For some cities and towns, the total payouts were so big that they had to take out loans to make them
TRENTON — Last year, cities and towns across New Jersey were forced to lay off thousands of employees to cope with budget woes, while momentum for benefit reform in Trenton pushed a record number of public workers into retirement.
In theory, the exodus of employees was supposed to make municipalities leaner and provide some financial relief.
Instead, some of New Jersey’s most cash-strapped cities had to pay millions to departing employees for their unused sick and vacation time, even as they struggled to provide basic services, a Star-Ledger analysis shows. The fattest checks to departing workers exceeded $200,000.
For some cities and towns, the total payouts were so big that they had to take out loans to make them.
The examination of records, as well as interviews with union and local officials, show cities are encountering a perfect storm: The Christie administration’s push for public workers to pay more for pensions and health care prompted many to retire early just as the bad economy and state aid cuts forced layoffs. Cities and towns with no money to spare were then hit with having to make big payouts for accumulated time that was promised years ago.
"It’s real disconcerting," said William Dressel, executive director of the New Jersey League of Municipalities. "You have a wave of retirements and you have layoffs, and you expect to save some money, but you have to pay these people as they walk out the door."
The Star-Ledger reviewed eight municipalities that either borrowed to make their payments under a new law that allows this, or experienced high-profile layoffs last year: Newark, Atlantic City, Camden, Jersey City, Trenton, South Brunswick, East Orange and Hackensack.
In total, these municipalities paid more than $39 million last year to more than 700 employees who cashed in their unused sick and vacation time, about $54,000 per employee.
At the same time, they laid off about 460 employees, mostly police and firefighters, records show. The state does not have records for every town, but officials say they believe this pattern was repeated across New Jersey.
East Orange, for example, laid off 55 employees last year while paying nearly $1 million in unused sick and vacation time to a dozen workers, mostly police and fire. The city took out a special emergency note to make the payment, which carries an interest rate of 2.25 percent, records show.
Jim Ryan, spokesman for the state Police Benevolent Association, said cities that previously benefited when employees skipped vacations to work contributed to the problem because they failed to first calculate the cost of the payouts in the rush to lay off police and push veterans to retire. The result, he says, is that departments are dangerously depleted.
"The majority of our members are on the front lines and don’t benefit," said Ryan. "It’s the administrators getting the big paychecks and leaving our members behind in depleted departments and without proper backup."
Asked how the public can reconcile the large payouts with the layoffs and diminished services, East Orange Business Administrator Jillian Barrick said, "There’s really no good explanation for it."
Gov. Chris Christie says this is an age-old practice that has be stopped.
"Sick leave is to be used when you are sick, not as a supplemental retirement fund paid for by the taxpayers for people who already have taxpayer-funded pensions," he said in vetoing legislation that would have capped sick-time payouts.
Jersey City paid more than $15 million last year to departing employees, even as it nearly gutted its police department to bridge a budget deficit. The city borrowed $9 million, at 4 percent interest, to make the payment and expects to take out a similar loan this year.
"We’re seeing an unprecedented number of retirements. I’ve never seen anything like it," said Jersey City Mayor Jerramiah Healy.
Across New Jersey, 20,237 public employees retired last year, an almost 65 percent increase from the 12,270 who retired in 2009 and the highest number in at least a decade, records show. Union leaders say fear of public-employee benefit reforms was a major reason workers headed for the exits.
The Newark Fire Department illustrates how these payments drove up the cost of shedding veteran employees.
In 2009, 17 employees retired from the department and were paid $1.2 million for unused vacation time, records show. Last year, the number of retirees more than tripled, costing taxpayers about $6.1 million in payouts for unused time.
Collectively, the firefighters cashed in 16,120 unused days, or the equivalent of 44 years worth of time. They were also paid based on their final daily wage, not the wage they earned when they banked many of the vacation days years ago.
Anthony Tarantino, president of the Newark fire union, said the numbers were larger because Christie is scaring everyone into retirement. Newark has not yet provided the The Star-Ledger with records on police and the rest of its work force.
