TRENTON – Nearly every town surveyed by the state comptroller’s office is making excessive payments to public employees for unused sick leave or has language in place to allow it, in violation of state law.

In a report issued Thursday, the Office of the State Comptroller said 95% of the 60 municipalities it surveyed – that’s all but three – were not following laws limiting sick leave payments, which it called a waste of taxpayer funds that adds to property tax bills.

Many towns allow public workers to convert unused sick days into yearly bonuses. Some promised to make large payments years down the road, which is prohibited and can potentially increase a worker’s pay by hundreds of thousands of dollars.

“Taxpayers’ money is being wasted in ways that violate New Jersey law,” said acting Comptroller Kevin Walsh. “Municipalities are agreeing to make huge payments in the future. Laws that were intended to lower property taxes are being ignored and violated in a staggeringly high number of municipalities.”

Walsh said his office hasn’t yet quantified how much has been wasted but that a majority of the municipalities surveyed have already wasted public funds while some have policies that will allow for it.

“It could easily be millions. It could easily be tens of millions,” Walsh said. “Over time, it could exceed that.”

The comptroller’s survey found:

  • 80% are letting employees cash out their sick time when they resign or change jobs
  • 60% allow payments over the $15,000 cap
  • 48% can give employees annual payouts for their unused sick days

“Municipalities are annually handing out what are effectively unlawful, under-the-radar annual bonuses,” Walsh said. “Waste is happening today, and towns have committed themselves to even more waste in the future.”

Acting State Comptroller Kevin Walsh (Townsquare Media NJ)
Acting State Comptroller Kevin Walsh (Townsquare Media NJ)
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Sick leave payouts – derided as ‘boat checks’ by then-Gov. Chris Christie – aren’t prohibited in New Jersey, but limits on them were enacted in 2007 that apply to senior employees and 2010 that apply to all employees hired after that date.

Michael Cerra, the executive director of the New Jersey State League of Municipalities, said local governments need to review policies, ordinances and contracts to make sure their language comply with current law.

But Cerra said the issue is also complex because the Public Employment Relations Commission, which oversees public contracting, interprets the section of the law that addresses conversions of annual vacation time into payments differently than the comptroller does, leaving towns caught in the middle during contract talks.

"There are significant challenges to interpreting what was the legislative intent," Cerra said. "If you want to play the blame game, I think there's plenty of blame to go around when there are different interpretations of the law, when it has to be negotiated at the local level between the local governing unit and the collective bargaining unit.

"And when there are differing interpretations floating out there, it's not necessarily language that you can remove from a contract because you're not sure if the agency is going to back you up or not," he said.

The comptroller’s office checked whether towns pay more than $15,000 for unused sick leave; give months’ worth of ‘terminal leave’ time off before retirement; agree to yearly sick-leave payment; provide financial incentives for unused sick leave; provide sick-leave payments when an employee resigns or switches jobs; and let employees roll over more than one year of vacation time.

“The reform that was initiated in 2007 and expanded upon in 2010 appears, at least based on the 60 municipalities we looked at, to have failed more than succeeded,” Walsh said. “The Legislature in 2007 and 2010 thought it has solved the problem, but there are a lot of signs that New Jersey’s towns have disregarded the law.”

The only three towns of the 60 surveyed that were found to be following all the sick-leave rules were Holmdel, Montgomery and Upper Township.

Franklin Township in Somerset County, South Brunswick, West Windsor and West Milford are violating five of the six restrictions analyzed. Thirteen towns violate four of the restrictions, 21 violate three, 15 violate two and four violate just one.

“Municipal officials who let this waste occur on their watch should be held accountable,” Walsh said. “If I were a resident of one of the towns that already wasted my funds, I would want to know how this happened. Who let it happen? How much money was wasted? These are all fair questions for New Jersey residents who pay taxes.”

Walsh said mayors in towns not complying with sick-leave laws should question their municipal attorney, chief financial officer, town administrator and auditor as to how it has happened.

The municipalities violating the sick-leave rules have until Sept. 30 to send the comptroller’s office a corrective action plan.

Cerra said the takeaway from the report should be a need to clarify things at the state level so towns can more easily follow the Legislature's intent.

"I don't think anyone can really say there's a willful disregard to follow the law here based on the report itself, which acknowledges differing interpretations by different state agencies, which acknowledges that in many cases this is at the collective bargaining table," Cerra said.

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The report concludes that there are no enforcement mechanisms to ensure the sick-leave laws are followed. It said a person within each local government should be designated to monitor it, a specific state agency should enforce it, and all payouts beyond standard pay should be posted publicly and approved by the municipal council.

Michael Symons is the Statehouse bureau chief for New Jersey 101.5. You can reach him at michael.symons@townsquaremedia.com

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