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9/26/2018 » 9/28/2018
GFOA of NJ Annual Fall Conference

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State House News for Finance Officers

August 9, 2018

 

911 Funding

 

The federal government is moving forward with plans to make New Jersey ineligible for $115.0 million in 911 grant funding to upgrade public safety answering points (PSAPs) with Next Generation (NG911) capabilities pursuant to the Middle Class Tax Relief and Job Creation Act, which also required the National Telecommunications and Information Administration (NTIA) and the National Highway Traffic Safety Administration (NHTSA) to jointly administer a matching grant program to provide financial assistance for eligible government entities. 

 

With this in mind, on August 3rd the Federal Registry contained new regulations that will “require all applications for grant funding to: “certify that the State has not diverted any portion of designated 911 charges imposed by the State for any purposes other than the purposes for which such charges are designated or presented,” and  “that no taxing jurisdiction in the State  will be a recipient of 911 grant funds if it has diverted any portion of designated 911 surcharges imposed by the taxing jurisdiction for any purpose for which such charges are designated or presented.” In other words, and as a direct result of the State’s decade long diversion of 911 fees, county and municipal governments across the State are ineligible to receive critical 911 monies from the federal government.   


Moreover, Congressman Leonard Lance (NJ-7) signed on as a co-sponsor of recently introduced federal legislation that would prevent states from diverting fees collected from consumers on their cell phone bills.  In summary, H.R. 6424 (Collins R-NY-27/Lance R-NJ-7), would direct the Federal Communications Commission (FCC), in consultation with public safety organizations, and state and local governments, to determine the appropriate use of the 911 fees collected from consumers.  Current federal law authorizes states to establish their own definitions of eligible 911 expenses, which has led to the wide spread diversion of fees across the nation with the State of New Jersey as the number one offender. 

 

As has been well documented, the State diverts an estimated 89.0% of the $120.0 million in surcharges it collects each year as 911 System and Emergency Response Fees (Fees) and of which it deposits into the 911 System and Emergency Trust Fund Account (Fund).  In fact, the State has collected approximately $1.3 billion in fees since 2006 with only 11% of Fund monies being spent on eligible expenses as recently reported by the FCC. Moreover, the State has failed to provide any funding for eligible expenses to local 911 centers operated by counties and municipalities; and, has instead diverted Fund dollars to cover general operating expenses in the Department of Law and Public Safety.  Importantly, counties and municipalities as first responders handle the vast majority of the State’s public safety service requests through local PSAPs and have come to inequitably rely on the collection of local property taxpayer dollars to improve, operate, and maintain 911 systems.  For these reasons, State leaders must restore critical Fund dollars and comply with federal grant funding to streamline operations and save taxpayer dollars. 

                                                                                                                                            

Janus Question and Answers

By Joseph M. Hannon, Esq. with Genova Burns and NJAC Labor Counsel

 

1.     What did the Court rule in Janus? The Supreme Court, in a 5-4 ruling, determined that the involuntary payment of an “agency shop fee” by nonmembers of a union is unconstitutional as a violation of the free speech rights of those employees.

 

2.     What are agency shop fees? In New Jersey, if a majority of employees in a negotiations unit vote to be represented by a union, then that union is the exclusive representative of all employees covered by the collective negotiations agreement.  This includes employees who choose to be members of the union and those employees who are part of the collective negotiations unit due to their titles, but who choose not to be union members.  Those individuals who choose not to be union members pay a fee known as an “agency shop fee” that is deducted from their pay, which is paid to the union.

 

3.     Did the Supreme Court decision in Janus affect those individuals who are members of the union? No, individuals who choose to be members of the union and have the full union dues deducted from their paychecks are not affected by the Supreme Court’s ruling in Janus.  The Supreme Court’s decision only affected those individuals who are not union members, but are covered by a collective negotiations agreement and therefore had “agency shop fees” deducted from each paycheck.

 

4.     How were agency shop fees covered in New Jersey prior to the Janus ruling?  N.J.S.A. 34:13A:5-5 to 5.8 of the Employer-Employee Relations Act governed the payment of “agency shop fees”, or representation fee in lieu of dues in New Jersey.  The fee included the regular membership dues, initiation fees and assessment charged by the majority representative to its own members less the cost of benefits financed through the dues, fees and assessments and available to or benefitting only its members, but in no event could the fee exceed 85% of the regular membership dues, fees and assessments.  The fee could not include costs of support of lobbying activities to foster policy goals in collective negotiations and contract administration, i.e. it could not include monies spent to further political activities.

 

5.     Is any fee structure permissible for nonmembers of unions after Janus?  Yes.  The Supreme Court invalidated any involuntary fee collected by unions from nonmembers covered by a collective negotiations agreement.  However, the Court stated that an “agency shop fee” may be deducted if the nonmember affirmatively consents to pay.  In order to satisfy this criterion, the nonmember must “clearly and affirmatively” consent before any money is taken from them.  We recommend a written consent form.

 

6.     How should public employers handle the “agency shop fees” deductions that are currently being made to employees’ paychecks?  In light of the Supreme Court’s ruling in Janus, public employers should immediately cease the payroll deductions of “agency shop fees” or representation fee in lieu of dues from all its employees who choose not to be members of a union, yet are covered by a collective negotiations agreement and notify the union of same in advance.

 

7.     How should such notice be provided?  In light of the recent provisions of the Workplace Democracy Enhancement Act, the most advisable course of action for public employers would be to notify union leadership that the fee deductions will cease immediately

 

8.     What if the union or employee advises that they would like the agency shop fee to continue to be deducted?  Is that appropriate?  A fee in lieu of dues for nonmembers prohibited by the Supreme Court’s ruling in Janus if it is involuntary.  No fees should be deducted for nonmembers unless the nonmembers show by “clear and compelling” evidence that the nonmember is consenting to the fee deduction.

 

9.     What is the appropriate amount for a voluntary “agency shop fee” after the Janus ruling?  The decision is not clear as to what an appropriate amount would be if the employee provides a clear and compelling consent to the deduction.  As any fee that is deducted must be though “clear and compelling” evidence that the employee has consented to fees being deducted, then any amount agreed upon would potentially be permissible.  The provision of the Employer-Employee Relations Act should be used as a guidepost for such an arrangement.

 

10.  If an employee chooses not to pay any agency shop fee are they still covered by the collective negotiations agreement?  Yes, nonmembers who are covered by the Recognition Clause of a collective negotiations agreement are still entitled to the benefits of that collective negotiations agreement, including wages, benefits and other negotiated terms and conditions of employment.  Public employers must continue to treat these employees as covered by the contract and provide them the same rights as all other members of their union.  In fact, unions could directly charge nonmembers who do not pay a fee for representation services in a grievance or disciplinary hearing as provided in the Supreme Court’s decision.

 

11.  How should a public employer handle a situation in which union members seek to withdraw from the union?  Withdrawal from a union by a union member is not affected by the Janus decision.  Any withdrawals shall be handled in accordance with current law including, but not limited to, the Workplace Democracy Enhancement Act, Employer-Employee Relations Act and rules and regulations of the Public Employment Relations Commission.

 

Water Infrastructure

 

GFOA’s Legislative Affairs Committee is in the process of reviewing Senate, No. 2805/Assembly, No. 4324 (Smith D-17)(Pinkin D-18), which would establish the "Water Resources Protection Trust Fund Act" to impose  a user fee on water consumption and to  utilize fee revenues for water quality, supply, and infrastructure projects.

 

In summary, this bill would establish in the Department of Environmental Protection (DEP) a special non-lapsing fund as the “Water Resources Protection Trust Fund” to finance water quality, supply, and infrastructure projects, and to further provide grants or low-interest loans to assist local governing bodies and water purveyors in funding water quality, supply, and infrastructure projects.  To support the Fund, the bill would impose on the owner or operator of every public community water system, a water consumption user fee of $0.40 per 1,000 gallons of water delivered to a consumer, not including water delivered for resale.  The measure would further provide that any person subject to the water consumption user fee may collect the fee by including the amount of the user fee due as a separate line item on every customer bill or other statement presented to consumers.  The person subject to the water consumption user fee may use up to one percent of all revenues collected to defray the costs of administration and collection accordingly. 

 

The legislation would permit the use of monies in the Fund for the following purposes:  the costs of transferring water between public water systems during a state of water emergency or to avert a drought emergency in all or any part of the State; the protection of existing water supplies through the acquisition of watershed and wetlands areas;  the interconnection of existing water supplies, and the extension of water supplies to areas with contaminated ground water supplies; water supply infrastructure projects undertaken by water purveyors for the purpose of drought mitigation; the costs of a safe or dependable yield analysis of the State's surface and ground water sources undertaken by the Department; projects to rehabilitate, repair, or replace public water system infrastructure; grants to local government units to finance the cost of developing asset management programs for public water systems; and  projects to remediate lead in drinking water infrastructure. 

 

In addition to the projects authorized above and beginning 10 years after the effective date of the bill, moneys in the fund may be used for projects to rehabilitate, repair, or replace wastewater treatment system infrastructure, including, but not limited to, combined sewer overflow abatement projects. As noted above, the legislation would authorize the Department to make low-interest loans available to local governing bodies or or water purveyors to finance the costs of certain water quality, supply, and infrastructure projects.  Each loan and the terms and conditions would be subject to approval by the State Treasurer, and local governing bodies and water purveyors must demonstrate the ability to match the grant funding requested by generating funds in ratios as determined by DEP.  Additionally, the legislation would require the Department to submit each year to the Legislature, a financial plan designed to implement the financing of projects on the Department’s priority list.  S-2805 and A-4324 are respectively awaiting consideration in the Senate Environment and Energy and Assembly Environment and Solid Waste committees. 

 

Make Extra Mortgage Payments, Get a New State Tax Credit
John Reitmeyer, NJ Spotlight, August 1, 2018 

Citing a need to do more to help middle-class residents build up home equity in high-cost New Jersey, lawmakers are proposing a new tax credit that would reward homeowners for making extra mortgage payments.

The proposed new tax credit is being modeled on a similar piece of federal legislation, and the state version would be worth as much as $1,000 annually if legislation now under consideration in the State House becomes law. The push to encourage homeowners to get ahead on their mortgages also comes as the GOP-led Congress is considering making permanent a series of federal tax-code changes that are expected to hurt many New Jersey residents and the state’s housing market. These include a cap on a longstanding federal write-off for state and local taxes known as SALT.

New Jersey recently expanded its own state income-tax deduction for local property taxes in response to what’s been happening at the federal level. Creating a new tax break for early mortgage payments would also help address the affordability issue in the face of the federal tax changes, according to the bill’s sponsors. We wanted to be in a position to counterbalance some of the things that we saw coming out of Washington,” said Sen. Troy Singleton (D-Burlington). “The fundamental point is to allow folks to really get more resources that they can use for other things, and to use the equity in their home as early as they can.”

The SALT assault:  Among the many tax changes that President Donald Trump signed into law late last year was a $10,000 limit on the federal SALT deduction, which had previously been uncapped for over a century. New Jersey residents cherish the deduction, as it has helped to offset the cost of the state’s highest-in-the-nation local property taxes. Originally set up to expire in 2025, the SALT cap is being considered for inclusion as a permanent part of the tax code by Congress.  State Attorney General Gurbir Grewal is participating in a multistate lawsuit that was filed earlier this month in federal court to challenge the new limit on the SALT deduction. The suit wants the $10,000 cap to be declared unconstitutional, in part on the grounds that it intrudes on the well-established taxing authority of the states. Meanwhile, state lawmakers also worked with Gov. Phil Murphy in recent weeks to expand New Jersey’s income-tax write-off for local property taxes, lifting the cap on the state’s deduction from $10,000 to $15,000.

