It's Enough to Make You Sick: Benefits Still Crushing Taxpayers

The exact cost of bad decisions by government bodies, whether they be the U.S. Congress, state legislatures or local city councils, is often hard to quantify.

That wasn’t the case earlier this week in Jersey City, N.J., when officials announced they will need to float a bond this year to cover more than $9 million in payouts to city employees for unused sick days and vacation time.

Across the country, from New Jersey to Southern California, government reformers, citizen watchdog groups and angry taxpayers are calling for an end to the practice of allowing public employees to cash in unused sick days and vacation time when they retire. The clarion call among these groups is for a shift to the private sector approach toward sick days and vacations, which essentially amounts to “use ‘em or lose ‘em.”

“It’s a little strange that we’ve developed to a point where we’ve lost what sick time was supposed to be,” said New Jersey’s State Senate Republican leader Tom Kean Jr. “Now it’s an additional income stream.”

“These are jackpot awards that municipalities can’t accurately anticipate or budget for in advance,” Kean added.

Kean supports legislation in New Jersey, also backed by Republican Gov. Chris Christie, that would phase out cash payments entirely for unused sick and vacation time. The practice would end the day the legislation was signed into law. New employees would be banned from the payouts, while current employees would be required to use vacation time they’ve already accumulated rather than cashing it in for a lump sum at retirement.

Kean noted that in Atlantic City, N.J., city officials recently earmarked $2.2 million in savings from police and fire department layoffs directly toward money owed to public employees for unused sick and vacation days.

“They had to lay people off to pay for sick leave,” he said.

The issue is hardly unique to New Jersey. In Massachusetts, Thomas Kinton, the recently retired chief executive of the state’s Port Authority, stepped down after a 35-year career with the agency. According to media reports in Boston, Kinton is owed more than $450,000 because the agency once allowed its top executives to collect 100% reimbursement for unused sick days. The perk was eliminated shortly after Kinton took Massport’s top job, but he was grandfathered in.

In San Diego, a joint investigation by the Watchdog Institute at San Diego State University and two local media outlets  -- the San Diego Union-Tribune newspaper and television station 10News -- found San Diego County government alone has paid retiring employees $2.5 million for unused sick days since 2006. One retiring prosecutor cashed in $118,000 worth of unused sick time, according to the investigation.

And that’s just a tiny sampling.

For decades, the argument in favor of public employee perks such as payouts for unused sick and vacation time and making minimal or no contribution at all to their pension and health care funds has been that public employees make less money than their counterparts in the private sector but are just as qualified.

That argument has been weakened, however, by a recent report from the U.S. Bureau of Labor Statistics which showed that, on average, it costs more for state and local governments to compensate their employees than private sector employers.

To wit, total compensation costs for state and local employees averaged $40.28 per hour in December, according to the report. That breaks down to $26.42 for wages and salary and $13.86 for various benefits.

Meanwhile, private employers paid an average of $27.75 per employee. Of that, $19.64 went to wages and salary and $8.11 toward benefits, according to the Department of Labor.

In any event, critics of the perks have long questioned the methods by which public employee contracts have been negotiated. Those methods became the subject of a national debate earlier this month when Wisconsin’s state legislature voted to limit collective bargaining powers for state employees.

Lani Lutar, president and chief executive of the San Diego County Taxpayers Association, said politicians who negotiate public employee contracts have intentionally -- and “cynically” -- approved “unsustainable lavish” perks for public employees in lieu of large salary increases knowing that the perks would attract less scrutiny from the media and the public.

“When the economy was strong there was an assumption that (stock) market gains would continue to pay for these benefits. And politicians saw that there would be increased attention on salaries so they hid away these perks in benefits,” she said.

What’s more, Lutar noted that many of the perks granted by politicians were structured so they would be paid out in the future, long after the politicians who granted them had left office.

“Unfortunately, in many instances labor union leaders and elected officials worked in concert on this. There was an acknowledgement among both parties that this would be less likely to result in public dissent,” she said.

Lutar described payouts for unused sick leave and vacation days as “just inexcusable at a time when government is cutting services and threatening to increase taxes.”

Reformers believe the debate over taxpayer funded, public employee perks is just beginning. The recent economic downturn forced the topic out into the sunlight, they say, and now that the public has been made aware they are demanding reform.

“As long as the economy remains sluggish this will remain at the top of the political dialogue,” said Lutar. “People are feeling the pain themselves and they want government to make the same type of cuts that they’ve had to make at home.”

Kean added: “I think people want people to do good work at fair pay. This is a beginning not an end to this conversation and a much greater step toward fiscal common sense.”