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New Jersey's Lavish Payday for Retirees


Many get six-figure parting gifts for accrued vacation time and sick days

Raymond Carnevale had to act fast. Like a lot of New Jersey government employees, the chief financial officer of Hackensack had spent decades amassing a stockpile of unused vacation and sick days. So when Republican Governor Chris Christie took office last year threatening to end lavish payouts for retiring public-sector workers, Carnevale, 63, punched out for good. He retired in May, netting a $267,573 windfall from the 402 sick and vacation days he'd accrued. "To say it's getting out while the getting's good is too harsh: It's more like getting out while it's safe," says Carnevale, who is eligible for an annual pension of $68,345.

Hackensack, a city of about 43,000, paid $4.6 million in sick and vacation time to 36 retiring workers including Carnevale this budget year. Christie, who has sought to portray civil servants as a pampered class, calls the payouts "boat checks"—as in, it's enough money to buy one—and wants to do away with them. "There's no way to justify paying cash to people for not being sick," Christie said at a May 18 town hall meeting in Monroe Township. "Only in government would we do something like this."

The governor's tough talk has sparked a rush to retire among teachers, police, firefighters, and other state workers. Public retirements jumped 60 percent last year in New Jersey and are on track to climb 14 percent in 2011.

The exodus is straining the already tenuous finances of many New Jersey communities. Statewide, 428 municipalities face liabilities totaling more than $825 million for accumulated sick and vacation days—a figure equal to $250 for every property taxpayer in the state, according to the governor's office. Hackensack, along with Newark and Jersey City, has had to borrow to cover the sick-leave payments.

The rich payouts are swamping local governments around the country as states struggle to close pension deficits totaling as much as $480 billion, according to data compiled by Bloomberg. In California the compensation packages of municipal employees are under scrutiny in the wake of a pay scandal in the Los Angeles suburb of Bell. Anne Montgomery, the city manager of Mill Valley, a San Francisco suburb of 14,000 people, took home $315,531 in 2009. The figure included $124,000 for unused leave on top of her salary, according to data provided by the League of California Cities and the controller's office.

California Democratic Governor Jerry Brown has said he will support legislation forbidding municipal employees from including unused vacation and sick time in the formula used to calculate their pensions.

Christie and Stephen Sweeney, the president of the Democratic-controlled New Jersey State Senate, have agreed on a plan to freeze cost-of-living raises and increase the minimum retirement age from 62 to 65 for new workers, in order to narrow a $53.9 billion deficit in the state pension system. But they have yet to reach a deal on unused sick and vacation days. Christie wants to force current employees to use up their banked days, while Democrats favor placing a cap on the size of the checks.

Carnevale says he supports either capping or getting rid of the payouts for new hires, while preserving them for existing employees. Hackensack's former finance chief recalls that the payments were among the biggest expenses he had to cover each year when preparing budgets.

Fateen Ziyad, director of the Newark Fire Dept., where 100 out of 700 employees took retirement last year, says Christie is unfairly demonizing public workers. "The governor has made us out to be the new Wall Street fat cats," he says. "The fact is that all of these things were negotiated."

The bottom line: New Jersey Governor Chris Christie wants to stop paying public workers for unused sick and vacation days, which add up to $825 million.

Dopp is a reporter for Bloomberg News.

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