Under Singleton’s proposed tax-credit legislation, New Jersey’s middle-class homeowners could also qualify for an up to $1,000 annual tax credit on their state income-tax liability if they make early payments on 15- or 30-year home mortgages.  Homeowners earning up to $125,000 annually, or married couples earning up to $250,000 annually, would be eligible to receive the largest tax credits, which would be worth up to 50 percent of their mortgage prepayments, capped at $1,000. Homeowners earning up to $135,000 annually and married couples earning up to $270,000 annually could also qualify for less generous tax credits, according to the legislation, while anyone making over those amounts would not be eligible for any tax break.  The credit could be taken for up to 10 years, and it would be available for those who have either a home mortgage for their primary residence or a refinanced mortgage that requires payments to be made in regular intervals.

Impact on state’s tax revenue not clear:  Singleton said the legislation is modeled on a similar effort by Democrats at the federal level, the Building Equity for the American Middle-Class Act. It also follows an approach that’s generally encouraged by financial advisors as homeowners can realize significant interest savings over the life of a long-term mortgage if they are able to pay more each month or make one additional mortgage payment each year.  “We look at this as an opportunity to further expound on the stuff we’re trying to do to not only help and promote homeownership, but in this instance to promote equity in peoples’ homes, and to use our tax code to do that,” Singleton said.

It’s unclear how much income-tax revenue would be lost by the state if the mortgage-prepayment write-off is eventually enacted. The nonpartisan Office of Legislative Services will be preparing a routine fiscal estimate for the legislation, Singleton said.  But he also suggested any revenue loss could be made up in the long run if the tax credit ends up strengthening the state’s middle class, and if it encourages more residents to remain in New Jersey instead of leaving for other states where the total state and local tax burden is much lower.  “If you look at the opportunity to counterbalance what can happen, in terms of lost revenue, and what this means as another added incentive for homeownership and for folks to stay in the state, we think this is something that we can deal with,” Singleton said.

 

Lawmakers Want to Borrow $1B for Education Items but Leave Voters with Final Say 

John Reitmeyer, NJ Spotlight, July 9, 2018

 

A proposed $1 billion bond question on the November ballot to fund a range of education-facility upgrades won overwhelming bipartisan support as it moved through the Legislature in recent weeks. Now, Gov. Phil Murphy must decide whether New Jersey voters should have the final say this fall.

Under legislation sent to Murphy last week, the state would issue long-term general-obligation bonds to raise money for improving security at K-12 school districts, expanding vocational-technical training facilities, and upgrading school drinking-water infrastructure.  Sponsors and other advocates of the bond issue have been pointing to the need to harden educational facilities in the wake of recent mass shootings inside schools in other states and to help New Jersey’s vocational-technical high schools keep up with the increasing demand for a career-focused technical education.  But at a cost of $1 billion, the proposed new borrowing will likely test voters’ willingness to add to the state’s credit-card bill as New Jersey already ranks among the most indebted states in the U.S.

For his part, Murphy, a first-term Democrat, has spoken in favor of expanding vocational-technical facilities, suggesting it would complement his own efforts to beef up a part of the state economy that relies heavily on those with technical-skill certifications instead of college degrees. But that was before lawmakers significantly added to an original, $500 million borrowing proposal by inserting the school-security and school-water language, doubling the size of the proposed borrowing to $1 billion.

It started out as borrowing for vo-techs:  According to the final version of the legislation that both the Assembly and Senate passed, the new bond issue would raise $450 million for school security upgrades; $400 million to expand vocational-technical high schools; $100 million for school water-system improvements; and $50 million to expand county college technical-training facilities.

The original proposal for the bond issue came out of a yearlong review of state policies related to the manufacturing industry, which lawmakers are trying to revive as a leading sector of New Jersey’s economy. During a series of hearings, legislators heard from industry leaders who said they have a number of job openings, but not enough qualified applicants to fill them. And officials from the New Jersey Council of County Vocational-Technical Schools testified that more than 30,000 students filed applications last year to attend a vocational-technical high school, but only a little more than 12,000 students statewide were accepted, primarily due to space constraints.

“The overwhelming demand for these programs proves that many employers are actively looking for job candidates with technical training,” said Sen. Steve Oroho (R-Sussex), a primary sponsor of the proposed bond issue. “With proper funding, I am confident that our county vo-tech schools will continue to create pathways to long-term employment for countless New Jersey residents,” said Oroho, who is one of the members of the legislative-manufacturing caucus.  The $450 million for school-security upgrades was added to the proposed bond issue in April, several weeks after a mass shooting at Marjory Stoneman Douglas High School in Parkland, Florida left 17 people dead. The massacre sparked thousands of Garden State students to walk out of class to demand more action by lawmakers to protect them. It also prompted the New Jersey Legislature to hold hearings on how to improve school security, including with facility upgrades.

Trying to clean up lead: “Creating comprehensive school security programs is one of the most critical ways we can safeguard our students, our teachers, and our communities from outside threats,” said Sen. Tony Bucco (R-Morris), another primary sponsor of the legislation.  Meanwhile, the decision by lawmakers to add language to raise money to improve school drinking-water infrastructure comes as many communities in New Jersey have been struggling to address concerns about aging pipes and increased lead levels in school-district facilities.

Last year, New Jersey voters had no problem approving $125 million in new borrowing to fund library capital projects throughout the state. It was just the latest state bond issue to get support at the ballot box, as voters in 2012 also authorized $750 million in new debt to help fund improvements at colleges and universities throughout the state.  But at $1 billion, this year’s proposed borrowing issue is worth more than the last two combined. It would also go before voters after the most recent official state-debt report from the state Department of Treasury indicated New Jersey is now carrying a total of $46.1 billion in bonded debt, easily outpacing the size of the current, $37.4 billion annual budget.

Sen. Michael Doherty’s was sole ‘nay’ vote:  More recent borrowing issues that did not require voter approval — including for an ongoing renovation of the State House in Trenton — have also helped New Jersey maintain its standing as one of the nation’s most-indebted states, ranking fourth highest in the categories of net tax-supported debt and per-capita debt, according to Treasury’s report.  A fiscal estimate prepared by the nonpartisan Office of Legislative Services also projected annual borrowing costs for a $1 billion bond issue could total between $57 million and $72 million, based on current interest rates and market conditions.

Sponsors of the proposed bond issue — which only one member of the 120-seat Legislature, Republican Sen. Michael Doherty, voted against — have responded to questions about the state’s already high debt burden by saying the ballot question would ultimately leave it up to voters to determine whether the state should take on the additional borrowing.  But to get on the ballot in its current form this November, the bill needs a final sign-off from Murphy. The governor has generally declined comment on pending legislation since taking office earlier this year, and his press aides did not respond when asked for his position on the proposed bond issue last week.


State House News for Finance Officers

June 29, 2018

 

PROPERTY TAX ASSESSMENTS

On June 25th, both houses passed and sent to the Governor, ASSEMBLY, NO. 2836 (Mazzeo D-2/Murphy D-7)(Beach D-6), which would authorize counties, in addition to Monmouth County and Gloucester County, to operate under the alternative real property assessment dates established pursuant to the “Real Property Assessment Demonstration Program.”

In summary, this legislation would require that upon a county board of taxation’s adoption of an alternative real property assessment calendar as the “Real Property Assessment Demonstration Program,” the county tax administrator must forward a copy of that resolution to the county governing body within seven business days. The bill would then require the county governing body to consider the board of taxation’s resolution within 60 days after receipt of the resolution. The measure would further require the county governing body to consider the resolution and either adopt the alternative real property assessment calendar by resolution or ordinance, as appropriate, or disapprove it by vote of a majority of its members.

If adopted, the legislation would require that not later than the first day of the second month next following the adoption of the alternative real property assessment calendar, the county must inform the county’s residents, by publication in the official newspaper of the county, of the adoption of the alternative real property assessment calendar, and the effect of the adoption of that calendar on county property taxpayers, including, but not limited to, the change in the date for filing an assessment appeal with the county tax board. Not later than the next business day following the adoption of the resolution, the county clerk must inform the Director of the Division of Taxation in the Department of Treasury of the governing body’s decision. The adoption of that alternative real property assessment calendar by a county would be permanent, and the county would not be permitted to adopt any other real property assessment calendar.

The real property assessment calendar as part of the “Real Property Assessment Demonstration Program” would re-schedule the property assessment appeal process to dates prior to the calculation of the local property tax rate, which allows for a more accurate local property tax rate to reflect local budgetary needs and the true value of the tax base that provides the property tax revenue to fund the local budget.

The chart below sets forth the current statutory dates relative to the individual functions that comprise the real property assessment process, and the dates for those functions under the “Real Property Assessment Demonstration Program.”

DATES RELATIVE TO THE CERTIFICATION OF THE TAX LIST, ASSESSMENT APPEALS, AND THE CALCULATION OF LOCAL TAX RATES UNDER THE

“REAL PROPERTY ASSESSMENT DEMONSTRATION PROGRAM” (ADP)

Description of Function

Non-ADP Date

ADP Date

Assessing Date

October 1 of pre-tax year

October 1 of pre-tax year

Certification of Preliminary Assessment

 

N/A

 

November 1 of pre-tax year

Notification of Assessment Postcards

 

February 1

 

November 15 of pre-tax year

Assessment Appeal Filing Deadline

April 1; May 1 in municipalities wherein revaluation of real property has occurred

 

 

January 15

Assessment Appeals Heard

May, June and July

February, March and April

Tax List Filed

January 10

May 5

County Preliminary Equalization

March 10

May 15

County Final Equalization

March 10

May 25

Municipal Budget to Tax Board

March 31

May 15

County Budget to Tax Board

April 1

May 15

School Budget to Tax Board

May 19

May 15

Certified Tax Rates

May 20

May 31

Tax Duplicates

June 3

June 3

Tax Bills

June 14

June 14

 

GFOA of NJ supports the measure as it would more effectively manage the losses due to successful assessment appeals by a property owner, which reduces the property tax base, and of which require municipalities to refund large amounts of property taxes previously collected from those property owners. Moreover, a successful appeal lowers the property assessment, and the amount of property taxes due and payable from those property owners in future years. Governor Murphy is expected to sign the measure into law.

WORKERS COMPENSATION

On June 7th, the Senate passed by a vote of 29-4 Senate,  No. 716 (Greenstein D- 14/Bateman R-16), which would create a rebuttable presumption of workers’ compensation coverage for public safety workers and other employees in certain circumstances.

In summary, this legislation would hold that in the course of employment, if a public safety worker is exposed to a serious communicable disease or a biological warfare or epidemic-related pathogen or biological toxin, all care or treatment of the worker, including services needed to ascertain whether the worker contracted the disease, shall be compensable under workers' compensation, even if the worker is found not to have contracted the disease. If the worker is found to have contracted a disease, the bill would create a rebuttable presumption that any injury, disability, chronic or corollary illness or death caused by the disease is compensable under workers' compensation. The measure would affirm workers’ compensation coverage for any injury, illness or death of any employee, including an employee who is not a public safety worker, arising from the administration of a vaccine related to threatened or potential bioterrorism or epidemic as part of an inoculation program in connection with the employee’s employment or in connection with any governmental program or recommendation for the inoculation of workers.

The bill would further create a rebuttable presumption that any condition or impairment of health of a public safety worker which may be caused by exposure to cancer-causing radiation or radioactive substances is a compensable occupational disease under workers' compensation if the worker was exposed to a carcinogen, or the cancer-causing radiation or radioactive substance, in the course of employment. Employers would be required to maintain records of instances of the workers deployed where the presence of known carcinogens was indicated by documents provided to local fire or police departments under the “Worker and Community Right to Know Act,” P.L.1983, c.315 (C.34:5A-1 et seq.) and where events occurred which could result in exposure to those carcinogens.

