Comptroller: NJ towns flout sick-time payout rules, wasting taxpayer dollars

Karen Yi

Published Jul 7, 2022

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Karen Yi

Published Jul 7, 2022

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Nearly every New Jersey municipality reviewed in a recent probe ignored state laws capping sick and vacation leave payouts for their workers, in at least one case wasting nearly $200,000 of taxpayer money, the state’s top auditor says.

The Office of the State Comptroller probed 60 municipalities — selected based on their budgets and population sizes — and found 95% violated measures approved in 2007 and 2010 that were designed to curb employee benefit costs and avoid cushy payouts to government workers.

Just three of the 60 towns were entirely abiding by the laws, the agency said in a report released Thursday.

“Laws that were intended to lower property taxes are being ignored and violated in a staggeringly high number of municipalities,” acting Comptroller Kevin Walsh told reporters during a Thursday press call. “Municipalities are annually handing out what are effectively unlawful, under-the-radar annual bonuses. Waste is happening today and towns have committed themselves to even more waste in the future.”

Laws that were intended to lower property taxes are being ignored and violated in a staggeringly high number of municipalities.

Kevin Walsh, acting New Jersey state comptroller

Walsh said the most egregious rule-breaking included towns paying employees for unused sick time every year as bonuses, when state law mandates those benefits be paid only at retirement. Towns also offer costly retirement payouts that exceed state caps, his office’s review found.

“This is the tip of the iceberg. It could be hundreds of local governments in New Jersey that are similarly wasting public funds or committing to do so in the future,” Walsh said. “We've seen no indication that these laws are confusing. They're fairly plainly written.”

His office pointed specifically to the example of Palisades Park, where a business administrator’s contract called for him to receive $360,000 alone for “all accrued and accumulated sick, personal, severance and vacation time” as of the end of 2019. That included $160,000 for improper sick and vacation leave, the report said. The same business administrator collected unlawful sick leave payouts of nearly $10,000 each in 2018 and 2019, it said.

Walsh said a pair of reforms passed more than a decade ago had “failed more than succeeded.” He recommended municipalities review their procedures and come up with corrective action plans that could include recouping taxpayer money from the employees. He also called on the state Legislature to task a state agency with enforcement and amend laws to ensure municipal compliance.

Spokespeople for Gov. Phil Murphy and state Senate President Nick Scutari each said their offices would review the report and recommendations.

"[Assembly Speaker Craig Coughlin] remains steadfast in his goal of making New Jersey more affordable and will review the report to determine whether legislative action in this area can help support that goal,” spokesperson Regina Wilder told Gothamist.

Lawmakers first capped sick and vacation leave payouts for certain high-level public employees in 2007, following recommendations from a governor’s task force, the State Commission of Investigation and a legislative committee, aiming to control runaway costs caused by top officials using unclaimed benefits to pad their salaries. The Legislature limited sick leave for those senior employees to $15,000, payable only at retirement, but allowed those who had accumulated more than that already to keep those benefits.

In 2010, lawmakers expanded payout restrictions to all employees hired from that point on. The laws also bar employees from rolling over more than one year’s worth of vacation leave.

But the report found nearly all of the surveyed towns were ignoring the rules in their ordinances, employee handbooks and contracts. Fifty-six of the 60 towns failed to comply with the 2010 law and 41 were in violation of the 2007 law, it found. In all, 57 of the towns had violated at least one of the two laws.

Among the violations the report flagged: 13 municipalities permit yearly sick leave payments, 22 have no $15,000 sick leave cap and 29 allow payouts when a worker resigns or dies, not just at retirement. Some municipalities also waited years — in one case, five years after the 2010 law went into effect — to make employees subject to sick pay caps.

The comptroller’s office only analyzed municipal governments and did not include school districts or other public bodies, like water commissions or sewer authorities. Walsh predicted those sorts of government entities were also likely making illegal payments.

Walsh said his office didn’t quantify the cost of the violations to taxpayers, but estimated it at hundreds of thousands of dollars, and said the cost could reach into the millions if payment in excess of the state caps were allowed to continue.

He said there was no clear reason for why the law was being ignored, but said municipalities offered a range of responses, ranging “from ‘OK, we'll take a look at it’ all the way up to, ‘We didn't know that law was on the books.’”

“There are some municipalities that suggested that they knew that they were unlawful, but they were policies that were put in place by a prior administration,” Walsh said.

His office also released a public dashboard residents can use to track whether their towns were surveyed and found to be violating state law.

This story has been updated with additional information.

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Karen Yi

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Karen Yi covers homelessness and poverty. She joined the WNYC and Gothamist newsroom in 2020. Before that, Karen covered Newark for the Star-Ledger and spent almost a decade working for newspapers in New Jersey and Florida. She grew up in Miami and has a dog named Cashew. Got a tip? Email [email protected] or Signal 917-589-1460.

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