August 23, 2019 Edition
Vote-by-Mail
On September 23rd, the New Jersey Council on Local Mandates will hear NJAC’s complaint that the 2018 vote-by-mail law imposes an unfunded mandate on county governments and is unconstitutional as it requires county clerks to add to the list of registered voters receiving mail-in ballots in all future elections: all voters who requested and received mail-in ballots for the 2016 general (presidential) election. Last month, NJAC prevailed over the Attorney General’s motion to dismiss the matter before the Council; and, we’re optimistic that the Council will rule in our favor on September 23rd as we’ve clearly established that the new law imposes additional expenditures upon counties without a funding mechanism and does not fall within one of the constitutional exceptions.
Hunterdon County Clerk and NJAC Immediate Past President Mary Melfi and NJAC, recently conducted a survey of five randomly selected counties Camden, Cape May, Hunterdon, Sussex, and Union) to determine the actual costs incurred the 2019 primary election. In summary, these counties spent $134,380.00 to implement the 2019 primary election and expect to spend that same amount to implement the 2019 general election for a total of $268,760.00. Please note that that this figure does not include labor costs associated with the substantial increase in vote-by-mail ballots nor does the figure include the costs associated with vote-by-mail ballots for any fire election, special school election, or municipal election at an estimated total cost of $5.0 million per year.
In light of the fact the Legislature will hold a special quorum call later this morning to address its concerns with the 2018 vote-by-mail law following the Division of Elections recent ruling concerning voters who requested vote-by-mail ballots in 2017 and 2018, NJAC is urging the Legislature to include in any revision to the vote-by-mail law, an appropriation and permanent source of funding to offset the unfunded costs associated with the 2018 law and any additional changes made to the law. Importantly note that the recent ruling by the Division of Elections does not alter, in any manner, our contention that the 2018 vote-by-mail law imposes an unfunded mandate on county governments and is unconstitutional.
Interest Arbitration
The New Jersey Association of Counties (NJAC), the New Jersey State League of Municipalities (NJLM), the Government Finance Officers Association of New Jersey (GFOA), the New Jersey Association of County Administrators (NJACA), the New Jersey Conference of Mayors (NJCM), and the New Jersey Municipal Management Association (NJMMA) have asked to meet with State leaders to discuss permanently extending the 2.0% cap on binding interest arbitration awards.
Our collective organizations, which represent all 21 counties, 565 municipalities, 600 finance officers, and 200 municipal managers, have adopted permanently extending the 2.0% cap on binding interest arbitration awards as our top legislative priority. As predicted, the failure to permanently extend this law in December of 2017 has inequitably altered the collective bargaining process in favor of labor at the expense of property taxpayers as police and fire unions have been aggressively leveraging its expiration to win contracts that far exceed the 2.0% spending cap imposed on local governing bodies for nearly a decade. As has been well documented, the 2.0% cap on binding interest arbitration awards allowed local governments to live within their limited means and kept public safety employee salaries and wages under control, simply because parties were closer to reaching an agreement from the onset of negotiations. Moreover, the 2.0% cap on binding interest arbitration awards established clear parameters for negotiating reasonable successor contracts that preserved the collective bargaining process and took into consideration the separate and permanent 2.0% spending cap.
Recent arbitration decisions underscore the vital need to restore the cap. Although it was widely reported that the awards granted modest annual salary increases of 2.0% – 2.25%, a closer analysis of the West Windsor contract demonstrates a more significant economic impact of which is not readily disclosed in the award. To illustrate, the table below reveals that the actual annual salary increases range from a minimum of 8.54% to a maximum of 20.54% when step increases are included with the above raises. These substantial increases do not include: longevity pay; employer pension contributions, which equal approximately 30.0% of the annual salary of a public safety sector employee enrolled in the Police and Firemen’s Retirement System (PFRS); and, an additional 20.0% – 35.0% in employer health benefit contributions.
