Governor Christie Proposes Tool Kit to Limit Government Spending '

May 27, 2010

By: Keith D. Barrack, Esq. and Philip J. Morin III, Esq.

Governor Christie, in his continuing effort to change New Jerseys public spending habits, has prepared a 33-bill legislative Tool Kit intended to place caps on public spending, enhance municipal collective bargaining, and provide greater flexibility to public entities to address civil service issues.

Constitutional Amendments Would Cap State and Local Spending Increases: 2.5% Property Tax Levy Cap

The most significant measures call for Constitutional Amendments that would limit the increase in local property taxes and State spending appropriations to 2.5% each year. The local taxation threshold would not include revenue generated from new construction or improvements and may be exceeded to meet debt service obligations. Counties and Municipalities would be able to bank unused tax levy increases for three years. By way of example, assuming a municipality increased the tax levy by 2% in year one, it would be able to raise the tax levy by 3% in year two without voter approval because the average increase over the two-year period remained at 2.5%.

State appropriations will also face limitations on annual increases. If the amendment is passed, it would be unconstitutional for the Legislature to pass an annual budget or other law appropriating funds during a fiscal year that exceeds the prior fiscal year total appropriation by 2.5%. However, should the State not spend all appropriated moneys in a given fiscal year, the 2.5% appropriation cap in the following year may be exceeded by the value of the unexpended fund from the prior year without voter approval. The appropriation cap applies to State spending, but expressly excludes State aid for schools, pension and benefit obligations, payment for capital construction projects including the Transportation Trust Fund, debt service payments, and property tax relief.

In order to become law, a Constitutional Amendment must be passed by a three-fifths (3/5) majority of the Legislature and then must be approved by a majority of the electorate at the next general election. Should the Legislature approve the amendment via simple majority (41 votes in the General Assembly and 21 votes in the Senate), the amendment must be presented to the Legislature in the next legislative year, be approved by a simple majority, and approved by a majority of the electorate at the next general election.

Collective Bargaining, Civil Service, and Pension Benefits Changes Sought To Lower Local Government Costs.

In addition to limiting local revenue, Governor Christie seeks to provide mechanisms to lower costs by addressing collective bargaining standards, sick time payouts, pension obligations, and shared services arrangements.

The economic impacts of shared services would be augmented by eliminating terminal leave payouts, permitting staggered furloughs in a governmental unit, the ability to rescind civil service status via referendum, and allowing the layoff of personnel with seniority if lower level personnel are deemed critical and essential.

Governor Christie has also proposed limiting the maximum increase in collective bargaining increases to 2.5%. The 2.5% cap would include all economic issues such as salary, benefits, pension, sick and vacation time, and insurance. Mediators, whose fees would also be statutorily capped, would be legally barred from recommending any agreement that exceeds the 2.5% cap.

Public employees would not be able to cash out sick time in excess of $15,000 and any sick time payout would be payable via installments over as many as 10 years to lessen the financial impact on public entities. Unused sick time may be carried over for just one year. Employees whittling down sick time prior to retirement would also be impacted as they would not be permitted to take more than six consecutive sick days in the twelve months prior to retirement without a written verification by a doctor as to the necessity of the absence.

Individuals not directly employed by State, County or local entities may also find their ability to participate in the public pension system impacted. Governor Christie has proposed eliminating employees of insurance associations, joint insurance funds, the League of Municipalities, Association of Counties, and non-profit educational foundation employees from participating in the pension system.

For more information regarding these legislative initiatives and how they will impact your municipality, please contact Keith D. Barrack, Esq. by phone/email: 201-843-5858; kbarrack@florioperrucci.com. Additional assistance may be received by contacting Philip J. Morin III, Esq. by phone/email: 201-843-5858; pmorin@florioperrucci.com.

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