SENATE BUDGET AND APPROPRIATIONS COMMITTEE

 

STATEMENT TO

 

SENATE COMMITTEE SUBSTITUTE FOR

SENATE, No. 2

 

with committee amendments

 

STATE OF NEW JERSEY

 

DATED:  NOVEMBER 19, 2012

 

      The Senate Budget and Appropriations Committee reports favorably Senate Bill No. 2 (SCS), with committee amendments.

      As amended, this bill modifies the "Uniform Shared Services and Consolidation Act," sections 1 through 35 of P.L.2007, c.63 (C.40A:65-1 through C.40A:65-35), and the law governing the Local Unit Alignment, Reorganization and Consolidation Commission, P.L.2007, c.54 (C.52:27D-501 et seq.) to encourage and facilitate the provision of local and regional services through shared service agreements and joint meeting contracts.

      The bill amends and supplements the "Uniform Shared Services and Consolidation Act" to expedite the resolution of disputes over Civil Service rules and tenure provisions, which are reportedly responsible for delaying the implementation of shared service agreements and joint contracts.  The bill also makes a number of changes that affect employees of local units that enter into either a shared service agreement or a joint meeting. 

      Most notably, local units would no longer be required to provide employees terminated for reasons of economy and efficiency with a terminal leave payment; the Civil Service Commission would no longer be required to review employment reconciliation plans; and certain provisions of Title 11A, Civil Service, of the New Jersey Statutes, could be relaxed by the Civil Service Commission upon request by the parties to the agreement.  The local unit providing the service would have to decide which employees would transfer from a recipient local unit, subject to the provisions of any existing collective bargaining agreements within the affected local units.  To that end, the bill would repeal certain provisions of the "Uniform Shared Services and Consolidation Act" that preserve the tenure rights of police officers.

      Under current law, the Local Unit Alignment, Reorganization and Consolidation Commission (LUARCC) examines the consolidation of municipalities, the merger of autonomous agencies into their parent municipal or county government, and the sharing of services between municipalities or between municipalities and other public entities.

      This bill clarifies LUARCC’s powers to recommend the consolidation or merger of specific municipalities and autonomous agencies and the sharing of services between municipalities or between municipalities and other public entities.  When considering a possible recommendation for consolidation or the sharing of services, the bill, as amended, requires LUARCC to conduct at least five on-site consultation sessions in each local unit being studied, with the governing bodies, or their designees, and affected officials and other public entities under consideration for consolidation or the sharing of services. LUARCC would be required to include in every consolidation and shared services proposal an estimate of the savings that would result from the implementation of its recommendations.  Once LUARCC recommends a sharing of services, it must hold a series of public hearings in each affected municipality.  The State Treasurer would be required to certify LUARCC’s basis for its fiscal analysis before LUARCC could submit a recommendation to a municipality.  The municipality would then have the right to appeal LUARCC’s estimate of savings resulting from a recommendation to the Commissioner of Community Affairs.

      The bill provides that a LUARCC consolidation recommendation would not be binding on a municipality and there would be no penalty for failing to implement the consolidation.  However, the bill requires a municipality to approve a LUARCC recommendation for the sharing of services within 14 months of the recommendation, and implement the proposal within 28 months.  A municipality could approve the recommendation by adoption of a resolution or ordinance or by adoption by the voters of the local unit.  The bill, as amended, allows a municipality to adopt a resolution or ordinance approving the recommendation subject to voter approval.

      If a municipality does not approve a LUARCC recommendation for the sharing of services, or does not make a good faith attempt to implement the recommendation within the required timeframes, it would be subject to a loss of State aid equal to LUARCC’s estimated cost savings for implementing the recommendation.  A municipality would not be subject to a reduction in State aid if it approved a recommendation for the sharing of services and the failure to implement the recommendation was due to the action or inaction of the governing body or voters of another local unit.