In the case of any firefighter with seven or more years of service, the bill would create a rebuttable presumption that, if the firefighter suffers an injury, illness or death which may be caused by cancer, the cancer is a compensable occupational disease. The bill would provide that, with respect to all of the rebuttable presumptions of coverage, employers may require workers to undergo, at employer expense, reasonable testing, evaluation and monitoring of worker health conditions relevant to determining whether exposures or other presumed causes are actually linked to the deaths, illnesses or disabilities, and further provides that the presumptions of compensability are not adversely affected by failures of employers to require testing, evaluation or monitoring. The public safety workers covered by the bill include paid or volunteer emergency, correctional, fire, police and certain medical personnel.

GFOA of NJ opposes this legislation as it would likely increase annual expenditures by local governing bodies that employ or otherwise utilize public safety workers as it would shift of the burden of proof from the worker to the employer in certain cases, which may cause increased claims for workers’ compensation benefits and the requirement for public safety employers to maintain additional records. The companion version Assembly, No. 1741 (Quijano D-20/Benson D-14) is currently in the Assembly Labor Committee awaiting consideration.

ELECTRONIC PROCUREMENT

On June 21st, the General Assembly unanimously passed ASSEMBLY, NO. 3112 (Benson D- 14/Mukerhi D-33), which would authorize local governing bodies subject to the “Local Public Contracts Law” and “Public School Contracts Law” to use electronic procurement technologies for such purposes as authorized by the local governing body.

In summary, the measure would authorize local governing bodies to use “electronic procurement” for the receipt of proposals and quotations, competitive contracting, the use of reverse auctions, and related practices for the purchase of goods and services, the sale of personal property, and other public procurement-related activities to be determined by the Director of Local Government Services. The measure would also authorize local governing bodies, joint purchasing units, or cooperative pricing systems to use electronic procurement practices for the following purposes: to purchase electric generation service, electric related service, gas supply service, or gas related service, for use at its facilities so long as the purchase otherwise complies with the provisions of the "Electric Discount and Energy Competition Act"; for the sale of surplus personal property under certain circumstances; and, for the sale of real property that would otherwise comply with the sale and lease provisions of the “Local Lands and Buildings Law.”

Contracts awarded for the administration of electronic procurement practices would be subject to the requirements of the "Local Public Contracts Law," and the "Public School Contracts Law.” The bill would also require the Director of the Division of Local Government Services in the Department of Community Affairs, in consultation with other State government entities, to promulgate rules and regulations to effectuate the provisions of the bill. Local officials support this legislation as it would modernize the procurement process saving valuable time, money, and  resources. The companion version SENATE, NO. 1599 (Beach D-6/Oroho R-24) is currently in the Senate Community and Urban Affairs Committee awaiting consideration.

PROMPT PAYMENTS

On June 25th, both houses unanimously passed and sent to the Governor ASSEMBLY, NO. 3808 (Greenwald D-6/Bramnick R-12) (Singleton D-7/Oroho R-24), which would provide for the prompt payment of public contracts for the purchase of goods and services.

In summary, and unless otherwise provided for in the contract, the measure would the measure would require State agencies, local governing bodies, and school districts to make penalty payments to such business concerns after 45 days following the required payment date instead of after 60 as is the case under current law. The penalty would consist of interest on the late payment at a rate established by the State Treasurer, and of which must be paid to the business concern for the period beginning on the day after the required payment date and ending on the date on which the check for payment is drawn. Interest may be paid by separate payment to a business concern but must be paid within 30 days of the late payment.  The measure would allow public entities to waive certain interest payments for delinquencies due to circumstances beyond an entity’s control, including but not limited to lightning strikes or natural disasters. Governor Murphy is expected to sign the measure into law.

 

State House News for Finance Officers

June 8, 2018

                                                                                                                                 

Utility Connection Fees

 

On June 7th, the Senate passed by a vote of 34 – 0 Senate, No. 1247 (Rice D-28/Kean R-21), which would authorize additional connection fees for certain utilities operated by local governments and would establish certain credits and reductions for these fees. 

 

In summary, the bill would allow sewerage authorities, municipal authorities, and local units operating a county or municipal sewerage facility or water supply facility to impose new connection fees for an addition, alteration, or change in use to certain connected properties that materially increases the level of use and imposes a greater demand on the utility system, but does not involve a new physical connection of the property to the system.  I’m out of breath from that sentence.  This additional fee would be equal to the amount by which the increased use and demand on the utility system exceeds the use and demand that existed prior to the addition, alteration, or change in use.  The additional fee would not take the place of fees for any new or additional connections.

 

The bill would also require utilities to apply credits to connection fees charged for a reconnection of certain disconnected properties that were previously connected to the utility system. If the reconnection does not require any new physical connection or does not increase the nature or size of the service or the number of services units or does not expand the use of the utility system, the credit would be equal to the amount of the new connection fee.  If the reconnection requires any of the foregoing, the credit is equal to the amount of any connection fee previously paid for the property.  If no connection fee was ever paid for the property, but all service charges due and owing on the property have been paid for at least 20 years, the credit is equal to the amount of the new connection fee.  However, if no connection fee was ever paid for certain disconnected properties, a connection fee is to be charged in addition to any amount due and owing after application of a credit.  The bill would provide for this fee to be equal to the lesser of: (1) 20 percent of the service charges that would have been paid based upon the usage for the last full year that the property was connected to the utility system for the period from the date of the disconnection from the utility system to the date of the new connection; or (2) the new connection fee. The companion version of the bill in the General Assembly, Assembly, No. 2779 (Greenwald D-6) is currently in the Assembly State and Local Government Committee awaiting consideration.

 

Property Tax Exemption Analysis

 

On June 11th, the Senate Budget and Appropriations Committee will consider Senate, No. 1701 (Singleton D-7/Sweeney D-3), which would require an application for a long-term property tax exemption to include a cost-benefit analysis and for the mayor or other chief executive officer of the municipality to produce an independent cost-benefit analysis to be submitted along with the application to the municipal governing body before it can decide on the exemption.  The bill would also require a municipal governing body to include in its resolution approving or disapproving of a project for which a long-term tax exemption is sought specific findings about the net impact of the project on the finances of the affected local governments, including the municipality, county, and school district.

 

This bill would require that municipalities consider and evaluate whether an investment in a redevelopment project through the grant of a long term property tax exemption will generate satisfactory revenue returns to the municipality, as well as the financial impacts to counties, school districts, and other local governments, and would allow the public to do the same by making the required cost-benefit analyses and findings part of the public record. Under the bill, the cost-benefit analyses and financial impact findings required for grants of long term property tax exemptions would have to be posted on the Internet website of the granting municipality.  If the municipality does not have a website, the Department of Community Affairs (DCA) would be required to make this information available on its website. 

 

The bill would also require municipalities that grant new long-term property tax exemptions to provide pertinent information about each approved project to DCA, which would post that information, along with existing long term property tax exemption information retrieved from plain language budget summaries submitted to DCA, in a database, sorted by municipality, on its Internet website. The companion version Assembly, No. 345 (Murphy D-7) is currently in the Assembly State and Local Government Committee awaiting consideration. 

 

Prompt Payments


On June 7th, the General Assembly passed by a vote of 73 – 0 Assembly, No. 3808 (Greenwald D-6/Bramnick R-12), which would amend the “New Jersey Prompt Payment Act” to require State agencies that are delinquent in making payments to a business concern that provide goods or services.  In summary, the measure would require State agencies, local governing bodies, and school districts to make penalty payments to such business concerns after 45 days following the required payment date instead of after 60 as is the case under current law.  The penalty would consist of interest on the late payment at a rate established by the State Treasurer, and of which must be paid to the business concern for the period beginning on the day after the required payment date and ending on the date on which the check for payment is drawn.  Interest may be paid by separate payment to a business concern but must be paid within 30 days of the late payment.  The measure would allow public entities to waive certain interest payments for delinquencies due to circumstances beyond an entity’s control, including but not limited to lightning strikes or natural disasters The companion version of the bill in the Senate, No. 3808 (Singleton D-7/Oroho R-24) is on Second Reading in the Senate. 

 

Solar Energy Generation Facilities

Also on June 7th, the Senate passed by a vote of 37 – 0 Senate, No. 601 (Smith D-17/Greenstein D-14), which would require the owner of solar and photovoltaic energy generation facilities and structures to remove and recycle the facility and structures and any related equipment or infrastructure after the termination of their use. The measure would require the Department of Environmental Protection (DEP) to adopt regulations that establish standards for the removal and recycling of solar and photovoltaic energy generation facilities and structures.  The bill would also impose civil penalties up to $1000.00 on any person in violation of the measure and any rules or regulations adopted accordingly.  The companion version of this legislation in the General Assembly Assembly, No 4011 (Pinkin D-18) is currently in the Assembly Environment and Solid Waste Committee awaiting consideration

 

Tax Appeal Refunds

 

On June 7th, the General Assembly passed by a vote of 50 - 22 Assembly, No. 2004 (Karabinchak D-18/Mazzeo D-2), which extends the period of time in which  municipalities are required to refund the excess collection of nonresidential property taxes following a successful tax appeal to within three years of the date of final judgment.  The measure would require a municipality to refund these excess property tax collections in substantially equal payment periods and in substantially equal payment amounts.  The legislation would maintain the current statutory time-period of 60 days in which municipalities are required to refund the excess taxes paid on residential properties following a successful tax appeal.  The Senate has yet to introduce a companion version of this legislation. 

 

 

Sweeney Bill Would Alter the Way New Jersey Distributes Schools                                                               

 Ryan Hutchins & Linh Tat, Politico, May 31, 2018

State legislative leaders are moving forward with a bill that would dramatically change the way New Jersey distributes state aid to local school districts.  State Senate President Steve Sweeney introduced a bill, NJ S2, on Thursday that would phase out adjustment aid — the so-called hold harmless provision that has allowed some districts to receive more aid than others — and eliminate growth caps so districts with growing enrollments can receive more funding.  The changes would shift $68 million from districts the state Senate president considers overfunded to some of the most underfunded ones and ensure every district receives at least 58 percent of the funding they should receive from the state. Currently, some districts are funded at 20 percent or 45 percent, he said.  The bill, Sweeney said, “gives the districts that have lost children the chance to shrink in attrition and right size. … It gives us the chance to end the unfairness that’s going on.”

Assembly Speaker Craig Coughlin is on board with the changes and plans to advance the legislation soon, according to an Assembly source who was not authorized to discuss the issue publicly.  The growth cap would be eliminated immediately while the adjustment aid would be phased out over seven years. Sweeney, who until now had been seeking a five-year phase-out, attributed the change to compromising with the Assembly.  “This is not as quickly as I would like it to be, but in negotiation between houses … we ramp it up, with, I think, minor impact, if any, at all,” Sweeney said.  The state Senate president said he hopes to have the bill clear the Legislature by next week.

Governor Phil Murphy said during Thursday afternoon’s “Ask Governor Murphy” radio broadcast on WKXW-FM that he had not seen the legislation but that recent budget talks with legislative leaders have yielded “very good progress.”  Asked by host Eric Scott if the preliminary aid figures given to school districts in March would be revised, with some districts losing funding, Murphy said, “it’s going to be an equitable distribution.”  In a statement later Thursday, Dan Bryan, a spokesman for Murphy, said the governor is committed to fixing the inequities in New Jersey’s school funding, “the most notable among them being the systematic underfunding of the school funding formula over the past eight years.“  “But let's be clear: In order to fix the inequities in our school funding system, we need the revenues proposed in Governor Murphy's FY19 budget,” Bryan stated. "The Governor and his team have been working with the Senate President and Assembly Speaker on modernizing the [school funding formula] and he looks forward to reaching an agreement soon that works for all New Jersey students and families.”

