September 8, 2009
Re: Lame Duck Issues
- Limits on School District Management Discretion
- Unused Sick Leave Pay-out Limits
- Ethics Issues
- Telecommunications Taxes
- Redevelopment and Eminent Domain
- Affordable Housing Reform
Here’s a look at some of the issues affecting municipal government that may get attention, when the Legislature returns for its “Lame Duck” session, after the November Elections.
I. State Limits on School District Management Discretion Could Hurt Property Taxpayers and Students and Lead to Similar Limits on Municipal Management
A-4140 would prohibit any local or regional school district, county vocational school district, charter school, or other public educational entity from entering into a subcontracting agreement which may affect the employment of employees in a collective bargaining unit during the term of a collective bargaining agreement covering those employees. School management would be permitted to enter into a subcontracting agreement for a period following the term of a current collecting bargaining agreement only if met new requirements only if it gave notice and allowed the majority representative the opportunity to meet and discuss the decision to subcontract and negotiate over its impact. The bill imposes further reporting requirements on a subcontractor the bill makes all actions of an employer regarding subcontracting, except for those expressly required or prohibited by the bill, mandatory subjects of negotiations.
A-4142 provides that the terms of a collectively negotiated agreement will supersede the terms of any individual contract between any public employer and any individual public employee whose position is within the bargaining unit covered by the collective agreement. This provision applies to individual contracts of both educational and non-educational public employers and employees. In addition, with respect to only the educational sector, the bill makes binding arbitration the terminal step for the review of any imposition of discipline under collective bargaining agreements, extending that requirement to major, as well as minor, discipline, and extends the scope of collective bargaining to cover procedures for major, as well as minor, discipline.
We believe that the subcontracting bill would make it much more difficult to implement such cost saving measures. Most often, these measures would be considered for support services. Accordingly, school districts would be forced to look for other cost savings in the classroom or to levy increased property taxes. The discipline procedures bill would limit management flexibility and, most likely, increase costs. If school employees win these ‘rights,’ municipal employees will, inevitably, seek parity.
These bills are both important to the NJEA, which will push for their passage during the lame duck session, regardless of the outcome of the elections. Both bills are ready for a Floor vote in the Assembly. To date, neither has a Senate companion.
II. Bills Would Extend $15,000 Limit on Payments for Unused Sick Leave at Retirement
Current law limits to $15,000 the maximum amount that may be paid to a State employee for unused accumulated sick leave when the employee retires and imposed an identical limit on elected officials and certain defined appointed officers and employees of local governments and boards of education, although permitting payment of a higher amount for unused sick leave accumulated prior to June 8th or under a contract terminating after June 8th that covered the officer or employee. Pursuant to companion bills, A-2645 and S-1327, all local government and board of education officers and employees would be limited to receiving a payment upon retirement of not more than $15,000 as supplemental compensation for unused accumulated sick leave. The bill would apply to payments made after the bill’s effective date or after the termination of a contract covering an officer or employee that is in effect at the time of enactment and that provides otherwise.
We anticipate Lame Duck action on these, and other, bills that respond to highly publicized pension and benefit abuses.
III. Ethics Issues
Likewise, we anticipate lame duck action on ethics legislation. We don’t know if the Legislature will consider one of the bills already introduced, or a bill yet to be drafted. However, it should be helpful to review the most comprehensive proposal available, to see which issues might be addressed.
A-4033, known as the “Ethical Standards of Conduct Reform Act,” addresses the standards applicable to the conduct and benefits of elected and other public officials to ensure that public officials serve the public and fulfill their responsibilities with integrity. It includes forfeiture of office provisions, a total ban on dual office holding, new campaign contribution reporting requirements, a ban on the use of campaign contributions for criminal defense costs, a ban on counting payments from more than one employer for PERS pension purposes and other provisions effecting members of the Legislature.
IV. Telecommunications Taxes
Before 1966, municipalities assessed and collected taxes on Business Personal Property. In that year, the Legislature made the State the collection agent for most of these taxes (while promising municipal ‘hold harmless’ funding on this). However, municipalities retained the right to tax the personal property of telephone and telegraph companies that paid the Public Utility Gross Receipts and Franchise Taxes (PUGRAFT).
