Examining the Entire Structure of How We Pay for Local Services, Including Schools

Insider NJ editor Max Pizarro looks at the political standoff between the NJ Legislature and Gov. Phil Murphy over the proposed 2020 budget, which was passed by both the Assembly and Senate and is in Murphy's hands.

In a state with more than 550 municipalities, a police chief retiring is really not that big a deal.   

But when Lodi’s Vincent Quatrone departed headquarters for the last time this week, he left with a $283,000 terminal leave package.

Two relevant facts must be understood here. 

One is that many retiring police officers and other municipal workers get much more money than that upon retirement. 

And the second is that they are doing nothing wrong. These payments are legally earned and no one should resent retiring workers for taking a benefit many others wish they had. 

But it’s not that simple.

A study last year by The Record of Bergen County calculated that municipal employees in four counties alone – Bergen, Passaic, Morris and most of Essex – would be entitled to an estimated $273 million if they retired at the same time. Most of this would be in unused sick, vacation and personal days. This is a theoretical estimate given the fact all employees will not retire simultaneously, but it makes the point. That point is enhanced when you consider that some towns, including Hackensack, have had to borrow money to pay retiring employees. So, if you want to understand why property taxes are as high as they are in New Jersey, this is one reason why. 

Why does this happen?

One reason is the unique – if not crazy – philosophy of public employment in the state. It is a system that essentially pays people who do not take vacations and who do not take sick time. If you think good health is its own reward, you’re wrong. 

In most of private industry, workers are annually given an allotment of sick, vacation and personal days. This very legitimate benefit allows employees to vacation on the company dime and to stay home with pay if they’re ill.

In many cases, workers have to use their compensatory days in a calendar year; hence the phrase, “Use it, or lose it.” Some companies allow workers to carry over sick or vacation time from year-to-year. But there is generally a ceiling and upon retirement, workers are usually not paid for the days they did not use.

Public employment is quite different. In many cases, employees can bank their unused time and receive a hefty check upon retirement, which is the case with Quatrone in Lodi. So, a long-time worker retiring in 2018 may be getting compensated for a few sick days he did not use in, say, 1998. But as we can see with the amount of money involved, it’s usually more than a few days, 

This benefit began years ago when public workers were not well paid, But thanks to the influence of public unions, that is no longer the case.

Nonetheless, no matter the pay scale, the benefit is hard to defend. 

Sick time by definition properly pays an employee who is too ill to work. But if employees are not ill, and if they show up every day to work, why do they deserve a “sick day” benefit? Ditto for vacation time. Those who don’t use it should not be compensated for not doing so. After all, they are being paid when they show up for work.

It’s also worth noting that most terminal leave payments are based on what a worker is earning at the time of retirement, not 20 years ago when the rate of pay could have been much lower. 

Curiously, most local and state officials agree reform is needed. Some municipalities have capped terminal leave payments at $15,000. Lodi has done that, but the retiring chief was entitled to his payment under a previous contract.

Then-Governor Christie made reducing public employee benefits a big part of his first term. Christie wanted to eliminate all cashing in of unused time statewide, but Democrats suggested a $15,000 limit. Given the fact nothing happened, a $15,000 limit would have been a good compromise. 

This is now a problem for Governor Phil Murphy, who so far has not been overly aggressive in suggesting specific ways to cut property taxes.

To truly reduce property taxes, one has to examine the entire structure of how we pay for local services, including schools. Short of that, we must reduce what municipalities pay out wherever possible. One way to do that is to eliminate or sharply curtail terminal leave payments. 

Municipalities occasionally have to borrow money to fix roads, develop parks and to buy capital equipment.

They shouldn’t have to do so to pay a retiring employee hundreds of thousands of dollars.

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