Tom Henry

(The following is the second of three articles prepared by Tom Henry of Sea Isle City for Cape Issues. They will be published in three weekly segments beginning with the March 3 print edition.)

Part 2: Individual V. Rank And File Contracts

One aspect of public sector collective bargaining, that is widely over-looked, is the right of those excluded from membership in a bargaining unit to individually bargain for the terms and conditions of their employment. Two recent reports prepared by the State Commission of Investigation ( SCI) found that the salaries and benefits provided to the rank and file bargaining units pale in comparison to the privately negotiated deals for senior administrators in municipalities and school districts. The SCI Report entitled, “TAXPAYERS BEWARE: What You Don’t Know Can Cost You.” found:

“Lucrative provisions of privately negotiated deals enable superintendents and others at the top tier of public school administration to receive compensation and benefits often well beyond the reach of any other class of public-service employees…. It is not unusual for these arrangements to be structured such that they continue to benefit recipients with costly and, in some cases, ir-regular pensions and perquisites well into retirement.” (SCI, March, 2006)

The second SCI report is appropriately titled “The BEAT GOES ON: Waste and Abuse in Local Government Employee Compensation and Benefits”. This report concludes:

“At a time of economic distress unprecedented since the Great Depression — with governments’ budgets depleted and austerity the theme of the day even in the private sector — the gravy train continues to roll without impediment for select groups on the public payroll.”
Taken together the two SCI reports identify significant practices that enrich some public employees while helping to drain municipal and county budgets. The commission’s findings fall into five broad areas:

• Inflated and Questionable Compensation and Benefits

• Severance Packages Buy-Outs.

• Pension Manipulation

• Obstacles to Public Disclosure.

• Lax Oversight

Inflated Compensation and Benefits include:

• Allowing individuals to collect additional sources of income at tax-payers’ expense, including stipends, bonuses, and a range of other payments.

• The practice of grant-ing and accumulating inordinate amounts of sick, vacation, and other forms of paid leave and the cashing-in of unused leave annually during employment.

• Awarding individuals annual lump-sum contributions, at taxpayer expense, toward the purchase of personal tax-sheltered investments, including special trust accounts and annuities.

Severance Packages/ Buy-Outs:

Various forms of “terminal leave” are used to allow local employees to stay on the payroll, using up accrued sick time and other leave at full salary. These arrangements allow employees to collect, in addition to their pensions, lump sum payouts well into six-figures and in amounts larger than the equivalent of a full year’s salary.

Pension Manipulation:

The SCI reports found the pensions are “inflated through a number of stratagems, primarily by padding earnings with an assortment of base-salary add-ons, including cash stipends, bonuses, the proceeds of unused accumulated sick and vacation time sold back to the employer and even tax-payer-subsidized reimbursements for employee contributions to the pension system” (SCI, 2006, p. 10). These practices are used even though many forms of “extra compensation” are explicitly deemed impermissible by the state for inclusion in base salaries for pension calculation purposes.

Weak Oversight

Both SCI reports found significant gaps in over-sight and accountability at the local and state levels of government with regard to ensuring the propriety and reasonableness of compensation and benefits for public administrators. Factors that contribute to the lack of adequate oversight include:

• In many instances, senior administrative personnel are solely responsible for tracking their own sick and vacation leave time, the accumulation of which can lead to substantial personal windfalls through sell-back arrangements.

• Neither the taxpayer-funded portion of audit reports nor approved administrative compensation packages are subjected to regular or meaningful review or examination by outside authorities except in instances suggesting outright fraud.

Obstacles to Public Disclosure

Both of the SCI investigations reported on the absence of any mechanism to assure unfettered, uniform, and timely access to data and information that bear directly upon the cost of public employees especially senior administrative personnel.

The prevailing system is marked by widespread inconsistency in which the taxpaying citizens often must run a gamut of impediments in search of an accurate understanding of the full scope and budgetary implications of an individual’s compensation and benefit package.

Tom Henry has more than forty years experience in public sector collective bargaining. He has written several articles on the financial impact of collective bargaining on organizations. He has been the President of the New Jersey Association of County College Negotiators.

Click here to read Part 1 of the series.

Click here to read Part 3 of the series.