 

COMMITTEE AMENDMENTS:

      The committee amendments modify the requirements concerning employment reconciliation plans under the "Uniform Shared Services and Consolidation Act" to:

·        authorize the parties to a proposed shared service agreement or joint contract to request relaxation of Civil Service rules and regulations in order to permit employees of the local units who are not subject to Civil Service to become civil service employees and part of a uniform employee pool from which the new shared service provider may choose to hire employees.  This permits and expedites designation of a person as a civil service employee, without regard to the normal processes, including testing and employment lists;

·        delete a provision that required local units to make decisions choosing which employees to retain and what titles to place them in within a period of 12 full months;

·        provide that employment decisions made by local units will be subject to the provisions of any existing collective bargaining agreements within the affected local units, including provisions concerning layoff, transfer, seniority, testing, bumping rights, and tenure; and

·        provide that disputes over the operation of collective bargaining agreements pertaining to employment decisions may be resolved through mediation or, if that is unsuccessful, by binding arbitration.

      The committee amendments delete provisions from the bill that imposed a 12-month window for the suspension or relaxation of Civil Service rules and ensured employees certain baseline protections.

      If one or more of the local units that are potential parties to a shared service agreement or joint contract have adopted Title 11A, Civil Service, the committee amendments allow the parties to employ a stratified layoff process, through which, they would assign current employees of the local units to one of three employee bands: executive, managerial, or non-managerial.  Employees within a given employee band would be allowed to invoke seniority in the event of layoffs.  The amendments would prohibit employees assigned to one band from invoking seniority rights over an employee assigned to another band.  Within an employee band, employees would retain and be entitled to exercise all seniority and layoff rights they have under Civil Service law and regulations and under any applicable collective bargaining agreements.

      The committee amendments authorize the Public Employment Relations Commission (PERC) to provide technical advice and mediation services to help resolve disputes over the representation of employees in a merged bargaining unit pursuant to the formation of a joint meeting.  The amendments provide that if disputes over representation cannot be resolved through advice and mediation, PERC shall determine the appropriate units for purposes of collective negotiations and conduct elections to permit employees to select their majority representative.  The amendments provide, however, that agreements between majority representatives regarding the representation of employees in a merged unit are to be binding on the new employer.

      The committee amendments prohibit LUARCC from engaging in a study to examine the sharing of services involving a municipality that could potentially serve as the basis for a recommendation that, if not acted upon, could result in a reduction of State aid if that municipality demonstrates that it is already sharing services with another local unit, unless the commission affirmatively demonstrates that it has already studied all municipalities in the State that are not engaged in sharing services with other local units.

      The committee amendments also prohibit LUARCC from including a county in a study that could potentially serve as the basis for a recommendation that, if not acted upon, could result in a reduction of State aid to a municipality unless a request to undertake the study is agreed to by the governing bodies of the affected municipalities through the adoption of resolutions stating support.

      The committee amendments delete a provision of current law that provides the Legislature a 30-day period to disapprove a LUARCC-recommended consolidation or shared services proposal.

      The committee amendments provide that a local unit must approve a LUARCC-recommendation to share services within 14 months of notice of the recommendation and implement the recommendation within 28 months of notice.

 

FISCAL IMPACT:

      The Office of Legislative Services has determined that the enactment of the Senate Committee Substitute for Senate Bill No. 2, as amended, would have an indeterminate impact on local expenditures, municipal revenues, and State expenditures.  The consolidation of two or more local units, or the implementation of a shared service agreement or joint meeting could result in reduced local costs, but the total amount of savings depends on the nature of the local initiative.  A municipality would lose State aid, in the form of CMPTRA, if it does not: 1) approve a LUARCC-recommended shared services proposal within 14 months following the date of notice of the commission’s recommendation, or 2) make a good faith attempt to enter into and implement the recommended joint contract or shared services proposal within 28 months following the date of the commission’s recommendation.  The State could experience a reduction in expenditures for State aid to municipalities, but these savings could be offset by new costs incurred by LUARCC and the New Jersey Civil Service Commission.