The equation is clear, failure to renew and permanently extend the 2.0% cap on binding interest arbitration awards is unsustainable without increasing property taxes, reducing non-union staff, or eliminating essential services. Moody’s Investors Services, Fitch Ratings, and Standard and Poor’s all agree and have issued stern warnings about allowing the cap’s expiration. Of note, Moody’s submitted “that salary costs are among the largest of municipal expenditures, the cost implications are obvious and considerable,” and that “the effect of this is, in most cases, unlikely to be rapid, but ultimately, the loss of the arbitration cap is likely to cause the public sector’s credit quality to deteriorate.” Fitch Ratings concluded that “the arbitration cap is beneficial to local government credit quality as it helps to align revenue and spending measures and supports structural balance in the context of statutory caps on property tax growth.
NJAC has also drafted a model resolution for all 21 counties to adopt that urges Governor Phil Murphy and the New Jersey State Legislature to enact legislation that will permanently extend the 2.0% cap on binding interest arbitration awards that expired in 2017; and, to further require the Public Employment Relations Commission (PERC) to include in all arbitration awards: a full financial impact statement that summarizes the total cost of all awards in a clear, concise, and transparent manner.
Statute of Limitations
On August 9th Governor Murphy signed into law Assembly, No. 5392 (Quijano D-20/Murphy D-7)(Vitale D-19/Scutari D-22), which establishes new liability standards in sexual abuse lawsuits filed against public entities and public employees. In general, the measure would establish standards that would be identical to the liability standards applied to non-profit organizations under the Charitable Immunity Act.
As you may recall, earlier in the year, Governor Murphy also signed into law Senate, No. 477 (Vitale D-19/Scutari D-22), which eliminates the statute of limitations in certain civil actions for sexual abuse and expands the categories of defendants liable in such actions effective December 1, 2019. In light of the concerns expressed by NJAC, the New Jersey State League of Municipalities (NJLM), and the New Jersey School Boards Association (NJSBA) that S-477 law effectively eliminates the safeguards provided local governing bodies under the New Jersey Tort Claims Act (TCA) as all lawsuits are defended with limited property taxpayer dollars, the sponsors introduced A-5392 to re-establish some additional layers of protection for local governing bodies while preserving the intent of the S-477. Please note that S-477 and A-5392 present several complex legal challenges, and we recommend county counsels to review both measures in their entirety as this summary provides an abridged version of the matter.
County Correctional Police Officers
Also, on August 9th, Governor Murphy signed into law Senate, No. 1739 (Van Drew D-1/Oroho R-24)(Land D-1/Andrzejczak D-1), which would retitle county correction officers as county correctional police officers.
Earlier this year, the Legislature amended the bill to clarify that the measure would not authorize the transfer of pension benefits from the Public Employee Retirement System (PERS) to the Police and Firemen’s Retirement System (PFRS) for county correction officers. NJAC advocated for this change to clarify that the bill would not alter the pension benefits of any person whose title would change. In general, county correction officers that participate in PERS are typically hired by counties at 35 years of age or older or fail to meet other PFRS requirements. Approximately 250 county correction officers statewide fall into this category, and that the transfer of these employees from PERS to PFRS would cost approximately $3.7 million per year statewide for active employees. Please note that the current employer pension contribution rate for PERS employees is 13.37% of an employee’s annual salary, while the current employer pension contribution rate for PFRS employees is 27.3%. This figure does not include employees who would transfer from PERS to PFRS and then retiree, and that PFRS retirees are costlier for local governing bodies as their pension benefits are greater and may be taken for a longer period of time.
In general, the new law directs the Civil Service Committee to retitle county correction officers as county correctional police officers, sergeants as county correctional police sergeants, lieutenants as county correctional police lieutenants, captains as county correctional police captains, deputy wardens as county correctional police deputy wardens, and wardens as county correctional police wardens. The law also requires any fees associated with the retitling to be borne by the corrections officer whose title has been changed such as any costs associated with an updated uniform, badge, or equipment.
Job Applicant Wage and Salary Experience
On July 25th, Governor Murphy signed into law Assembly, No. 1094 (Downey D-11/Lampitt D-6)( (Gill D-34/Weinberg D-37), which prohibits employer inquiries about a worker’s wage and salary experience under certain circumstances.