Sweeney‘s legislation arrives about four weeks before the state budget deadline and as Murphy and lawmakers remain in a dispute over the need to raise taxes. Sweeney and Coughlin are both resisting the governor’s call for higher taxes on millionaires and a restoration of the 7 percent sales tax.  An agreement on school funding, which Sweeney has made his top priority, could be seen as a positive sign in the progress. The governor himself has publicly expressed optimism about reaching a budget deal by the June 30 deadline, saying he and lawmakers are in the sixth inning of the game.  But Sweeney, who has clashed with Murphy since the fellow Democrat took office in January, thinks otherwise. He has been playing a tough negotiating game behind closed doors, even withholding support for an accounting maneuver that may be necessary for keeping the state’s general fund from running out of cash. He told reporters at the Statehouse there’s still a lot of game left to play before reaching an agreement.  “We're not in the sixth inning,” Sweeney said. “I’ve done budgets. This is my ninth budget. So I know better than anybody right now. We're not in the sixth inning.”  The school aid changes envisioned by Sweeney’s new legislation could also factor directly into the budget talks. Districts across the state have already set their budgets for the next school year and could be hit with large revenue gaps. That could require the state to make additional aid available to avoid a financial crisis for some districts.

Enrollment growth caps, which have limited the flow of new aid to districts even as the number of pupils has grown, would go away in the 2019-2020 school year. Adjustment aid would be phased out over seven years, starting in 2018-19. The current growth caps are set at 10 percent for districts spending above their adequacy threshold and 20 percent for districts spending below it. Adequacy threshold refers to the amount of money a school system should spend to ensure every child receives a “thorough and efficient” education.  Adjustment aid was applied to some districts when the state adopted its current funding formula in 2008. The money was given to districts to shield them from a sudden sharp decline in state aid because of the change in the formula.

The aid was supposed to be phased out over time, but that never occurred. As a result, some districts continue to receive money from this fund, though they're receiving more than their share of state aid.  The Sweeney bill would reduce that aid and “other overfunded categories of state aid” by 5 percent this year, 8 percent next year then 10 percent, 14 percent, 18 percent, 21 percent and 24 percent in the following years.  The former Abbott districts — typically the large, urban districts — would be allowed “cap relief” for seven years so they can raise more local taxes to make up the anticipated loss in adjustment aid.  A spokesman for the state’s largest teachers union said the association was reviewing the latest proposal. The New Jersey Education Association has previously opposed any changes that would result in funding losses for districts.  David Sciarra, executive director of the Education Law Center, which has represented former Abbott districts, said in a statement the group “adamantly” opposes any changes that would cut resources necessary for students to receive a “thorough and efficient” education.

"By slashing state aid over the next seven years, Senator Sweeney's proposal would do just that, impacting school children across the state,” he stated, adding that the only recourse appears to be increasing local taxes significantly. "Before even considering this proposal, legislators must demand to know which schools will lose state aid and be unable to deliver the education their children are constitutionally entitled to receive.”  Sweeney’s bill would also create a new category of hold-harmless aid for career-technical schools, called the “vocational expansion stabilization aid.” This funding would ensure that such schools get no less than the amount they received in 2017-18, or more if the formula calls for giving them more in a given year. This exception recognizes the fact that vocational schools rely largely on the county for their aid and cannot raise taxes on their own.

Phil Murphy Orders State Agencies to Prepare for Government Shutdown

Matt Arco & Brent Johnson, NJ Advance Media, June 1, 2018

Governor Phil Murphy's administration put New Jersey's state agencies on notice Friday that they should prepare for another state government shutdown if a state budget isn't signed by the June 30 deadline.  The letter to Murphy's cabinet members, obtained by NJ Advance Media, asked them to update contingency plans for their departments.

It was sent shortly after top staffers in the state Senate and Assembly met with Murphy's senior staff Friday morning amid ongoing negotiations about Murphy's first state budget proposal -- which so far have been fraught.  The meeting was tense and unproductive, according to six sources with knowledge of the event who would speak only on the condition of anonymity. One source described it as "ugly."  Shortly thereafter, Murphy's chief counsel, Matthew Platkin, ordered state agencies to submit their shutdown contingency plans to the governor by noon on June 11.

It would be the second straight year that New Jersey's government shut down over July 4th weekend because of a dispute at the budget deadline.  Friday's meeting came a day after state Senate President Stephen Sweeney -- New Jersey's second-most powerful elected official -- introduced a plan to revamp the state's school funding and said he was willing to risk another shutdown to get it done.  Sweeney, D-Gloucester, is also angry about a pro-Murphy ad that an independent group with ties to the governor is preparing to air. A script for the TV spot has Murphy on camera touting the accomplishments of the first five months of his administration. But Sweeney views it as putting pressure on lawmakers to agree with the governor's $37.4 billion budget plan -- which includes $1.5 billion in tax hikes -- when the negotiations should happen in private. Murphy downplayed the ad during an unrelated event in Woodbridge on Friday morning.  "Frankly, the script looks so divisive, I wouldn't be surprised if the Russians were involved," Murphy quipped.

But Sweeney isn't laughing.  He says Murphy, along with state Assembly Speaker Craig Coughlin, D-Middlesex, should be discussing the budget with each other -- not over the airwaves.  "If you read the ad, it's basically saying we need to do all the things he's asking for in the budget and we need revenues," Sweeney told NJ Advance Media in a phone interview Friday. "Pretty simple. That's the stuff we should be negotiating."  One source said the situation between Murphy and Sweeney -- who have had a rocky relationship thus far -- is currently "as bad as it gets." Another source said it appeared Murphy's team was manufacturing political drama with Friday's meeting. The sit-down ended shortly after Platkin, Murphy's counsel, and Kevin Drennan, the executive director of the state Senate and a top Sweeney aide, exchanged words about Sweeney's school funding plan, according to two sources. Platkin abruptly left the room out of anger, the sources said. Hours later, he released the memo warning of a shutdown. Drennan confirmed he was in the meeting but said "the characterizations that have been reported are inaccurate and overblown. I don't believe it is appropriate to be talking publicly about what transpired in private discussions," Drennan added in a statement. "Our goal is to get things done, not to create distractions."

The drama comes a year after a budget dispute between then-Gov. Chris Christie, a Republican, and leaders of the Democrat-controlled state Legislature shut down the state government for three days. State parks, beaches and agencies were shuttered over July 4th weekend. And NJ Advance Media captured widely circulated photographs of Christie lounging on the sand outside the governor's summer house at one of the closed state beaches. Now, Murphy, a Democrat, is in charge. But legislative leaders from his own party disagree with his first state budget proposal. They have pushed back against Murphy's plans for a new tax on millionaires and reverting the state sales tax from 6.625 percent back to 7 percent to increase funding for education, transportation and more. Legislative leaders are considering crafting their own budget with no millionaires’ tax or sales tax increase to send to Murphy, according to multiple sources. It would include Sweeney's school funding plan, legislative add-ons that Murphy nixed and additional money for homestead rebates.

If Murphy and the Legislature don't agree to a budget by June 30 -- the end of the fiscal year -- that will trigger another shutdown. And the way it stands now, state parks and beaches would be closed again. A bill being considered in the Legislature to keep them open amid another shutdown has not passed yet and it's unclear if it will by the end of the month. The bill, introduced last year, would require those sites to remain open for seven days in the event of a shutdown.

 

State House News for Finance Officers

May 18, 2018

 

Pension Changes

On February 26th, the Senate was scheduled to vote on Senate, No. 5 (Sweeney D-3/Kean R-21), but instead held the measure that would transfer management of the Police and Firemen’s Retirement System (PFRS) to the Board of Trustees of PFRS.  Funded entirely by property taxpayer dollars, county and municipal governments across the State will spend an estimated $913.0 million in 2018 to subsidize the Police and Firemen’s Retirement System (PFRS), while PFRS members will contribute approximately $334.0 million to the defined benefit plan.  In other words, property taxpayers will finance over 73.0% of PFRS in 2018, while PFRS members will pay 27.0%.  It is also important to note that employee contributions are statutorily capped at 10% of an employee’s annual salary, whereas employer contributions are based on actuarial recommendations and equal 27.35% of an employee’s annual salary in 2018.  If there’s a shortfall due to underperformance of investments, benefit enhancements, or other factors, the risk of loss is borne by the taxpayers and the employer must make up the difference. 

For these reasons, the local officials across the State oppose Senate, No. 5 (Sweeney D-3/Kean R-21), which would transfer management of PFRS to the Board of Trustees of PFRS.  Our collective members of mayors, freeholders, business administrators, finance officers, and others are primarily concerned with the fact that this legislation would inequitably vest the Board’s far-reaching power with labor by a 7-5 majority; and, would enable the new Board of Trustees to enhance members benefits before requiring PFRS to attain any target funded ratio as required under current law.  One of the many hallmarks of P.L. 2011, C.78 is the prohibition enhancing member benefits in any of the State’s six pension systems until the systems achieve a target funded ratio of 80% by fiscal year 2019 and maintain the ratio thereafter. S-5 removes that requirement only for PFRS; and, would further fail to establish a true fiduciary duty to prudently manage fund assets for Board of Trustee members since counties and municipalities would continue to assume the risk of loss with PFRS as it would remain a defined benefit plan and not a defined contribution plan such as a 401(k).

As has been well documented, the local pension systems funded by counties and municipalities are healthy and actuarially sound as local governing bodies have met their obligations as employers, and have made the statutorily required full pension contributions for over a decade.  Local governments which took advantage of the optional “pension holiday” are paying it back.  In those circumstances they are contributing their portion of the $913 million referenced above, plus an additional payment and interest.  While S-5 does include the safeguards of fiduciary fund, we strongly believe additional safeguards are necessary to protect not only the taxpayers but the employees as well. 

As such, NJAC and NJLM are urging the Senate to consider the following recommendations that will serve to protect the long-term health and viability of PFRS; and, will importantly establish critical safeguards that demand the new Board of Trustees manage valuable property taxpayer dollars in an effective and efficient manner:  (1) create a 15-member PFRS Board of Trustees comprised of an equal number of labor and management representatives with 1 independent member; (2) authorize NJAC and NJLM to make direct management appointments to the new Board of Trustees as is the case with the labor representatives; (3) prohibit the new Board of Trustees from enhancing member benefits until the system achieves a target funded ratio of 80% in 2019 as required under current law;  and (4) require a vote of 2/3 of the full membership of the new Board of Trustees to enhance members benefits and only after the system achieves a target funded ratio of 80%. 

If the Legislature and Governor fail to amend the measure accordingly, then NJAC and NJLM recommend changing PFRS to a defined contribution plan where employees make greater contributions and assume a greater risk of loss as is the case with 401(k) investments. Separate, but certainly related, we’re also urging State leaders to permanently extend the 2% cap on binding interest arbitration awards, which local leaders hail as a critical tool for controlling personnel costs; negotiating reasonable successor contracts; and, avoiding arbitration awards granted by third party bureaucrats who are not accountable to taxpayers. Given the inaction on extending the 2% cap on binding interest arbitration awards, the sunsetting of employee health benefit controls implemented under Chapter 78, the restricting of SALT deductions on federal income taxes, and the long-term ramifications of enacting this legislation without the recommended safeguards, county and municipal leaders fear they are facing a perfect storm of uncontrollable property tax growth and substantial service cuts

Earned Sick Leave

On March 12th, NJAC, the New Jersey State League of Municipalities (NJSLOM), and the New Jersey School Boards Association (NJSBA) testified before the Assembly Labor Committee seeking amendments to Assembly No. 1827 (Lampitt D-6/Mukherji D-33), which mandate certain employers provide earned sick leave to employees.

