95 percent of surveyed towns are not following laws prohibiting sick leave payouts, OSC finds

OSC’s statewide survey of 60 towns shows laws have been ignored to a “startling degree” and frustrated Legislature’s effort to lower taxes

  • Posted on - 07/7/2022


TRENTON – The Office of the State Comptroller (OSC) released a report finding the overwhelming majority of the New Jersey towns it sampled are wasting taxpayer funds by making and agreeing to make excessive sick leave payments to public employees.  

Many towns allow public employees to cash out their unused sick days for what are essentially yearly bonuses, OSC found. In some instances, towns unlawfully promise to make large payments years into the future. Such policies can increase a single employee’s pay by potentially hundreds of thousands of dollars.  

Municipalities who promise all their employees sick leave payouts create a financial liability of many millions of dollars for taxpayers. OSC created an interactive map in partnership with New Jersey’s Open Data Center team where the public can see which towns are unlawfully allowing sick leave payments and other abuses. 

OSC’s report found that in the 60 towns reviewed: 

  • 80% are letting employees cash out their sick time when they resign or change jobs 
  • 60% allow payments over the $15,000 cap 
  • 48% can give employees annual payouts for their unused sick days 

“Year after year, towns spend taxpayer money to fund costly, wasteful year-end bonuses for public employees that are hidden from taxpayers,” said Acting State Comptroller Kevin D. Walsh. “The laws on sick leave payments are being ignored by a lot of towns, and this is putting a financial strain on taxpayers. Mayors and council members who want to lower property taxes are missing an opportunity to do so.”   

A Familiar Problem in New Jersey 

As the State’s independent watchdog, OSC has previously reported on wasteful sick time payouts. In its 2021 report on Palisades Park, OSC found that the borough’s Business Administrator was collecting annual sick leave payouts and was entitled to a $360,000 payout when he retired, $160,000 of which was for unlawful sick and vacation leave. Enforcing the law would have resulted in a 30% reduction in his retirement payout.   

In an effort to understand how widespread the problem is, OSC issued a survey to 60 municipalities across the state. (View the full map and OSC’s source data here.) 

Multiple independent government agencies have reported on sick leave abuse in the past. In 2005-2006, three different reports came to the same conclusion: extravagant sick and vacation leave payouts were driving up property taxes in New Jersey and reforms were needed to end it. The Legislature enacted laws in 2007 and 2010 to reform such practices. 

“Many of the towns we surveyed showed no awareness that these laws even existed,” said Walsh. “Legislators from throughout New Jersey thought they had reformed the State’s sick leave policies but the reforms have largely failed with these 60 municipalities and likely many more. Municipalities are willingly and unlawfully assuming substantial financial obligations that must be paid by today’s, tomorrow’s and future generations’ taxpayers. 

Lack of Transparency, Lack of Enforcement 

OSC’s report found that there are no enforcement mechanisms in place to make sure towns are following the law. The report makes a number of recommendations to the Legislature, including:  

  • Designating a specific person within local government to ensure sick and vacation leave abuse laws are followed 
  • Requiring that all payouts to employees beyond their standard pay are posted publicly and approved by the council so that taxpayers are aware of any additional compensation 
  • Tasking a specific state agency to interpret and enforce the laws 
  • Evaluating whether exemptions for some senior employees in local governments remain appropriate 

OSC also recommends that individual towns retain an attorney to review existing policies and procedures that appear to be against the law. Towns should assess how much financial liability the town currently has or will have in the future. They must also prepare a corrective action plan and send it to OSC for review by September 30. OSC urges towns to make the results public so taxpayers can track where their money is going. 

“Funds that belong to taxpayers should be spent with the highest integrity and transparency,” said Walsh. “It is disappointing to see so many municipalities disregarding state law and wasting taxpayer funds.” 

OSC’s Tipline 

Public employees and members of the public should report if their town is refusing to follow laws limiting sick leave payments. Submit a confidential tip to OSCs hotline by email, on OSCs website, or by calling 1-855-OSC-TIPS.

The Office of the State Comptroller (OSC) is an independent State agency that works to make government in New Jersey more efficient, transparent and accountable. OSC is tasked with examining all aspects of government expenditures, conducts audits and investigations of government agencies throughout New Jersey, reviews government contracts, and works to detect and prevent fraud, waste and abuse in Medicaid.

Stay up-to-date with the latest from OSC by following us on Twitter, Facebook, LinkedIn, and on Instagram at @NewJerseyComptroller.

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