LEGISLATIVE FISCAL ESTIMATE

SENATE, No. 2318

STATE OF NEW JERSEY

216th LEGISLATURE

 

DATED: OCTOBER 28, 2014

 

 

SUMMARY

 

Synopsis:

Limits certain unused sick leave pay and vacation leave carry-forward for school and local employees; limits sick leave use by new public employees before retirement.

Type of Impact:

Expenditure reduction. Local government and school district funds.

Agencies Affected:

School districts and local government entities.

 

Office of Legislative Services Estimate

Fiscal Impact

FY 2010 

FY 2011 

FY 2012 

 

Local Savings

Indeterminate – See comments below

 

 

 

 

·       This bill limits the payment for unused sick leave and limits vacation leave carry-forward for school and local employees and restricts new employees’ use of sick leave during the last twelve months of their employment before retirement.

·       The savings to school districts and local government entities cannot be determined. Although there is reporting by municipalities and counties of accumulated absence liabilities to the Department of Community Affairs, the Office of Legislative Services (OLS) is unable to estimate the bill’s fiscal impact with regard to future earned leave.

·       The OLS notes that potential savings that would accrue to school districts and local government entities under the provisions of this bill, would not occur until the expiration of current obligations of collective negotiations agreements or current individual contracts of employment with relevant provisions.  

·       The OLS also notes that the bill may increase the costs of sick leave, overtime, and productivity, especially, if it results in a change in employee behavior, as employees might be inclined to make use of their accumulated sick leave each year if the payment for unused sick leave is capped at retirement.

·       As of State FY 2010, the Department of Community Affairs reports that total accumulated absence liabilities were $1.123 billion: $864.3 million in municipal accumulated absences liabilities and $259.3 million in county accumulated absence balances.  In the 2014 State of the State, the Governor indicated that municipal accumulated leave balances totaled $880 million, which is a change of 2 percent from FY 2010. 

 

 

BILL DESCRIPTION

 

      Senate Bill No. 2318 of 2014 amends current law to make applicable for all current and future officers and employees of boards of education and local governments the limit of $15,000 for the payment of supplemental compensation at retirement for accumulated unused sick leave, and the limit on the carrying forward of vacation leave for one year only.  Current officers and employees will be permitted to retain any supplemental compensation for unused sick leave, or to carry forward any vacation leave, already accrued as of the bill’s effective date.

      Current law imposes these limits on officers and employees commencing service with an individual employer on or after May 21, 2010 and for certain high-level officers and employees who were in service on June 8, 2007.

      The bill imposes limits on the use of sick leave by a State, local, or board of education employee in the twelve months before retirement. This provision applies to employees who commence employment with an individual employer on or after the bill’s effective date. Specifically, the bill prohibits the use of six or more consecutive days of accumulated sick leave, without medical necessity verified in writing by a physician, by an officer or employee in the twelve months prior to retirement in anticipation of that retirement.  The employer may require the officer or employee to submit to an examination by a physician selected by the employer to verify the medical necessity. The employer must (1) impose a fine and issue a reprimand against the officer or employee found to be in violation of this prohibition, with the fine to be an amount equivalent to one and one-half times the daily rate of compensation for each day of violation, or (2) for a subsequent violation of the prohibition, deduct a number of sick leave days equivalent to the number found to have been used in violation of this prohibition from the number of unused accumulated sick leave credited on the effective date of retirement upon which supplemental compensation, if any, for the officer or employee at the time of retirement is calculated, or (3) both.

      The bill would not be construed to impair the obligation of a collective negotiations agreement or individual contract of employment with relevant provisions in effect on the bill’s effective date.

 

 

FISCAL ANALYSIS

 

EXECUTIVE BRANCH

 

      None received.

 

 

OFFICE OF LEGISLATIVE SERVICES

 

      The savings to local government entities cannot be determined at this time.  Although reporting by municipalities and counties of accumulated absence liabilities to the Department of Community Affairs commenced in 2002, the OLS is unable to estimate the bill’s fiscal impact with regard to future earned leave. 

      P.L.2010, c.3 limited payments to be made by local government entities and boards of education to future employees for accumulated unused sick leave at $15,000 and at the time of retirement.  This bill amends that law to make applicable for all current and future officers and employees of boards of education and local governments the limit of $15,000 for the payment of supplemental compensation at retirement for accumulated unused sick leave.  Current officers and employees will be permitted to retain any supplemental compensation for unused sick leave, or to carry forward any vacation leave, already accrued as of the bill’s effective date.  This means that all officers and employees employed prior to the enactment of 2010 will also now be limited to a payment of $15,000 for unused sick leave balances, or the value of any unused “retained” supplemental compensation at retirement whichever is greater.  An employee will continue to accrue sick leave for the purpose of using the sick leave. 

      The limit on the carry-forward of unused vacation leave may also result in savings to boards of education and local governments as it may serve to reduce the amount of unused vacation leave for which the employer would provide supplemental compensation.

      As of State FY 2010, the Department of Community Affairs reports that total accumulated absence liabilities were $1.123 billion: $864.3 million in municipal accumulated absences liabilities and $259.3 million in county accumulated absence balances.  In the 2014 State of the State, the Governor indicated that municipal accumulated leave balances totaled $880 million, which is a change of 2 percent from FY 2010.  The Department of Community Affairs was not able to provide accumulated absence liability data for FY 2002 in order to compare the rate of change in accumulated absence liabilities from FY 2002 to FY 2010 to the rate of change in accumulated absence balances from FY 2010 to FY 2014. 

      The OLS notes that potential savings that would accrue to school districts and local government entities under the provisions of this bill, would not occur until the expiration of current obligations of collective negotiations agreements or current individual contracts of employment. The OLS also notes that the bill may increase the costs of sick leave, overtime, and productivity, especially, if it results in a change in employee behavior, as employees might be inclined to make use of their accumulated sick leave each year if the payment for unused sick leave is capped at retirement.

 

 

Section:

State Government

Analyst:

Kimberly McCord Clemmensen

Senior Fiscal Analyst

Approved:

David J. Rosen

Legislative Budget and Finance Officer

 

 

This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.

 

This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).