This bill requires each employer to provide earned sick leave to each employee it employs in the State, except for construction employees that are under contract pursuant to a collective bargaining agreement. The employee accrues one hour of earned sick leave for every 30 hours worked.  The employer is not required to permit the employee to accrue at any one time, or carry forward from one year to the next, more than 40 hours of earned sick leave if the employer has less than 10 employees in the State, or more than 72 hours of earned sick leave if the employer has 10 or more employees.  Unless the employee accrued earned sick leave with the employer before the effective date of the bill, for an employee hired prior to the effective date of the bill, the leave accrues beginning on that date and the employee may use the leave beginning on the 90th day after the employee is hired, and for an employee hired after the effective date of the bill, the leave accrues beginning on the date of hire and the employee may use the leave beginning on the 90th day after the employee is hired, unless the employer agrees to an earlier date.

The bill provides that an employer is in compliance with the requirements of the bill with respect to providing earned sick leave if the employer offers any other fully paid leave that may be used for the same purposes provided by the bill in the same manner provided by the bill, and is accrued at a rate equal to or greater than the rate required by the bill. The employer is required to pay the employee for earned sick leave at the same rate of pay with the same benefits as the employee normally earns, except that the pay rate may not be less than the State minimum wage. If an employee is transferred to a separate division, entity, or location, but remains employed by the same employer, the employee is entitled to retain and use all earned sick leave accrued at the prior division, entity, or location.

Earned sick leave may be used for: Time needed for diagnosis, care, or treatment of, or recovery from, an employee’s mental or physical illness, injury or other adverse health condition, or for preventive medical care for the employee; Time needed for the employee to care for a family member during diagnosis, care, or treatment of, or recovery from, the family member’s mental or physical illness, injury or other adverse health condition, or preventive medical care for the family member; or, Absence needed due to circumstances resulting from the employee or a family member being a victim of domestic or sexual violence, if the leave is to obtain medical attention, counseling, relocation, legal or other services.

The bill prohibits retaliatory personnel actions against an employee for the use or requested use of earned sick leave or for filing of a complaint for an employer violation.  The bill sets requirements for record keeping and for notifying workers of their rights under the bill.  It provides for penalties and other remedies for non-compliance with the requirements of the bill, based on the penalties and remedies for non-compliance with the “New Jersey State Wage and Hour Law,” P.L.1966, c.113 (C.34:11-56a et seq.). The bill specifies that it is intended to set minimum standards for earned sick leave, but not to prevent any employer policies, collective bargaining agreements or other laws or ordinances which set higher standards. With respect to employees covered by a collective bargaining agreement in effect at the time of the effective date of the bill, no provision of the bill will apply until the expiration of the collective bargaining agreement.

NJAC recognizes that the intent of the legislation is to provide earned sick leave to employees who are not covered by collective bargaining agreements or existing sick leave policies, but is concerned that the measure would apply to public employees already covered by generous leave policies.    As has been well documented, 20 of the State’s 21 counties currently participate in civil service, which requires employers to provide employees with a minimum of 15 paid sick leave days each year that accrue without limit.  Additionally, paid sick leave is currently a negotiable item in labor negotiations; and, as a matter of general policy, sick leave provisions contained in collectively bargained agreements are extended to non-affiliated and at-will employees.   As a result of these existing civil service requirements and collective bargaining agreements, county employees already receive substantial sick leave compensation. 

With this in mind, and in order to avoid the potential for confusion and costly litigation resulting from the attempted reconciliation of multiple frameworks governing paid sick leave, NJAC has urged the sponsors throughout the legislative process to exempt county governments from the measure. Such an exemption may be accomplished by using a definition of “employer” similar to that used in the Newark paid sick leave ordinance, which reads as follows: “Employer” is as defined in N.J.S.A. 34:11-56a1(g) except that Employer does not include (a) the United States government; (b) the State or its political subdivisions or any office, department, agency, authority, institution, association, society, or any instrumentality of the State including the Legislature or Judiciary; or (c) the City of Newark.”  Although the Committee ultimately amended measure, we have not had the opportunity to review the amendments.  Senate No. 2187 (Weinberg D-37) is currently in the Senate Labor Committee awaiting consideration. 

Workplace Democracy Act

On March 5th, the Senate Labor Committee favorably reported Senate Bill No. 2137 (Sweeney D-3), which would establish the “Workplace Democracy Enhancement Act,” and is designed to ensure that employee organizations which are the exclusive representatives of public employees in collective negotiations are able to carry out their statutory duties by having access to and being able to communicate with the employees they represent.

The bill requires public employers to provide exclusive representative employee organizations with access to members of the negotiations units.  The rights of the organization to access required by the bill include:  the right to meet with individual employees on the premises of the public employer, during the work day, to investigate and discuss grievances, workplace-related complaints, and other workplace issues; the right to conduct worksite meetings during lunch and other non-work breaks, and before and after the workday to discuss workplace issues, collective negotiations, the administration of collective negotiations agreements, other matters related to the duties of the organization, and internal union matters involving the governance or business of the organization; and the right to meet with newly hired employees, without charge to the pay or leave time of the employees, for a minimum of 30 minutes, within 30 calendar days from the date of hire of each employee, during new employee orientations, or if the employer does not conduct new employee orientations, at individual or group meetings.

A public employer is required, within 10 calendar days of hiring, to provide the organization the following information about a new employee: name, job title, worksite location, home address, work telephone number, date of hire, work email address, and any personal email address and home and personal cellular telephone numbers on file with the public employer.  Public employers are required to provide updates to the employee organizations of that information every 120 calendar days. The bill specifies that home addresses, phone numbers, email addresses, birth dates, employee negotiation units and groupings, and communications between employee organizations and their members, are not government records and are exempt from the disclosure requirements of P.L.1963, c.73 (C.47:1A-1 et seq.). The bill grants employee organizations the right to use the public employer email systems to communicate with their members, and government buildings to meet with their members, regarding negotiations and administration of collective negotiations agreements, grievances and other workplace-related complaints and issues, and internal organization matters.  The meetings may not be for the purposes of supporting or opposing candidates for partisan political office or distributing literature regarding partisan elections.

A public employer is required to negotiate, upon employee organization request, contractual provisions to memorialize the parties’ agreement to implement the provisions of the bill listed above.  The bill sets forth procedures and time line regarding the resolution of any disagreement in the negotiations. The bill prohibits a public employer from encouraging employees to resign, relinquish membership in an employee organization, or revoke authorization of the deduction of fees to an employee organization, or encouraging or discouraging employees from joining, forming or assisting an employee organization.  Violations are regarded as an unfair practice, and, upon a finding that the violation has occurred, the Public Employment Relations Commission, is directed to order the public employer to make whole the employee organization for any losses suffered by the organization as a result of the unfair practice.

The bill modifies the procedures for an employee to withdraw authorization for payroll deduction of fees to employee organizations.  The bill provides that an employee may do so by providing written notice to their public employer during the 10 days following each anniversary date of the employee’s employment, and the public employer is then required to inform the employee organization of the withdrawal.  A withdrawal would take effect on the 30th day after the anniversary date.

This legislation would impose mandatory requirements on public employers to ensure that public unions are able to carry out their statutory duties by having access to and the ability to communicate with, their public employee members. We are concerned that many provisions of the bill, such as access to employees provided to unions, and meeting with union officials and their members, intrude into the collective bargaining process. By mandating minimum requirements the bill does not consider the potential disruption to the day-to-day operations of our respective members, particularly if the relationship between management and the union is contentious.   These are issues that have been successfully negotiated during the collective bargaining process.  We are also concerned with the new procedures established in S-2137, such as providing detailed contact information to the unions on all employees, whether they are members of the union, or not. We are further concerned that management will be used to assist unions in the recruiting/retaining of their members, which is inconsistent with the labor-management dynamic. 

Additionally we believe that this bill will unintentionally create taxpayer funded data mining and access that could violate public employees’ privacy and First Amendment rights.  Typically the detailed information employers will be required to provide unions on their employees in S-2137 is information a person provides an organization once they join, not beforehand, and certainly not by a third party, in this case their employer.  Currently, N.J.S.A. 34:13A-5.4 provides appropriate protections regarding union activities.  We are concerned that S-2137 infringes on the collective bargaining process and possibly the rights of the public employees. A-3686. 

Caps on Binding Interest Arbitration Awards

Mayors, freeholders, administrators, and finance officers across the State commend Senator Declan O’Scanlon (R13), and assemblywomen Betty Lou DeCroce (R-26) and Holly Schepesi (R-39) for introducing Senate, No. 1858/Assembly, No. 3378, which would permanently extend the 2% cap on binding interest arbitration awards. 

In addition to making the 2% cap on binding interest arbitration awards permanent as recommended by the Police and Fire Interest Arbitration Task Force, this legislation would: provide arbitrators with 90 days to render a decision; maintain the 14-day deadline to file an appeal and the 60-day period for the Public Employment Relations Commission (PERC) to render a decision; preserve the $10,000.00 cap on compensation for arbitrators; include step and longevity pay  in base salaries; void final agreements that are not filed with PERC or that do not include a cost summary; and, abolish the “Dynamic Status Quo Doctrine,” which requires local governments to pay costly step increases after a collective bargaining agreement has expired and where the parties have failed to reach a reasonable successor agreement.

For nearly a decade, the 2% cap on binding interest arbitration awards has kept public safety employee salaries and wages under control simply because parties have been closer to reaching an agreement from the onset of negotiations.  Moreover, the 2% cap on binding interest arbitration awards has established clear parameters for negotiating reasonable successor contracts that preserves the collective bargaining process and takes into consideration the separate 2% tax levy cap on overall local government spending.  Failure to permanently extend the 2% cap on binding interest arbitration awards will inequitably alter the collective bargaining process in favor of labor at the expense of taxpayers,   In addition to raising taxes, county and municipal governments across the State will need to consider imposing employee furloughs; privatizing services; freezing salaries for non-affiliated employees; and, reducing or eliminating non-mandated services such as transportation for the aged and disabled, meals on wheels, mental health and addiction services, and more. Without question, the 2% cap on binding interest arbitration awards has proven to be a vital tool for controlling personnel costs; negotiating reasonable successor contracts; and, avoiding arbitration awards granted by third party administrators who are not accountable to taxpayers.  

Shared Services and Consolidation 

On February 15th, the Senate Budget and Appropriations Committee favorably reported Senate, No. 1 (Sweeney D-3), which would clarify the powers of the Local Unit Alignment, Reorganization, and Consolidation Commission (LUARCC) to recommend specific consolidations and mergers between public entities. 

Under current law, LUARCC is responsible for examining the consolidation of municipalities, the merger of autonomous agencies into their parent municipal or county government, and the sharing of services between municipalities or between municipalities and other public entities.  S-1 would also enhance LUARCC's powers to facilitate shared service agreements by authorizing the Commission to recommend or to order the execution of specific shared service agreements.  The provisions of Title 11A, Civil Service, would not apply to an employee affected by a shared services agreement ordered or recommended by LUARCC. The measure would further require LUARCC to include in every consolidation proposal and every shared services proposal an estimate of the savings that would result from implementation of the proposed consolidation or sharing of services.  The bill would allow local units to contest LUARCC's estimate of savings by appeal to the Commissioner of the Department of Community Affairs.

 

Current law provides for public hearings when municipal consolidations are being considered.  This bill would provide that when LUARCC recommends a municipal consolidation, the Commission must be present at one or more of those public hearings.  The bill would also require LUARCC to hold at least two public hearings whenever the Commission recommends or orders a sharing of services. Under the bill, as under current law, LUARCC-recommended consolidation or shared service proposals would become effective upon adoption by a majority of the voters of each affected municipality.  If the voters of a municipality do not approve a shared services proposal or if a municipality or other entity identified in a proposed shared services agreement does not enter into and implement the proposed shared services agreement within 14 months following the effective date of the proposal, the State would annually reduce that municipality's State aid by the amount of savings that was estimated by LUARCC.   With respect to LUARCC-ordered sharing of services, if a municipality or other entity identified in a shared services order does not implement the order within 14 months of its effective date, the State would annually reduce the total amount of aid it provides to that municipality or entity by the amount of savings that was estimated by LUARCC.  Under these circumstances, the bill would authorize the State to take other steps it deems necessary to enforce the order, including withholding all State aid allocated to that municipality or entity until it complies with the order.

