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Money in a Belt rolled tightly



Jason Holt  By Jason Holt, Esq.
  Corporation Counsel,
  East Orange
  Associate League Counsel



We all know from our personal lives how difficult it is to go on a diet and stay on it. Public policy choices in local government are not any different. Because we are not the federal government, deficit spending is not authorized. Municipalities have to balance the books every year as required by the “Local Budget Law” and in doing so, live within the “Local Government Cap Law.” Even non-controversial savings gained through attrition of personnel are often whittled away. It’s just not easy to be on a diet.

It is especially difficult to maintain strict budget control when it involves public safety. The community demands protection and rightly so. The psyche of the public hones in on not just the reality of crime but its perception and this concept determines whether your community feels protected. Everyone wants safe neighborhoods, but safety costs money and citizens expect supportive public policy decisions. The issue is how government should handle precious resources in today’s fiscally overwrought environment. In these critical times budget reductions require surgical precision.

In order to prudently respond to the public policy challenges that your municipality may face, the following series of questions must be asked and answered:

  • What areas of concern do both the executive and legislative branches want to address? How do those areas differ from labor?
  • Have you identified the governmental priorities for your community in a non-traditional way? Everyone will say of course we have, but that is more than snow removal, garbage pickup, filling of pot holes; etc. In other words has each department been optimized?
  • Does your spending plan reflect those priorities?
  • How serious is your fiscal challenge and have you identified where you will find the savings you need to achieve?

Once you have answered those questions, the next most important question is—when do you include your lawyer in the discussion? The answer should be at the beginning, middle and end. In other words, your attorney should be involved through the whole process. The reasons why are legion. For example, let’s assume that a significant part of your budget is personnel driven and you have identified a dollar figure that should be saved from the employee side of the ledger. Is the anticipated savings realistic in light of the union contracts and state statutes? That’s where you need solid legal advice.

As much as you may want to try, it is very difficult to treat all unions the same. Remember, there is only one group of employees authorized to use deadly force (police) and one group of employees who run into burning buildings (fire). Accordingly, the State Legislature has decreed that police and fire are at the top of the heap. It is so because the “Police & Fire Public Interest Reform Act” makes uniform service contracts subject to compulsory interest arbitration. As a result uniform service unions are given a competitive advantage over all other unions. It also complicates your budget woes because it is almost impossible to achieve a zero percent increase in a uniform service contract negotiation. Employers should recognize all of the implications that go along with mandatory interest arbitration.

An across the board savings blueprint should be completed by your managerial/financial team done by cost factor analysis. All employees should be categorized and the costs associated with each known before pulling out the budget cutting axe and going to your unions. It should be viewed more as a surgical procedure. Have you completed attrition projections incorporating resignations, disciplinary terminations and retirements which will result in significant savings? For example, mandatory police retirements are easy to predict from existing personnel records because of the statutory retirement age of 65. Use your existing resources to make smart decisions based on facts.

A smorgasbord of options to be proposed on an ala carte basis should be developed and dollar figures associated with each known before proposals are made to the unions. Potential options include:

  • Freezing percentage wage increases;
  • Freezing step increases;
  • Instituting a voluntary furlough plan authorized by NJAC 4A:6-1.23 “to lessen the need for reductions in force;”
  • Capping, reducing or eliminating overtime where possible;
  • Salary deferment for elected officials to emphasize the seriousness of the fiscal challenge;
  • Shortening of the work week on a staggered basis allowing departments to stay open to the public;
  • Converting some paid holidays to unpaid;
  • Negotiated furloughs; and
  • Layoffs and demotions.

Some options are more complicated to use when it comes to police and fire. But with the exceptions of layoffs that are part of a plan approved by the state in civil service jurisdictions, all have to be negotiated with the unions. However, the decision to compel a reduction in the size of the workforce through layoffs should be treated as a managerial prerogative. As a reminder, there is a plethora of case law in which courts have helped define subjects as either negotiable terms of conditions of employment or non-negotiable management prerogatives. Also be aware that the third side to that triangle is those items in which the Legislature has pre-empted negotiations by statutorily removing the discretion of the employer. Recently enacted legislation, P.L. 2010, c. 1, 2 and 3 effective May 21, 2010, redefine areas of the retirement system, mandate cost sharing of health benefits and makes modifications to payments for accumulated leave. These new laws should be reviewed thoroughly before entering negotiations.

Many municipalities have opted not to completely fill the table of organization for police and fire. However, by skipping ranks you can open a can of worms. For example, if your table of organization calls for captains, lieutenants, sergeants and police officers and as a mechanism to save the differential in costs you don’t fill the position of lieutenant, but the job is being done by a sergeant. Pursuant to “The De Facto Officers and Employees: Right to Compensation Act” you have exposed your muniipality to additional liability. Suits can be brought under that statute costing you attorney fees as well as the additional compensation sought by the employee. Remember, in any case where an officer is doing the work of a superior officer you have financial exposure.

Assuming that the managerial/financial team has identified a savings that it would like to achieve from the personnel side of the ledger—how do you get it? Here are some tips to consider:

  • Understand what is legally permissible before settling on a strategy and starting negotiations.
  • Involve the head of the department in the decision making process. What may look benign on paper as a line item may be critical to the working of the department. The department head should be included in the discussions from the beginning. Those dialogues should also incorporate the legislative leadership.
  • Discussions with the unions should be done as a part of a team. Stay away from the lone wolf style. It usually does not work. Have the facts and numbers available for discussion.
In order to promote what is in the Public interest and encourage frank discussions all of the things we have discussed must be given their due weight. Each municipality has its own set of circumstances and these public policy decisions are critical to many aspects of the health, safety and welfare of the municipality. These challenges effect growth, redevelopment, stability and of course your tax dollar. Balance must be achieved between which services will be reduced or eliminated and budget reductions. Use your surgeon’s knife not the woodsman’s axe.

This article appeared in New Jersey Municipalities, Volume 87, Number 6, June 2010


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