In summary, this new law makes it an unlawful employment practice for any employer: to screen a job applicant based on the applicant’s salary history, including, but not limited to, the applicant’s prior wages, salaries or benefits; or, to require that the applicant’s salary history satisfy any minimum or maximum criteria. Under the law, an employer may consider salary history in determining salary, benefits, and other compensation for the applicant, and may verify the applicant’s salary history, if an applicant voluntarily, without employer prompting or coercion, provides the employer with that salary history. An applicant’s refusal to volunteer compensation information would not be considered in any employment decisions. An employer may also request that an applicant provide the employer with a written authorization to confirm salary history, including, but not limited to, the applicant’s compensation and benefits, after an offer of employment, which offer includes an explanation of the overall compensation package, has been made to the applicant.
The measure does not apply to: applications for an internal transfer or a promotion with an employee’s current employer, or use by the employer of previous knowledge obtained because of prior employment with the employer; any actions taken by an employer pursuant to any federal law or regulation that expressly requires the disclosure or verification of salary history for employment purposes, or requires knowledge of salary history to determine an employee’s compensation; and, any attempt by an employer to obtain, or verify a job applicant’s disclosure of, non-salary related information when conducting a background check on the job applicant, provided that, when requesting information for the background check, the employer shall specify that salary history information is not to be disclosed. If, notwithstanding that specification, salary history information is disclosed, the employer shall not retain that information or consider it when determining the salary, benefits, or other compensation of the applicant.
The new law further provides that employer inquiries regarding an applicant’s previous experience with incentive and commission plans and the terms and conditions of the plans, provided that the employer shall not seek or require the applicant to report information about the amount of earnings of the applicant in connection with the plans, and that the employer shall not make any inquiry regarding the applicant’s previous experience with incentive and commission plans unless the employment opening with the employer includes an incentive or commission component as part of the total compensation program.
Transportation Trust Fund Capital Projects
On July 23rd, Governor Murphy signed into law Senate, No. 876 (Sweeney D-3/Oroho R-24)(DeAngelo D-14/Bucco R-25), which revises the process for administering capital projects under the Transportation Trust Fund (TTF).
Relevant to county government, the new law requires the New Jersey Department of Transportation (DOT) to develop an annual highway project priority list for each county. The highway project priority list is a list of State highway projects chosen by the counties in which the projects are located, from a candidate list provided by DOT to the counties of all structurally deficient State bridges and State highway pavement areas in less than acceptable condition. The DOT Commissioner must consider each highway project priority list for the inclusion of those projects into the capital program subject to the availability of funds. If the State is unable to begin a project on the highway project priority list that was included into the capital program within three fiscal years, the county may confer with the department, and if the department finds that allowing the county or the South Jersey Transportation Authority to take over the project is cost-effective and will expedite completion of the project, the department can transfer the project to the county or the South Jersey Transportation Authority.
DOT will remain responsible for the cost of the project and provide payments to the county for the cost of the project on a reimbursement basis until the costs exceed the most recent estimated cost for the project developed as part of the project schedule or, if unavailable, the estimated cost developed with the initial project schedule. If the cost of the project exceeds already existing capital program appropriations for that project, the department is to deduct the necessary amounts from the amounts granted to that county from the local county aid program for the fiscal year in which the costs arise or for one or more future fiscal years as determined by the commissioner. Projects on the list that are transferred to a county or the South Jersey Transportation Authority are still required to adhere to all existing State procurement laws, including those applying to bidding and business set-asides.
The measure also permits DOT to bundle the design of certain transportation design projects funded, in whole or in part, by the Transportation Trust Fund. Projects that are eligible to be bundled are projects of similar complexity, project type, or geographic proximity, that are of similar size or design, where the bundling of design projects will not require more stringent environmental review, and whose inclusion in the program will save the department time and money. The purpose of the program is to save costs and time by allowing multiple transportation projects to be designed under a single contract. Contracts issued under the design bundling program are still required to adhere to all existing procurement laws, including those applying to bidding and business set-asides.
Landfill Gas to Energy Facilities
NJAC is urging Governor Murphy to sign into law Assembly, No. 3726 (Kennedy D22)(Smith D-17/Bateman R-16), which would require large food waste generators to separate and recycle food waste under certain circumstances.