 

Additionally, the would bill clarify the Legislature's intention that LUARCC have sufficient resources to fulfill its statutory obligations by empowering LUARCC to request specific resources from the State and localities and to contract for necessary services.  The bill would appropriate funds to LUARCC to cover the costs of operations and to fund extraordinary expenses of local units needed to implement a LUARCC-proposed consolidation plan or shared service agreement. The bill also provides that when local units enter into, renew, or extend shared service agreements or joint meetings pursuant to the "Uniform Shared Services and Consolidation Act," P.L.2007, c.63 (C.40A:65-1 et seq.) or any other law providing for the sharing of services, the provisions of Title 11A, Civil Service, would not apply to employees affected by the shared service agreement or joint contract. S-1 is on Second Reading in the Senate, and the companion version in the lower house Assembly, No. 1839 (Lampitt D-6/Moriarty D-4) is currently in the Assembly State and Local Government Committee awaiting consideration. 

 

Prepaid Property Taxes

On February 14th, the General Assembly passed by a vote of 72-0 Assembly, No 3382 (Freiman D-16/Mazzeo D-2), which would permit property taxpayers to repay quarterly property tax installments prior to the issuance of the tax bill for any installment. 

Under current law, a municipal tax collector is only required to receive prepayment for property taxes or assessments if the governing body of a municipality has passed a resolution to that effect.  In that event, property taxpayers may issue prepayments, either in whole or in part, and based of the taxes and assessments levied for the preceding year.  The bill would also require the tax collector to issue a receipt and credit the amount paid to the account of any taxes or assessments levied.  A-3382 would amend current law to permit property taxpayers to make prepayments for property taxes and assessments at any time during the year without prior authorization from the governing body. The measure would further provide that early property tax prepayments may be made through dedicated prepayments, which are payments for the anticipated quarterly installment of property tax and assessment obligations that are made before the issuance of the tax bill for an installment.  The bill would require taxpayers to make dedicated payments to tax collectors, and clearly indicate the property tax installment to which the payment should be credited.  Tax collectors must issue receipts of payment accordingly and refund any excess amounts within 30 days of the issuance of the tax bill for the installment.  A-3382 is on Second Reading in the General Assembly, and a companion version has not been introduced in the Senate as of this writing. 

Supreme Court Ruling Favors Sports Betting

Adam Liptak & Kevin Draper, New York Times, May 14, 2018

 

WASHINGTON — The Supreme Court struck down a 1992 federal law on Monday that effectively banned commercial sports betting in most states, opening the door to legalizing the estimated $150 billion in illegal wagers on professional and amateur sports that Americans make every year.

 

The decision seems certain to result in profound changes to the nation’s relationship with sports wagering. Bettors will no longer be forced into the black market to use offshore wagering operations or illicit bookies. Placing bets will be done on mobile devices, fueled and endorsed by the lawmakers and sports officials who opposed it for so long. A trip to Las Vegas to wager on March Madness or the Super Bowl could soon seem quaint.

 

The law the decision overturned — the Professional and Amateur Sports Protection Act — prohibited states from authorizing sports gambling. Among its sponsors was Senator Bill Bradley, Democrat of New Jersey and a former college and professional basketball star. He said the law was needed to safeguard the integrity of sports.

 

But the court said the law was unconstitutional. “It is as if federal officers were installed in state legislative chambers and were armed with the authority to stop legislators from voting on any offending proposals,” Justice Samuel A. Alito Jr. said, writing for the majority. “A more direct affront to state sovereignty is not easy to imagine.”

 

Across the country, state officials and representatives of the casino industry greeted the ruling with something like glee, nowhere more than in New Jersey, which anticipated the decision and had been prepared to quickly take advantage of it.

 

In 2011, the state’s voters passed a constitutional amendment in favor of legalizing sports betting, and three years later, the Legislature repealed its law against sports betting. Both were challenged in court. But now the Legislature only has to pass a law establishing the rules and regulations for sanctioned sports betting to begin at casinos and racetracks in the state.

 

A spokesman for Gov. Philip D. Murphy said his office sent a proposed bill to the Legislature weeks ago and has been negotiating behind the scenes in anticipation of a favorable ruling from the court. Stephen M. Sweeney, the State Senate president, said people in New Jersey would “definitely” be able to bet before June 30.

 

That would give the state a head start in joining Nevada, which was granted an exemption under the 1992 law, in allowing sports betting. But five states — Connecticut, Mississippi, New York, Pennsylvania and West Virginia — have recently passed sports betting laws, and similar legislation has been introduced in at least another dozen states.

 

“This is a dry constitutional issue about states’ rights, but it will likely change how we have viewed sports for the past 100 years,” said Gabriel Feldman, the director of the sports law program at Tulane Law School.

 

“It’s called the gamblization of sports,” he added. “Fans will become much more focused on gambling than following a team. It will make every second of every game of every week interesting to fans as it will give everyone something to root for.”

 

The American Gaming Association, a trade group that represents casinos, predicted that the ruling would generate revenue without endangering the integrity of sports competitions.

 

“Through smart, efficient regulation, this new market will protect consumers, preserve the integrity of the games we love, empower law enforcement to fight illegal gambling and generate new revenue for states, sporting bodies, broadcasters and many others,” the group said in a statement.

 

The ruling in Murphy v. National Collegiate Athletic Association, No. 16-476, is also likely to be a boon for media and data companies that have existing relationships with the major sports leagues. They include television networks like ESPN, which is likely to benefit from more fans having a more deeply vested interest in the action — resulting in higher ratings.

 

In addition, an entire industry has been created anticipating this kind of sweeping change. It includes data companies like Sportradar, which compiles and distributes instant information. Sportradar already has a relationship with the N.F.L. and the N.B.A., as well as the International Tennis Federation.

 

Not everyone was enthusiastic about the decision.

 

“The court’s decision is monumental, with far-reaching implications for baseball players and the game we love,” Tony Clark, the executive director of the Major League Baseball Players Association, said in a statement. “From complex intellectual property questions to the most basic issues of player safety, the realities of widespread sports betting must be addressed urgently and thoughtfully to avoid putting our sport’s integrity at risk as states proceed with legalization.”

 

But the ruling confirmed what professional sports leagues like the N.B.A. and Major League Baseball have come to accept in recent years — that no matter how hard they resisted, legalized sports wagering was inevitable. The leagues and their teams long fought efforts to make it so, because, among other reasons, they were not assured of being able to directly tap into the new, vast revenue stream.

 

Tax Fight: IRS May Nix States' Workaround on Deduction Caps From Tax Cuts and Jobs Act Darla Mercado, CNBC, May 15, 2018

A number of high-tax states have recently passed legislation to help residents manage new caps on their ability to take federal tax deductions. However, accountants are warning taxpayers to proceed with caution.

This year, the Tax Cuts and Jobs Act put in place a $10,000 cap on the amount of state and local taxes (SALT) that filers can claim on their taxes. Residents in high-tax locales can expect to feel the pain: In 2015, the average New Yorker's SALT deduction was $22,169, according to the Tax Policy Center. In New Jersey and Connecticut, those amounts were $17,850 and $19,665, respectively.

In response to the new tax code, those three states passed laws to create a workaround: Municipalities will be permitted to establish charitable funds to pay for local services and offer property tax credits to incentivize homeowners to make contributions. New York Gov. Andrew Cuomo signed off on this legislation on April 17. New York has also enacted a new voluntary payroll tax to address workers' inability to exceed the cap on their income taxes. On May 4, New Jersey Gov. Phil Murphy signed legislation to permit cities and towns in the Garden State to move forward on the charitable fund strategy. And Connecticut lawmakers approved the state's bill for a similar measure on May 9. The measure awaits the signature of Gov. Dannel P. Malloy.

Tax filers who itemize on their taxes are also able to claim a charitable tax deduction on their federal taxes — and can do so above and beyond the $10,000 SALT cap.

What's unknown is whether the IRS will bless these workarounds. Treasury Secretary Steve Mnuchin has already signaled his disapproval. "I hope that the states are more focused on cutting their budgets and giving tax cuts to their people in their states than they are in trying to evade the law," he said at a news briefing in January.

Even though state legislators have given their blessing — and have signaled that they're willing to fight the federal government in court — tax lawyers are telling their clients to hold off on making contributions to municipalities' charitable funds for now. "I think for everybody that we've dealt with in the states with the workarounds, we've expressed our concern that Treasury may not go along with this," said Michael D'Addio, a principal at Marcum LLP.

Attorneys and critics of the workarounds said that the IRS requires that there be charitable intent in order for a contribution to be deductible. Municipalities' decision to offer donors a credit for donating to a charitable fund may also be seen as fishy, critics and lawyers said.

"Also, if you make a contribution that imposes a liability on the recipient, then the liability disallows the contribution," said Jared Walczak, senior policy analyst at the Tax Foundation. "In this case, the liability is the local or state government offering a tax credit, which zeroes out the actual charity," he said.

For individuals who are questioning whether to make a contribution to their municipality's charitable fund instead of paying the property tax as they usually do, attorneys are advising them to sit tight for now.

"The caveat we give clients is that it remains to be seen from the IRS' point of view," said Seth Rabe, senior manager of the state and local tax services group at Mazars USA. "You could potentially be subject to back taxes and your contribution isn't viewed as a gift."

To play it safe, filers could always try maxing out the available $10,000 SALT deduction prior to making charitable contributions to state funds, Walczak said. Waiting until the absolute last minute for guidance might also be smart.

"Hopefully, we'll know in December whether to make the charitable contributions," Galle said. "You'd want to wait until the end of the year to see what the federal government will say about the federal deductibility of these things."

 

State House News for Finance Officers

March 16, 2018

 

Pension Changes

On February 26th, the Senate was scheduled to vote on Senate, No. 5 (Sweeney D-3/Kean R-21), but instead held the measure to consider potential amendments that the upper house will likely adopt at its voting session on March 26th.  In the meantime, GFOA, the New Jersey Association of Counties (NJAC), and the New Jersey State League of Municipalities (NJLM) met on March 15th with representatives from the offices of the Speaker of the General Assembly and prime sponsor of the companion version Assembly, No. 3671 (Johnson D-37/Dancer R-12) to discuss our long-standing concerns with the measure. 

Funded entirely by property taxpayer dollars, county and municipal governments across the State will spend an estimated $913.0 million in 2018 to subsidize the Police and Firemen’s Retirement System (PFRS), while PFRS members will contribute approximately $334.0 million to the defined benefit plan.  In other words, property taxpayers will finance over 73.0% of PFRS in 2018, while PFRS members will pay 27.0%.  It is also important to note that employee contributions are statutorily capped at 10% of an employee’s annual salary, whereas employer contributions are based on actuarial recommendations and equal 27.35% of an employee’s annual salary in 2018.  If the Fund falls short of projections due to underperformance of investments, benefit enhancements, or other factors, the risk of loss is borne by taxpayers as local government employers must make up the difference. 

