ATLANTIC CITY — Millions of dollars saved by massive layoffs of city police officers and firefighters last year were used to pay off the retirements of the departments’ veterans, budget figures show.

Budget documents reviewed by The Press of Atlantic City show the Langford administration last year transferred

$3.5 million into an account to accommodate $7.1 million in accumulated leave payments for an unexpected number of retiring city personnel, most of whom were public safety workers. Nearly $2.2 million came from surpluses in the city’s fire and police salaries, courtesy of the layoffs.

One retiring deputy fire chief received more than $272,000, three other public safety workers collected more than $200,000 each and 12 more cleared at least $100,000.

“Those high payouts definitely had an effect on the budget,” Business Administrator Michael Scott said. “They made us do some things we didn’t want to do.”

The administration laid off 60 police officers and 30 firefighters last year, saying it needed to combat a near-$10 million budget shortfall. Those job cuts came after a rush of retirements that ultimately totaled 78 employees, costing the city nearly $7.1 million by the end of last year. About $1.9 million of those costs will be paid in annual installments over the next three years.

The 2010 retirement costs were the highest in more than five years. The second-largest annual payout during that time came in 2007, when the city spent $6.8 million in terminal leave, a common term for accumulated sick and vacation days. Those payments were caused by the retirements of 32 firefighters and 58 police officers in late 2006, a mass exodus prompted by cuts to retirement health benefits. In 2008 and 2009, the city paid out less than $2 million annually.

PBA President Dave Davidson Jr. said the city should have been prepared for the retirements. He pointed out that — even with the terminal leave nearly double what was budgeted — the city ended 2010 with more than a $4.3 million surplus.

“This is total mismanagement,” Davidson said. “They know what the potential for those terminal payoffs are well in advance. As we sit here today, they know how many guys are eligible to leave and how much money they could cost.”

The surplus, Davidson argued, shows the layoffs didn’t need to be so severe.

“Maybe we still would have lost 10 or 12 guys,” he said. “But what happened last year didn’t need to happen.”

But that money is “not an outright surplus,” said Michael Stinson, Atlantic City’s director of revenue and finance. Instead, much of it will be used to replenish terminal leave and tax-appeal reserves that have been depleted in recent years.

“We’re looking at $220 million in budget expenses,” Stinson said. “To only have $4 million as a reserve, that’s next to zero. You have to build reserves, so if something unexpected happens, you’re prepared for it.”

Financial straits

The mayor’s 2011 budget, proposed to City Council late last month, includes $3 million for terminal-leave payments and $700,000 for the tax-appeal reserve.

“I just think a $4.3 million surplus, no matter how they want to paint the picture, is crazy,” Davidson said. “Explain that to the guys sitting home. It’s the city saying, ‘You’re our checkbooks and we’re going to use you to pay for our problems.’”

Deputy Police Chief Ernest Jubilee said he was not surprised money was left over since the city did not have to pay for all the positions originally in the budget.

“If that money was left over, it went back to the general fund to assist the city to balance the budget,” he said. “I wish we didn’t have to lay off, but the city was in financial straits.”

Jubilee said the department was told: “You’re 60 percent of the budget, your share is ‘x.’ They gave us that number, and we paid our share.”

The final 2010 budget was not completed until November, he noted.

“We were really operating on a temporary budget most of the year,” Jubilee said.

Even after the budget was set, police were asked to make concessions to return any of the laid-off officers.

The city has argued that it brought back 17 officers in December, but Davidson and union members point out the city’s 300 officers — paying $410 each — covered the total cost of $123,000 for the month of salaries and benefits.

Last year’s numbers show the police budget still had enough in its salary and wages for the city to pay the bill. Even with a $2.5 million transfer to terminal leave, the year ended with more than $191,000 left for that budget.

“Even if they’d just matched us,” Davidson said. “Then we could have brought back 34 guys.”

Cap on leave payments

Many believe the spike in Atlantic City retirements in 2010 occurred as a result of talks to cap terminal-leave payouts at $15,000, similar to the mandate on state employees. Speculation grew as discussions continued about whether veteran employees would lose the majority of their accumulated sick payments, and a rush of employees in Atlantic City began filing retirement papers.

In the end, state Sen. Paul Sarlo, D-Bergen, Essex, Passaic, sponsored a bill that capped the payouts at $15,000, but only for new hires or employees whose accumulated time had yet to exceed $15,000. The bill passed both legislative houses but was sent back to the Senate by Gov. Chris Christie, who insisted the law did not go far enough.

“This bill does not sufficiently remedy the gaps in current law that require taxpayers to continually fund unreasonable payouts to public employees,” he wrote.

State Democrats say they recognize the need for reform but that major changes must be made gradually out of fairness.

“He wants to hang a man and shoot him,” said state Sen. Jim Whelan, D-Atlantic. “I don’t know how you tell people who have worked their whole career under the assumption that they can build up their terminal leave that they’re going from $300,000 to $15,000. I just don’t know how you do that.”

Sarlo’s bill, however, would not have done anything to help Atlantic City last year. Only 16 of the 78 retirement payouts last year was less than $15,000, only accounting for about $158,000 of the total payouts.

Even after the money transfers, Atlantic City government still struggled to afford the payouts. Records show the city eventually started to pay the large sums in four annual installments, stretching some payouts into 2013 to make them manageable. Of the $7.1 million of terminal-leave payouts committed to last year, nearly $1.9 million of it will be paid over this year, 2012 and 2013.

Atlantic City’s accumulated leave problems have been prevalent for years. In late 2009, the State Commission of Investigation released a report highlighting New Jersey municipalities wasting money on terminal leave and other costly public-employee benefits. The report showed Atlantic City paid more than $13.7 million to 160 police officers and firefighters from 2004 to 2008 for accrued unused sick leave, in addition to their pensions, at retirement.

The city has taken some steps to limit its payouts. In 2008, the administration under Mayor Scott Evans adopted a new version of the Policy and Procedures Manual, which limits civilian administrators and other white-collar professionals to a $15,000 cap on unused sick leave. However, that applies only to employees hired after Jan. 1, 2000. Blue-collar employees can receive as much as a full year of terminal leave or a maximum of $15,000 based on their remaining balance of accumulated sick time.

But police and fire personnel can still convert between six and 18 months of unused sick leave for cash.

Scott said the administration also is going to start encouraging employees to use their vacation time and soon will impose new limits on vacation accumulation. However, Scott could not say what those limits would be or when they would be implemented.

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