 

Impact on Local Costs

      The consolidation of two or more municipalities or autonomous service agencies, or the implementation of a joint meeting or shared service agreement, could result in a reduction in costs incurred by those entities.  The OLS cannot determine the total amount of savings that would result from the implementation of the bill because that amount would be affected by the details of each consolidation, joint meeting, and shared service agreement.  Local units that enter into a shared service agreement may experience reductions in costs associated with equipment, maintenance, and personnel.  There are a number of factors that affect the amount of cost savings that would result form the consolidation and sharing of services, such as the size of the entities to be consolidated, the type of service to be shared (i.e., code enforcement, health, property assessment, or police), and whether an entity will be required to incur significant up-front costs in order to provide the shared service to two or more municipalities instead of one. 

      To the extent the bill revises current provisions of law that mandate the terms and conditions of shared service agreements, joint meetings, and consolidations, the enactment of the bill may reduce certain financial obstacles to the voluntary implementation of these types of service delivery initiatives.  For example, local units would no longer be required to issue terminal leave payments to employees terminated for reasons of economy and efficiency. Current law requires the municipality that is providing the service under a joint meeting or shared service agreement to provide each employee who is terminated for reasons of economy or efficiency with a payment of one month of their regular base salary at the time of termination for each five-year period of past service as an employee with that local unit.  The repeal of certain protections afforded to police officers, chiefs of police, and employees of local health agencies, as well as the establishment new “stratified layoff process” may also make it less costly for local units to pursue consolidation or the joint delivery of services.

 

Impact on Municipal Revenues

      The implementation of the bill could result in a decrease in State aid distributed to municipalities through the CMPTRA program.  A municipality would be penalized with a reduction in State aid, equal to the amount of net savings that would result from the implementation of a shared services proposal, as calculated by LUARCC, if it does not: 1) approve a LUARCC-recommended shared services proposal within 14 months following the date of notice of the commission’s recommendation, or 2) make a good faith attempt to enter into and implement the recommended joint contract or shared services proposal within 28 following the date of notice of the commission’s recommendation.  A reduction in State Aid is considered a loss of miscellaneous municipal revenues. 

 

Impact on State Expenditures

      The implementation of the bill could result in a decrease in State expenditures from the Property Tax Relief Fund for State Aid to municipalities.  A municipality would be penalized with a reduction in State Aid, equal to the amount of net savings that would result from the implementation of a consolidation  or shared services proposal, if it does not: 1) approve a LUARCC-recommended shared services proposal within 14 months following the date of notice of the commission’s recommendation, or 2) make a good faith attempt to enter into and implement the recommended joint contract or shared services proposal within 28 following the date of notice of the commission’s recommendation.

      Any savings due to reductions in State aid payments could be offset by increased costs incurred by LUARCC in the performance of its enhanced duties.  The bill permits LUARCC to contract for the services of professional, technical and operational personnel and consultants as it may determine are necessary to perform its duties, within the limits of funds available to it for these purposes.  It also makes General Fund appropriations for amounts necessary for the operating expenses of LUARCC and makes Property Tax Relief Fund appropriations in amounts for non-recurring costs that LUARCC determines are necessary to fund extraordinary expenses of local units to implement consolidation plans and shared services agreements.

      The OLS notes that the implementation of the bill will lead to an increase in costs incurred by the New Jersey Civil Service Commission.  However, the OLS cannot determine the exact amount of these costs or when the Civil Service Commission will need to hire new employees to perform its responsibilities in connection with joint meetings and shared service agreements.  It could take LUARCC several months to study the various options for shared services and consolidation and the bill provides municipalities with 28 months to make a good faith effort to implement a shared services recommendation.  This could lessen the Civil Service Commission’s need to hire new personnel in the short-term.  The OLS cannot determine the amount of any costs that would be associated with any litigation that may commence following enactment of the bill.