With this in mind, we’re primarily concerned with the fact that this legislation would inequitably vest the Board’s far-reaching power with labor by a 7-5 majority; and, would enable the new Board of Trustees to enhance members benefits before requiring PFRS to attain any target funded ratio as required under current law.  One of the many hallmarks of P.L. 2011, C.78 is the prohibition enhancing member benefits in any of the State’s six pension systems until the systems achieve a target funded ratio of 80% by fiscal year 2019 and maintain the ratio thereafter. This legislation removes that requirement only for PFRS; and, would further fail to establish a true fiduciary duty to prudently manage fund assets for Board of Trustee members since counties and municipalities would continue to assume the risk of loss with PFRS as it would remain a defined benefit plan and not a defined contribution plan such as a 401(k).

 

As has been well documented, the local pension systems funded by counties and municipalities are healthy and actuarially sound as local governing bodies have met their obligations as employers, and have made the statutorily required full pension contributions for over a decade.  As such, we’re urging the Legislature to consider the following recommendations that will serve to protect the long-term health and viability of PFRS; and, will importantly establish critical safeguards that demand the new Board of Trustees manage valuable property taxpayer dollars in an effective and efficient manner:  create a 15-member PFRS Board of Trustees comprised of an equal number of labor and management representatives with 1 independent member;  authorize NJAC and NJLM to make direct management appointments to the new Board of Trustees as is the case with the labor representatives; prohibit the new Board of Trustees from enhancing member benefits until the system achieves a target funded ratio of 80% in 2019 as required under current law;  and, require a vote of 2/3 of the full membership of the new Board of Trustees to enhance members benefits and only after the system achieves a target funded ratio of 80%.

If the Legislature and Governor fail to amend the measure accordingly, we recommend changing PFRS to a defined contribution plan where employees make greater contributions and assume a greater risk of loss as is the case with 401(k) investments. Separate, but certainly related, we’re also urging State leaders to permanently extend the 2% cap on binding interest arbitration awards, which local leaders hail as a critical tool for controlling personnel costs; negotiating reasonable successor contracts; and, avoiding arbitration awards granted by third party bureaucrats who are not accountable to taxpayers. Given the inaction on extending the 2% cap on binding interest arbitration awards, the sun-setting of employee health benefit controls implemented under Chapter 78, the restricting of SALT deductions on federal income taxes, and the long-term ramifications of enacting this legislation without the recommended safeguards, county and municipal leaders fear they are facing a perfect storm of uncontrollable property tax growth and substantial service cuts.   S-5 is on Second Reading in the Senate, and A-3671 is currently in the Assembly State and Local Government Committee awaiting consideration. 

Workplace Democracy Enhancement Act

On March 5th, the Senate Labor Committee favorably reported Senate Bill No. 2137 (Sweeney D-3), which would establish the “Workplace Democracy Enhancement Act.”

We plan on meeting with the sponsors to discuss our concerns that this legislation would impose mandatory requirements on public employers to ensure that public sector unions fulfill their statutorily required duties by having access to and being able to communicate with the employees they represent.  We’re concerned that the measure would unlevel the playing field in favor of labor in the collective bargaining process and would disrupt daily operations by in part permitting representative employee organizations to meet with employees on the premises during the work day, the right to conduct worksite meetings during lunch and other non-work breaks, the right to meet with newly hired employees within 30 calendar days, and other similar requirements.  These items should be left to the collective bargaining process.  We’re also concerned that this legislation would unintentionally create a taxpayer funded data mining operation; and, may violate an employee’s privacy and First Amendment rights by requiring public employers provide employee contact information before the employee joins representative employee organization. 

In summary, the bill would require public employers to provide exclusive representative employee organizations with access to members of the negotiations units.  The rights of the organization to access required by the bill would include:  the right to meet with individual employees on the premises of the public employer, during the work day, to investigate and discuss grievances, workplace-related complaints, and other workplace issues; the right to conduct worksite meetings during lunch and other non-work breaks, and before and after the workday to discuss workplace issues, collective negotiations, the administration of collective negotiations agreements, other matters related to the duties of the organization, and internal union matters involving the governance or business of the organization; and, the right to meet with newly hired employees, without charge to the pay or leave time of the employees, for a minimum of 30 minutes, within 30 calendar days from the date of hire of each employee, during new employee orientations, or if the employer does not conduct new employee orientations, at individual or group meetings.

The bill would further require public employers within 10 calendar days of hiring to provide the organization the following information about new employees: the name, job title, worksite location, home address, work telephone number, date of hire, work email address, and any personal email address and home and personal cellular telephone numbers on file with the public employer.  Public employers would also be required to provide updates to the employee organizations of that information every 120 calendar days. The bill specifies that home addresses, phone numbers, email addresses, birth dates, employee negotiation units and groupings, and communications between employee organizations and their members, are not government records and are exempt from the disclosure requirements of P.L.1963, c.73 (C.47:1A-1 et seq.). The bill would grant employee organizations the right to use the public employer email systems to communicate with their members, and government buildings to meet with their members, regarding negotiations and administration of collective negotiations agreements, grievances and other workplace-related complaints and issues, and internal organization matters.  The meetings may not be for the purposes of supporting or opposing candidates for partisan political office or distributing literature regarding partisan elections

The bill would require public employers to negotiate, upon employee organization request, contractual provisions to memorialize the parties’ agreement to implement the provisions of the bill listed above.  The bill would set forth procedures and time line regarding the resolution of any disagreement in the negotiations. The bill would further prohibit a public employer from encouraging employees to resign, relinquish membership in an employee organization, or revoke authorization of the deduction of fees to an employee organization, or encouraging or discouraging employees from joining, forming or assisting an employee organization.  Violations would be regarded as an unfair practice, and, upon a finding that the violation has occurred, the Public Employment Relations Commission, is directed to order the public employer to make whole the employee organization for any losses suffered by the organization as a result of the unfair practice. S-2137 is on Second Reading in the General Assembly, and the Assembly Labor Committee will consider Assembly No. 3686 (Coughlin D-19) at its meeting on Monday. 

Earned Sick Leave

On March 12th, local officials testified before the Assembly Labor Committee seeking amendments to Assembly No. 1827 (Lampitt D-6/Mukherji D-33), which would mandate employers provide earned sick leave to employees.

Although we although appreciate the intent of the legislation, we’re concerned that the measure would provide additional benefits to public employees already protected by generous leave policies through collective bargaining agreements, statutory law, and past practices. Although the Committee did not accept our recommendation to exempt public employers from the legislation, the committee second referenced the bill to the Assembly Appropriations Committee, and attempted to address our concerns by amending the measure to include the following language that we’re still in the process of reviewing: 

This act shall not be construed to preempt, limit, or otherwise affect the applicability of any provision of any State law or regulation regarding earned sick leave for employees of public employers that provides rights or benefits to employees which provide a greater length of earned sick leave to employees than those required by this act, but shall supersede any provision of any State law or regulation which provides a lesser length of earned sick leave  to the employees than what is required by this act, notwithstanding the provisions of those other laws or regulations. 

With respect to the bill in its entirety, the measure would provide that an employee would accrue one hour of earned sick leave for every 30 hours worked.  The employer would not be required to permit the employee to accrue or use in any benefit year, or carry forward from one year to the next, more than 40 hours of earned sick leave.  Accrual would begin on the effective date of the bill for any employee who commenced employment, but had not accrued leave, before the effective date, and the employee may use the earned sick leave beginning on the 120th day after employment commenced.  If employment commences after the effective date, the accrual of earned sick leave will begin when employment commences and the employee may use the earned sick leave beginning on the 120th day after employment commences, unless the employer agrees to an earlier date.  The employee may subsequently use earned sick leave as soon as it is accrued.

The bill would further provide that employers may choose the increments in which their employees may use earned sick leave, provided that the largest increment of earned sick leave that an employee may be required to use for each shift for which earned sick leave is used shall be the number of hours the employee was scheduled to work during that shift.  The employer would be required to pay the employee for earned sick leave at the same rate of pay, and with the same benefits, as the employee normally earns.  Earned sick leave may be used for: time needed for diagnosis, care, or treatment of, or recovery from, an employee’s mental or physical illness, injury or other adverse health condition, or for preventive medical care for the employee; time needed for the employee to care for a family member during diagnosis, care, or treatment of, or recovery from, the family member’s mental or physical illness, injury or other adverse health condition, or preventive medical care for the family member; absence needed due to circumstances resulting from the employee or a family member being a victim of domestic or sexual violence, if the leave is to obtain medical attention, counseling, relocation, legal or other services; time during which the employee is not able to work because of a closure of the employee’s workplace, or the school or place of care of a child of the employee, in connection with an epidemic or other public health emergency, or because of an official determination that the presence in the community of the employee, or a member of the employee’s family, would jeopardize the health of others; time needed by the employee in connection with a child of the employee to attend a school-related conference, meeting, or event requested or required by a school official or responsible professional staff member, or to attend a meeting regarding care for the child.

The bill would permit employers to require employees to provide advanced notice of up to seven days prior to leave when the need to take the leave is foreseeable, and to make a reasonable effort to schedule the leave in a non-disruptive manner.  The bill permits an employer to require reasonable documentation of the need for the leave if it is for three or more consecutive days, and provides guidelines for what constitutes reasonable documentation for specified reasons for leave.  Under the bill, employers may prohibit employees from using foreseeable earned sick leave from being used on certain dates, and require reasonable documentation if sick leave that is not foreseeable is used during those dates. The bill would also permit an employer to offer payment to an employee for unused earned sick leave in the final month of the benefit year, which the employee may accept.  If the employee declines a payment for unused earned sick leave, or agrees to a partial payment, the employee may have the unused leave carried forward to the following year.  If the employee accepts the full payment, the entire accrual for the following year must be made available at the beginning of that year. 

The bill would also prohibit retaliatory personnel actions against an employee for the use or requested use of earned sick leave or for filing of a complaint for an employer violation.  The bill would set requirements for record keeping and for notifying workers of their rights under the bill.  In cases of employer non-compliance with the requirements of the bill, including the requirements regarding retaliation, record keeping, and notification to employee of their rights, the bill would provide certain penalties based on the penalties for non-compliance with State laws regarding the payment of wages.   The bill would finally prohibit counties and municipalities, after the effective date of the bill, from setting new requirements regarding earned sick leave and preempts existing local requirements.   The companion version Senate, No. 2171 (Weinberg -37) is currently in the Senate Labor Committee awaiting consideration.

Transportation Trust Fund Capital Projects

On March 12th, the Senate Transportation favorably reported and second referenced to the Senate Budget and Appropriations Committee Senate, No. 876 (Sweeney D-3/Oroho R-24), which would revise the process for administering capital projects under the New Jersey Transportation Trust Fund.

In summary, the bill would authorize the Transportation Trust Fund Authority to hire engineering consultants to generate bi-annual reports which identify, for each transportation project and public transit transportation project, the progress achieved in expending capital funds and the progress achieved in completing capital projects.  The Authority may also hire an outside consultant to generate a bi-annual report on all non-project line items in the annual capital program that are not included in the engineering consultant’s report.  This report would focus on the progress achieved in expending funds appropriated in the capital program and provide a description of how those funds are being expended, including but not limited to, contracts, employment levels, and measurable outcomes relating to each capital program line item.

The bill would also require the Department of Transportation (DOT) to develop an annual highway project priority list for each county. The highway project priority list is a list of State highway projects, chosen by the county in which the projects are located, from a candidate list provided by the department to the county of all structurally deficient State bridges and State highway pavement areas in less than acceptable condition.  The dollar amount of projects that a county can add to the list each year would be limited by the amount of grant money a county is statutorily scheduled to receive each year through the local county aid program.  The Commissioner would be required to consider each highway project priority list for the inclusion of those projects into the capital program subject to the availability of funds.  If the State is unable to begin a project on the highway project priority list that was included in the capital program within three fiscal years, the county may confer with the Department, and, if the Department finds that allowing the county to take over the project is cost-effective and will expedite completion of the project, the Department may transfer the project to the county.  However, the Department would remain responsible for the cost of the project and provide payments to the county for the cost of the project on a reimbursement basis.  If the department and county agree that a county is better suited to complete a project on the list, the Department and county could also form an agreement and transfer the project to a county in less than three years.  For all projects on the list, regardless of whether a county has taken over completion of a project, local aid program funds are not to be used for these projects.  All projects are State projects and are to be funded with department capital appropriations.  Projects on the list that are transferred to a county are still required to adhere to all existing State procurement laws, including those applying to bidding and business set-asides.

