CAPE MAY COURT HOUSE – The Herald did a review of the 2021 financial documents for the 16 Cape May County municipalities finding that unused sick and vacation time carried as a liability on town books totaled almost $20 million. When the county financial reports were added to the mix another $7 million augmented the total.
Earlier this year the Office of the State Comptroller issued a report based on a review of sick leave cash out practices in 60 municipalities. The report found that 95% of the municipalities covered in the survey had sick leave cash out policies that failed to comply with a series of changes to state law dating from 2007 and 2010. These statutes placed limitations on when and how municipal employees could be paid for unused sick leave.
Whether or not a municipality is failing to comply with the limitations passed by the legislature involves a complex analysis not just of the liabilities carried by the towns but also their employee policies and negotiated union contracts. The comptroller’s office limited its analysis to 60 locations out of 564 total municipalities in the state because of the effort necessary to investigate compliance.
The changes to the law over a decade ago apply to all of the state’s municipalities, 600 or so school districts, all 21 county governments and other local entities. In some cases employees hired prior to May 2010 were allowed to keep their booked leave. For the towns found to be noncompliant in the Comptroller’s review, corrective action plans are required.
On Nov. 21, the Middle Township Committee approved a resolution granting $58,190 in cash payouts of unused sick leave for 30 township employees. The payouts ranged from $596 to a high of $3,370. The Middle Township resolution from Nov.21 says, “The township allows the cash out of accumulated sick time by employees who meet the guidelines set forth in the personnel policy manual (PPM).” The PPM says that the township uses the cash out option as “an incentive to decrease sick leave usage.” The policy limits cash out of sick leave to a maximum of five hours per calendar year allotment.
There is one major caveat to that policy limit on hours eligible for cash out. The language of the policy acknowledges an exception to the limit where the cash out option is “otherwise provided for in an employee’s collective bargaining agreement.” The township’s union contracts most likely expand the hours eligible as indicated by the number of employees on the 2022 list contained as part of the resolution. Not one of the 30 employees approved for a cash payout of leave was limited to 5 hours. Many cashed out 60 hours.
A significant number of the employees receiving cash out of sick leave in 2022 are police officers with several of them hired after 2010. A state regulation that bars pay out of sick leave except at retirement for employees hired after May 2010 is at odds with many municipalities in New Jersey regarding payment options negotiated as part of collective bargaining agreements.
This situation is not a unique event in Middle Township isolated to 2022. Records show that in 2021 the Middle Township Committee approved cash payout for sick leave for 43 employees totaling $100,171 with a range of $4,459 as a high and $438 as a low. Payouts of banked earned leave also occur regularly as employees retire.
The 2022 financial documents show the township carries liability for earned leave payouts of $1.6 million with $1.1 million of that total connected to three union contracts and $515,508 of the total accounted for by local ordinance covering non-union employees. In 2022, the township appropriated $200,000 in its annual budget toward the reserve for these liabilities. That budget also contained a 5.5% increase in the local purpose property tax rate. $200,000 was also appropriated in the 2021 budget. The total reserve against the $1.6 million liability at the end of 2021 was $270,968.
