloomberg.

In the past year, New Jersey communities from Newark to Camden paid workers at least $43 million for unused sick and vacation time. Statewide, 428 municipalities face liabilities of more than $825 million for accumulated sick and vacation days, which would cost an additional $250 for every property taxpayer in the state, according to Christie’s office.

‘Only in Government’

Christie, a first-term Republican, wants to end the payouts, while Democrats, who control the Legislature, seek to cap them. The governor’s proposal would bar workers from accumulating additional sick and vacation days, and force current employees to use banked days for sick time or vacation. In December, he vetoed Democratic legislation capping the payments for all workers at $15,000.

“There’s no way to justify paying cash to people for not being sick,” Christie, 48, said at a May 18 town-hall meeting in Monroe Township. “Only in government would we do something like this.”

Christie calls the payments “boat checks” to explain where some of the money may be going. The $43 million in payouts included $306,000 paid to the West New York mayor’s chief of staff and $80,000 to the Somerville school superintendent, according to a list from Christie’s office. Camden, one of the nation’s poorest cities, paid out $3.5 million after eliminating 25 percent of its workforce.

Municipal Aid

Christie cut aid to municipalities and schools by $1.3 billion to help balance the current state budget. He and Senate President Stephen Sweeney, a Democrat from West Deptford, have reached an agreement on a plan to freeze cost-of-living raises and increase the minimum retirement age to help reduce a $53.9 billion deficit in the state pension system, said two people with knowledge of the pact.

The deal also would raise workers’ contribution to health- insurance premiums from the current 8.5 percent, the people said. No targets for the higher contributions were disclosed.

Christie and unions for government workers have clashed since he took office in January 2010. The New Jersey Education Association spent $6.6 million last year, more than any other lobbying organization, on ads criticizing Christie’s proposals.

Leaving Workforce

Public-employee retirements jumped by 60 percent in 2010 to more than 20,000 as Christie pushed his proposals. Through the beginning of June, 17,997 workers have submitted retirement papers this year, according to state records. If applications continue at the current pace, at least 23,000 police, teachers and other public workers will retire this year, a 14 percent jump from last year.

New Jersey isn’t alone in allowing towns to pay employees lump sums for unused sick and vacation days. In California, Anne Montgomery was paid $315,531 in 2009 as city manager of Mill Valley, a San Francisco suburb of 14,000 people. That included $124,000 for unused leave, according to data provided by the League of California Cities and the controller’s office.

When Ken Hampian retired as city manager of San Luis Obispo, California, in 2009, he augmented his $194,168 base salary with $52,144 by cashing out unused vacation and administrative leave, according to figures listed in a 2010 survey of city manager pay conducted by the League.

Unused Time

California Governor Jerry Brown, a Democrat, has said he will support legislation that would forbid municipal employees from including unused vacation and sick time in their pension calculations. That practice isn’t allowed in New Jersey.

Carnevale, the Hackensack official, said the payouts were among the biggest expenses he had to cover each year when preparing budgets. While previous labor agreements in the city allowed workers to retain the payments, he said he supports either capping or getting rid of them for new hires.

Hackensack Mayor Karen Sasso, a Democrat elected to the nonpartisan office, called the increase in sick-leave payouts the “other shoe” to Christie’s efforts to cut pension costs.

“They were afraid of what they might lose,” Sasso, 60, said of the retirements. “We couldn’t budget for that kind of mass exodus.”

Assemblywoman Pamela Lampitt, a Camden Democrat, has offered Christie a compromise that would cap sick-leave payouts at $7,500. Based on 434,017 current state and local employees, that bill would cost taxpayers $3.25 billion, said Christie, who rejected the offer.

Firefighters Retire

Newark, the state’s largest city, borrowed $7 million in December to cover the cost of retiree payments, Business Administrator Julien Neals said. The fire department, which had 100 of 700 members retire last year, accounted for more than $6 million of that total, fire director Fateen Ziyad said.

“The governor has made us out to be the new Wall Street fat cats,” Ziyad said in an interview. “The fact is that all of these things were negotiated.”

Jersey City has incurred $19.6 million in payouts since July 2009 as 180 police officers and firefighters retired ahead of planned pension changes and payout limits. Six recipients got more than $200,000 last fiscal year, including $252,000 paid to Deputy Fire Chief Robert Flora. In December, the city issued $9.3 million in one-year notes to cover part of the total and avert a 4 percent tax increase.

“They are a huge burden and may ultimately be proven unsustainable,” Mayor Jerramiah Healy said of the payments in an e-mail. “As it goes forward into the future, the burden is only going to be that much more difficult.”

--With assistance from Michael Marois in Sacramento. Editors: Stacie Servetah, Jerry Hart

To contact the reporter on this story: Terrence Dopp in Trenton Statehouse at tdopp@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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