The measure would also require Department to bundle the design of certain transportation design projects funded, in whole or in part, by the Transportation Trust Fund.  Projects that are eligible to be bundled are projects of similar complexity, project type, or geographic proximity, that are of similar size or design, where the bundling of design projects will not require more stringent environmental review, and whose inclusion in the program will save the department time or money.  The purpose of the program is to save costs and time by allowing multiple transportation projects to be designed under a single contract.  Contracts issued under the design bundling program are still required to adhere to all existing procurement laws, including those applying to bidding and business set-asides. The companion version Assembly No. 2607 (DeAngelo D-14) is currently in the Assembly Transportation and Independent Authorities Committee awaiting consideration. 

Property Tax Credits

 

On March 12th, the Assembly State and Local Government Committee favorably reported Senate, No. 1893/Assembly, No. 3499 (Sarlo D-36/Sweeney D-3)(McKeon D-27/Jasey D-27), which would permit local governing bodies to establish one or more charitable funds, each for a specific purpose, and would further permit property tax credits in association with certain donations. 

 

Once a local governing body establishes a charitable fund, the bill would allow anyone to make donations to it accordingly.  However, if a donation is made on behalf of a real property within the jurisdiction of the local unit, the property could be entitled to a property tax credit on the next property tax bill assessed after the donation is processed.  A local unit that intends to establish a charitable fund would do so by ordinance or resolution of the governing body, as appropriate.  A charitable fund ordinance or resolution would designate a fund administrator to assume responsibility for the collection and distribution of donations to the fund.  The ordinance or resolution would establish an annual limit on tax credit funding that may be made available as a result of local charitable donations, and an annual donation cap, which would be updated prior to the beginning of each fiscal year.  The limit on tax credit funding would equal 90 percent of the annual donation cap, or a different percentage as determined appropriate by the Director of the Division of Local Government Services (“DLGS”) in the Department of Community Affairs.  The annual donation cap would not limit all donations, only donations that could be creditable in relation to property tax payments.  A charitable fund ordinance could also limit the extent to which a large charitable donation on behalf of an individual property owner could count against the annual donation cap. 

 

Under the bill, a donation to a charitable fund could be made by or on behalf of a local property owner by directing the payment to the appropriate fund administrator.  If the donor intends to obtain a property tax credit in association with the donation, the donor would indicate to which parcel of property the donation should apply.  A donation could be credited across more than one parcel.   Following receipt of a local charitable donation, the fund administrator would issue a receipt to the donor.  The fund administrator would also notify the donor in the event that the annual donation cap has been reached, in order to provide notice that the donation is either being moved to the spillover fund or is otherwise held by the local unit, awaiting the donor’s direction.  Following this notification, the fund administrator would provide the donor with at least 60 days to direct the fund administrator to instead allocate the donation to another charitable fund or to rescind the donation. Following donation receipt, the fund administrator also would notify the appropriate tax collector within five business days of the amount of the donation and the size of the credit made available as a result of the donation. 

 

The legislation would also authorize charitable fund donations to be used for the payment of fees that may be required by a tax collector for their responsibilities under the bill, and the payment of administrative costs associated with the establishment of the fund.  Additionally, charitable fund would be used for purposes consistent with the specified charitable purpose, as designated in the ordinance or resolution establishing the fund.  The bill would further direct municipal tax collectors to allow a local property owner a credit to be applied to property taxes in association with certain charitable donations.  A credit would be equal to 90 percent of the amount of donations contributed on behalf of the owner’s specified parcel of property to a charitable fund within the local unit, or a different percentage as determined appropriate by DLGS.  The tax collector would apply the credit against the first property tax bill with respect to the specified parcel of property that is assessed on or after the fifth business day following receipt of the notification sent by the fund administrator.  If the total amount of all tax credits on a property exceed the amount of tax owed for the property to the local unit associated with a charitable fund, and the tax collector is unable to apply a full credit against the bill, then the tax collector would carry the remaining portion of the credit forward to one or more future bills.  However, no tax credit would be carried forward for more than five years.  The tax collector would indicate on a tax bill the value of the tax credits that apply to the bill and the value that would be applied to future bills.  In association with each credit, the bill permits the tax collector to require a fee from the fund administrator to be allocated towards the tax collector’s administrative expenses.  The General Assembly is expected to pass the measure at one of its upcoming voting sessions, and Governor Phil Murphy is expected to sign the bill into law. 

 

Senate Votes to Roll Back Parts of Dodd-Frank Banking Law

Donna Borak and Ted Barrett, CNN, March 14, 2018

The Senate on Wednesday passed sweeping changes to a swath of rules adopted in the wake of the 2008 financial crisis. The measure crafted by Idaho Sen. Mike Crapo, the top Republican on the Senate Banking Committee, passed 67 to 31, marking a rare occurrence of old-fashioned legislating on a bipartisan bill that nevertheless sharply divided Democrats. The legislation will now move to the House, where it will need to be reconciled with possible fixes proposed by Rep. Jeb Hensarling, chairman of the House Financial Services Committee.  A White House press secretary said in a statement that President Donald Trump supports Crapo's bill and would sign it into law. Still, the White House left the door open to possible changes that could be made by House lawmakers as long as the bipartisan bill reaches the president's desk "as soon as possible." The proposal provides long-awaited relief to thousands of community banks and dozens of regional lenders including Zions Bancorp, BB&T and SunTrust. It will also loosen regulations for mortgage lenders, expand access to free credit freezes for Americans and change rules for student loan defaults.

"This bill shows that we can work together and can do big things that make a big difference in the lives of people across this country," said Crapo on the Senate floor ahead of the vote. The bill's passage was a defeat for progressive Democrats, who strongly opposed easing regulations for some banks, warning that doing so would likely trigger another financial crisis.  "This legislation threatens to undo important rules protecting us from risk," Sen. Sherrod Brown, the top Democrat on the banking panel, said earlier this week on the Senate floor. "This legislation again puts taxpayers on the hook for bailouts."

Progressives pointed to several critical changes in the bill that would release more than two dozen regional banks from stricter oversight by the Fed and would make it easier for Wall Street banks to fight off existing regulations.

"Buried down in the details of the bill are more landmines for American families" Sen. Elizabeth Warren, a Massachusetts Democrat, said on the Senate floor ahead of the chamber's vote. "Washington has become completely disconnected from the real problem in people's lives." The bill raises the threshold at which banks are considered too big to fail. That trigger, once set at $50 billion in assets, would rise to $250 billion. It would leave only a dozen US banks -- including JPMorgan Chase, Bank of America and Wells Fargo -- facing the strictest regulations. The measure would also shield more than two dozen banks from some Fed oversight under the 2010 Dodd-Frank regulatory law. Those banks would no longer be required to have plans to be safely dismantled if they fail. And they would have to take the Fed's bank health test only periodically, not once a year.

Moderate Democrats accused progressives of overstating provisions in the bill and the likely impact it could have on the economy. Instead, they argued they have to respond to the distinct political and banking needs in their states, which they say have been hurt by consolidation in the banking industry since the law was passed. "They don't understand where we live," said Sen. Heidi Heitkamp, a moderate Democrat from North Dakota who is up for re-election, on the chamber floor. "They don't understand who we are. They don't understand we live in communities and that we support and protect each other. Instead, they write one regulation that's supposed to be one-size-fits-all."

Many of the measure's Democratic cosponsors hail from rural states won by Trump. Their support for the long-sought changes may demonstrate to their voters, many who voted for Trump, that they can work with the President and not reflexively oppose anything he supports. Ahead of Wednesday's vote, Sen. Mark Warner, a Virginia Democrat, defended his support for the bill, arguing he would never back remedies that would put the financial system at risk. "Let me be clear that I will do nothing and support no legislation that seriously undermines or cuts back on the provisions and the systemic protections that were put in place," Warner said on the chamber floor. "But eight years later ... there is widespread agreement that some of the standards we set in Dodd-Frank needed time for review."

Those cap changes include exempting community banks with $10 billion or less in assets from having to comply with the so-called Volcker Rule, a regulation that bars financial institutions from making risky bets with money insured by taxpayers.  It also stops banks that originate 500 or fewer mortgages each year from having to collect racial data on their loans. Under a 1975 law, financial institutions are required to report the race, ethnicity and ZIP codes of borrowers so regulators can make sure they aren't discriminating in lending.  Some new consumer protections were also added to the bill including offering Americans free credit freezes and barring lenders from declaring a student loan in default when a co-signer dies or declares bankruptcy.

It's not just progressives who've highlighted negative consequences from the changes to the bill. The nonpartisan Congressional Budget Office weighed in with its take on Monday, before the initial vote, and came to the conclusion that the bill, if passed, would increase the chances of another 2008-style collapse. "CBO's estimate of the bill's budgetary effect is subject to considerable uncertainty, in part because it depends on the probability in any year that a systemically important financial institution (SIFI) will fail or that there will be a financial crisis," the report states, before adding the caveat: "CBO estimates that the probability is small under current law and would be slightly greater under the legislation."

Bipartisan Bill Introduced to Restore Tax-Exempt Bond Provision Scrapped in Tax Reform

Jack Peterson, NACo, February 15, 2018

On February 13, Reps. Randy Hultgren (R-Ill.) and Dutch Ruppersberger (D-Md.), the chair and vice chair of the U.S. House Municipal Finance Caucus, introduced legislation to restore the tax-exempt status of advance refunding (AR) bonds, a financing tool allowing states and local governments to take advantage of favorable interest rates and refinance existing municipal bonds. AR bonds were eliminated in the tax reform package passed at the end of 2017. The bill is cosponsored by four additional members: Reps. Luke Messer (R-Ind.), Ed Royce (R-Calif.), Dan Kildee (D-Mich.) and Michael Capuano (D-Mass.).

Prior to the repeal of AR bonds in the Tax Cuts and Jobs Act (P.L. 115-97), governmental bonds – including municipal bonds – were permitted one advance refunding during the lifetime of the bond to refinance the bond. This allowed public issuers to take advantage of fluctuations in interest rates to realize considerable savings on debt service, which ultimately benefited taxpayers. The Tax Cuts and Jobs Act made the repeal of AR bonds effective at the end of 2017, meaning counties had only a few days to issue advance refundings for any outstanding bonds that qualified – a process that usually takes months or years.

The ability to advance refund outstanding bonds provided substantial savings to taxpayers and counties throughout the country. In 2016, the advance refunding of more than $120 billion of municipal securities saved taxpayers at least $3 billion, with taxpayers saving nearly $12 billion from 2012 to 2016. Best practices advanced by the Government Finance Officers Association (GFOA) recommended minimum savings thresholds on a present value basis of 3 percent to 5 percent when advance refunding municipal securities. The repeal of AR bonds in the Tax Cuts and Jobs Act generated over $17 billion in federal revenue at the expense of local governments and infrastructure development.

The legislation from Reps. Hultgren and Ruppersberger would restore AR bonds and give a needed boost to locally driven infrastructure projects across the country. However, U.S. House Ways and Means Committee Chairman Kevin Brady (R-Texas), who helped author the tax reform legislation and has oversight over AR bonds, expressed skepticism about restoring AR bonds, saying he’d prefer to focus on leveraging existing funding for infrastructure projects and shifting the current uses of private activity bonds.

 

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