NJAC is grateful to Senator Bob Smith and the Senate Environment and Energy Committee for taking the time work with the Association throughout the legislative process and recognizing the need to hold harmless and exempt existing landfill gas to energy facilities (LGTE) that have committed considerable public resources to cutting edge recycling and solid waste management activities. As has been well documented, Atlantic, Burlington, Cape May, Cumberland, Middlesex, Ocean, Monmouth, Salem, and Sussex counties have invested substantial taxpayer dollars into state of the art LGTE facilities that utilize methane gas produced from decomposing organic food waste to generate renewable Class One electricity under the “Electric Discount and Energy Competition Act.”
Additionally, this legislation addresses our initial concerns with the bill as introduced that mandating the source separation of food waste from other streams of waste would divert large volumes of critical material from these facilities, which in turn, would adversely affect the quantity and quality of the gas relied upon – ultimately jeopardizing their economic viability. Importantly note that last minute amendments to the legislation on June 25th would provide similar exemptions to resource recovery facilities that utilize anaerobic digestors under certain circumstances. Although NJAC has not taken a position on these specific amendments, environmentalists strongly oppose the last-minute exemption but have remained neutral on the LGTE exemption.
On July 26th, NJAC met with Governor’s Counsel to discuss the measure in detail and is encouraging affected counties to contact Governor Murphy as the Legislature will hold a special quorum call later this morning to introduce legislation to address the 2018 vote-by-law as discussed above. Although a separate matter, the Legislature’s action will force Governor Murphy to act on the measure since it passed both houses on June 27th and the State’s constitution generally provides the Governor 45 days to sign a passed bill into law. However, pursuant to Article V, Section I, 14 (C)(1) of the Constitution, “the period allowed for the Governor’s consideration of a passed bill shall be from the date of presentation until noon of the forty-fifth day next following or, if the house of origin be in temporary adjournment on that day, the first day subsequent upon which the house reconvenes….” In other words, the Governor has until Saturday to act on the bill.
Plug Pension Hole By Curbing Traditional Plan? It May Not Be Best Strategy by John Reitmeyer, NJ Spotlight, August 14, 2019
Closing a traditional pension plan to new workers has yet to fix pension-funding problems in several states where it’s been tried, according to a new report that takes a close look at reform efforts across the nation.
Instead, the report from the National Institute on Retirement Security, a nonpartisan and nonprofit research organization, found that costs often increased. In some cases, the authors noted, the states had trouble recruiting and retaining workers without being able to offer them a so-called defined-benefit retirement plan, one in which payments are based on salary and length of service and not investment results. The NIRS report — which used Alaska, Kentucky, Michigan and West Virginia as case studies — also highlighted how important it was for government employers to adequately fund their workers’ retirement plans.
“Responsible funding of pension plans is key to managing legacy costs associated with these plans,” the report said. “The experience of these states shows that changing benefits for future hires does not address an existing funding shortfall.” New Jersey has one of the nation’s worst-funded public-worker retirement systems. It’s also one of the states where some lawmakers have backed the idea of moving at least some employees out of traditional retirement plans to address the pension deficit.
Leading the latest push in New Jersey is longtime Senate President Steve Sweeney (D-Gloucester). Among other reforms, Sweeney has backed the proposal of a nonpartisan fiscal policy group he empaneled to establish a new, hybrid retirement system for new workers and those with less than five years of service. Under that plan, teachers and other government workers — but not police officers, firefighters and judges — would start to receive a defined-benefit pension on only up to $40,000 of salary. For any additional earnings, the affected workers would be enrolled in a hybrid “cash-balance” savings plan that would not require a matching contribution from the state. The plan would guarantee a 4-percent annual return for workers, and also offer a chance to do better based on how general pension-fund investments perform. Workers would also be required to continue making their full contributions into the retirement system, a feature that is specifically designed to avoid the funding problems experienced in other states that have gone away from a traditional plan.
Public-worker union officials have contended the changes would erode retirement security while doing little to address the pension system’s already huge unfunded liability — more than $100 billion, according to some estimates. They have also accused Sweeney of using the pension-reform proposal as a distraction after he signed off on major tax breaks enacted during former Gov. Chris Christie’s tenure that significantly reduced the state’s revenue stream — just as a new effort was being made to ramp up state pension contributions in response to the growing deficit in state retirement funds.