Across the state, the accumulated sick or vacation time pay for departing workers often topped $100,000.
The list of the biggest payout recipients included Jersey City Deputy Fire Chief Robert Flora, who got a $252,000 check. He was making about $155,000 a year when he retired and now collects a $108,620 annual pension. He declined comment.
In Camden, Police Capt. Terrence Grimes retired with an $81,346 annual pension and cashed in more than 450 days in exchange for a $210,981 check, records show. When reached by phone, Grimes declined comment.
Of the 188 police and firefighters that left Jersey City, 31 got checks of more than $100,000, including four who received a check for more than $200,000. In Atlantic City, 23 got checks totaling more than $100,000, including five who received more than $200,000.
"I think that’s an awful lot of money to walk out the door with," said Healy. "I think the practice needs to be curtailed so that a mayor and taxpayers 20 years from now are not bearing the burden."
Healy said one of the problems is the calculations are based on unreliable records that date back nearly 30 years in some cases. He said it’s the rough equivalent of the "honor system."
The issue hits home in Camden, a chronically poor city with one of the nation’s highest crime rates. Last year, as it faced a $26 million budget deficit, Camden cut checks totaling more than $3.5 million to 80 departing workers for unused sick and vacation time — an average of $43,750 per employee.
This year, Camden laid off half of its police department and a third of its fire department. Since the layoffs, violent crime in the city has spiked 19 percent, according to the latest figures released by the Camden County Prosecutor’s Office. The city was able to rehire 85 of the 223 laid-off police and firefighters thanks to emergency funding from the state and federal governments. Officials have yet to calculate the sick and vacation time payments to the laid-off workers.
The Star-Ledger review also found:
• Atlantic City Mayor Lorenzo Langford laid off 60 police officers and 30 firefighters last year to plug a $10 million budget shortfall — on top of 78 retirements that ultimately cost local taxpayers $7.1 million for unused sick and vacation time, records show. About $1.9 million of those costs will be paid in annual installments over the next three years.
• Hackensack borrowed $3.3 million to pay 24 employees for unused sick and vacation time, an average of $137,500 per worker. The city also borrowed $1.03 million to pay eight employees for their unused time with one caveat: They are still working. "They were veteran employees, and we were afraid of the brain drain," said City Manager Stephen Lo Iacono. "And they were afraid of what was going on in Trenton."
• South Brunswick borrowed $525,000, at 1.5 percent interest, to pay 18 retiring police officers for their unused sick and vacation time, records show.
• Cities that capped payments shelled out less per employee. With its payments capped at $20,000, Trenton paid about $2 million to 169 departing workers, $11,764 per person. Jersey City, which has no caps, paid about $54,000 per person.
The ability to cash in unused sick and vacation time, a controversial issue for years, is coming under more scrutiny as municipal budgets are squeezed.
Christie and lawmakers from both parties criticize them as archaic benefits handed out by politicians who curried favor with unions but are no longer around to pay the bills. Union leaders, particularly those with police and fire, say they compensate workers who often sacrifice time with family and friends to be on the job.
Lawmakers last year passed a bill to cap payments at $15,000 for new workers, while freezing the amount of accrued time for veteran employees. But Christie conditionally vetoed it, saying the benefit should be eliminated for future employees.
State Sen. Paul Sarlo (D-Bergen), the bill sponsor, said that even if the state acted today, cities and towns still have to pay the hundreds of millions that have already been promised.
He said he is negotiating with Christie’s office, saying they are not far apart but that a sticking point is Christie’s demand that current workers burn at least some of their banked time before taking new sick or vacation days. Christie spokesman Michael Drewniak confirmed that talks are ongoing but would not discuss details.
The state Police Benevolent Association does not oppose caps and has no other position other than it should be collectively bargained, Ryan said.
Dressel said that until Trenton acts, cities and towns will continue to incur more costs.
"The economy has forced these issues to the top, and there is a lot to blame to go around," he said.
The Star-Ledger attempted to reach several of the employees who retired with substantial payouts. They either refused to comment or did not return calls.