Following the AT&T divestiture, the Legislature, in 1989, exempted all but ‘local exchange companies’ from the PUGRAFT, which also exempted other telecommunications companies from local personal property taxes.
In 1997, with deregulation and in anticipation of growing competition in the telecommunications (and energy) industry, the Legislature repealed the PUGRAFT, and replaced it by applying the Corporation Business Tax to the utilities. Local exchange companies, such as Verizon, which were subject to the PUGRAFT on April 1, 1997, continued to be subject to local business personal property taxes. By legislating the ‘as of April 1, 1997’ standard, new entrants into the local exchange market were exempt from local personal property taxes. The legislation also changed the definition of ‘local exchange telephone company,’ inserting a ‘51% of dial tone service’ standard.
Technological changes in telecommunications have brought increased competition to the industry. In this new environment, Verizon has looked to cut its costs and ‘level the competitive playing field.’
To ‘level the playing field,’ it has proposed legislation to apply a uniform tax regimen to telephone, cable and satellite telecommunications service providers. And to assist in the cost cutting, it has used the ‘51%’ language to exempt itself from local business personal property taxes, in those municipalities where it claims to no longer supply dial tone to a majority of the telephone market.
These are two separate areas of concern for municipalities. If properly crafted and faithfully administered, telecommunications tax reform could benefit local budgets and assist with real property tax relief. But unilateral exemption from local personal property taxes provides no benefit and exacerbates the residential property tax crisis.
The State’s Tax and Revenue Policy Commission has been studying telecommunications tax reform and could report its findings before the election. That could lead to lame duck action.
We will be very involved in those debates.
Meanwhile, we are exploring legislative options to address the local personal property tax aspect of this serious problem, and monitoring pending litigation.
V. Redevelopment and Eminent Domain
One issue that may get consideration during the lame duck could involve amendments to the redevelopment law concerning the use of eminent domain. Before the summer recess, Senators Sweeney and Rice announced an agreement to amend their bill, S-559. This bill was released by the Senate Community and Urban Affairs committee in June 2008, but has remained idle since. The bill was not amended by the Senate, but may get such consideration after the November elections. Its Assembly companion, A-1492, awaits consideration by the Assembly Commerce and Economic Development Committee. The League opposes these bills.
As you know, in response to the US Supreme Court decision commonly referred to as the Kelo Decision, the League offered a “white paper” on the issue, outlining reforms that we believe would improve the process and bolter public confidence in our efforts to redevelop, but maintain the practice of eminent domain as a tool-of-last resort.
We were optimistic that any legislative response to the Kelo decision would do precisely what we outlined in our white paper. Represented by our special counsels on this issue, Ed McManimon and Tom Hastie of McManimon & Scotland, the League presented testimony and worked closely with Assemblyman Burzichelli and the Assembly Commerce and Economic Development Committee, as well as with Senator Rice and the Senate Community and Urban Affairs Committee. However, these more recent proposals, coupled with recent Court actions, could very well cripple efforts by our urban centers, in particular, to attract new development, jobs and housing.
VI. Affordable Housing Reform
We anticipate significant debate during the lame duck on the issue of affordable housing. Senator Raymond Lesniak, after the passage of the NJ Stimulus Act, which he sponsored, indicated that in addition to the suspension of the 2.5% non-residential fee in the Stimulus Act, he intended to push for significant COAH reform after the election. The League has been in regular communication with the Senator and the Administration on this, and we are cautiously optimistic that significant reform to the Fair Housing Act and to COAH is forthcoming.
If you recall, the League is currently challenging the validity of COAH’s third round regulations. In summary, we have demonstrated the calculation of the statewide need and COAH’s allocation of that need was based on faulty data and invalid statistical methods, and that will result in a negative financial impact on our taxpayers. Over 250 municipalities have made financial pledges towards this litigation. We anticipate the Appellate Division to schedule oral argument in the fall, and a decision late in the year or early next year.
Please keep these issues in mind, as you talk with your own State Legislators this month and next. If there are other matters that you believe warrant our attention, please let me know.
Very truly yours,
William G. Dressel, Jr.