Sweeney maintains the reforms, coupled with proposed changes to employee healthcare plans, would save the state and local governments billions of dollars in coming decades. He’s also threatening to put the proposed benefit changes before voters next year as a constitutional amendment if Gov. Phil Murphy — a union ally who favors increased pension funding and negotiated healthcare savings — stands in the way. Murphy has increased state pension payments incrementally in recent years, but he’s also continued the longstanding tradition of only partially funding the state’s annual pension contribution as he’s also boosted spending on K-12 education, mass transit, community college tuition assistance and other areas.
According to the NIRS report, Kentucky, when faced with its own severe pension-funding challenges, moved new employees into a hybrid system in 2014. But that change will not “meaningfully impact” the state’s pension-plan payments for decades because of the state’s already huge “legacy costs,” the report said. “As an alternative strategy, the state might have been better served by incentivizing those near retirement to work a few additional years and to delay benefit payments from a solvency-challenged system, instead of focusing on policies that would take decades to impact plan cash flows,” the report said. The authors gave credit to Kentucky policymakers for sticking with a plan to boost state pension contributions. But they also noted one of the state’s five funds saw its funded ratio plummet from 23 percent to 13 percent even after the benefit change was enacted. “The state cannot cut its way out of its funding problems by continuing to reduce retirement benefits for public employees,” the report said.
The changes made in Alaska, Michigan and West Virginia all predate Kentucky’s more recent reforms, and all three opted to move employees from defined-benefit into investment-results-based plans, also known as defined-contribution retirement plans. Yet despite closing its traditional plan in 1997, Michigan is still struggling with a significant unfunded pension liability, the report said. “Meanwhile, the financial security of its public employees is at risk, as the defined contribution plan that replaced the (traditional) pension plan will provide far less income in retirement.” Alaska closed its defined-benefit pension plans for teachers and other government workers in 2005, and the report’s authors cited evidence that not offering employees a defined-benefit retirement plan has been hurting efforts to recruit workers. They also noted that the state’s rural geography plays a role in thwarting recruitment efforts.
“The lack of a defined benefit pension plan and competitive benefits in general is often directly cited as a major reason why Alaska struggles to recruit teachers, state troopers, and other public employees,” the report said. Meanwhile, in West Virginia, policymakers decided to reopen the pension plan for teachers in 2005, and it has resulted in funding improvements as new members have joined the plan and begun making contributions that help offset its liabilities, the report said. “Importantly, West Virginia committed to full funding after reopening the plan,” the report said. “That commitment, combined with the contributions of new members and positive investment returns, have allowed the plan to slash its unfunded liability.”
Relief that $125M for Upgrades to NJ Libraries Finally on the Horizon by Colleen O’Dea, NJ Spotlight, August 6, 2019
It could be at least six more months before New Jersey libraries get any money from the $125 million bond issue voters approved 21 month ago, but local officials are pleased that the process for determining who will get money finally is underway. State library officials expect to be inundated with applications because the state has not provided capital funds to libraries in two decades.
The State Librarian is taking comments through August 30 on regulations implementing the bond issue, which will provide money to upgrade and modernize libraries across the state. Local elected officials and librarians have been waiting for the proposed rules, which fill roughly seven pages, since the passage of the bond question in November 2017. Sixty percent of voters supported the spending. “We are very happy the process has started,” said Patricia Tumulty, executive director of the NJ Library Association. “Libraries throughout New Jersey have been watching this very closely.”
According to the proposed rules, libraries will be able to apply for funds to buy new technology, make their buildings accessible to people with disabilities, add public meeting spaces, make necessary safety repairs and provide additional public services, including support of education, employment, welfare, job training and civic services.“ All people of New Jersey should have equitable access to New Jersey’s public library facilities, collections, technological resources, and services regardless of age, color, race, religion, or creed, socioeconomic level, or disability,” state the rules. The proposed regulations note that a 2014 survey found numerous libraries lacked ramps or elevators or were otherwise inaccessible to the disabled. That same survey also found a number of libraries were at least 75 years old, had not been renovated in a quarter of a century or more and had safety issues. The state library is still compiling responses to a more recent survey, but as of mid-May, 60 libraries had responded with plans to spend $185 million.
“There has been a tremendous amount of interest,” said Tina Kersztury, who worked on the last library bond issue and is now serving as a consultant to the state library. “We are expecting many applications from many, many libraries. We know libraries have been waiting a long time.” The regulations would cap at $350 the amount of spending per square foot that libraries could seek for new construction and $200 for renovations, “to promote the most prudent and efficient use of state grant funds.” The state will fund half the cost of projects that are approved and meet those caps, while local libraries are required to match that. That means the total investment is likely to exceed $250 million.
Among the criteria that will be used to evaluate applications are how well the plans meet current and future needs of the community, whether they meet state-of-the-art energy efficiency and health standards and their ability to serve the community during times of emergency — for instance, providing electricity to allow for phone charging when power is out due to a major storm. Woodland Park’s library needs would seem to meet all the criteria the state has set. Linda Hoffman, the library director, said the facility needs improvements to make it conform to the federal Americans with Disabilities Act, and currently holds adult programming in the children’s room due to a lack of space. “We have outgrown our space and cannot serve our patrons at the optimal standard in which a public library should operate,” she said. “Currently, our library does not have a meeting or programming room … Waiting lists for all programs have become the norm due to inadequate space. We need more space to provide essential services to our residents, such as career assistance, job training seminars, English Language Learning classes, citizenship classes, and civic services.”
Hoffman added that the library makes an ideal emergency resource center in a borough that contains two rivers that are the cause of major and flash flooding. Once the rules are finally adopted, which won’t happen before the end of September, the application process is likely to continue through the end of the year. Then the applications will be evaluated and the president of Thomas Edison State University, who oversees the state library, will decide which projects to recommend for funding. Finally, because the money will come from general obligation bonds, the Legislature must vote to provide the funds to the libraries. It could be next spring before the first money is awarded. That means construction won’t begin until more than two years after the successful vote. “We know we won’t be seeing any money until sometime next year,” Tumulty said. “Hopefully there won’t be any further delays.” Both local officials and lawmakers had questioned why it was taking so long to promulgate the regulations. State library officials said the change in administrations was at least partly to blame — Gov. Phil Murphy was elected in the same November 2017 election.
Funds from the state’s last bond issue, the 2012 Building Our Future Bond Act for state higher education construction, were appropriated just nine months after voters approved that question. “Although it has taken much longer than anyone anticipated, I am grateful that the opportunity is available,” Hoffman said. “I am relieved … that the process is in motion, since our building continues to deteriorate: broken seals on our windows, doors that need replacing, furniture getting weary, paint fading, and all of the many other weaknesses of an aging building. It is difficult making decisions whether or not to replace or fix issues, barring safety concerns, until we know if the funding will be available for this project.”
Hoffman added that further delays in the process “can result in a possible rise in construction costs and that is always a concern.” On the other hand, she said the extra time has allowed them to raise more money for their match. Kathleen Peiffer, deputy state librarian, said that while completing the proposed regulations took time, working with various agencies and the governor’s office was important. “It really was time very well spent, even though it slowed the process,” she said. New Jersey officials are working on another bond issue at the same time. This one, approved by voters last November, will provide $500 million to fund a variety of public- school projects: expanding career-training facilities at high schools and county colleges, upgrading school security, and protecting students from lead in the drinking water of school systems around the state. It’s unclear how long it will take to get these regulations written and funding out to schools.
Upcoming NJAC Events
Please make sure to visit our website at www.njac.org for additional details about the “New Jersey County Administrators Program” set for September 27th and October 4th and our next Board of Directors meeting on September 13th.
State House Trivia: Did you know that the top 5 summer songs of all time include: 5) Schools Out by Alice Cooper 4) Saturday in the Park by Chicago 3) Summer Breeze by Seals & Croft 2) One Summer Night by the Danleers 1) Under the Boardwalk by the Drifters.
“Summertime is always the best of what might be.” Charles Bowden