Analysis: LI taxpayers on hook for $2.1B in severance pay for public employees

Long Island taxpayers are saddled with paying an estimated $2.1 billion to cover severance costs accumulated by police officers, teachers and other public employees, a Newsday analysis has found.

The $2-plus billion long-term debt emerged from Newsday’s first-ever tabulation of unused vacation, sick and other paid days off that the Island’s governmental workers can cash out when leaving the job. Individual payments often top $200,000.

On a per capita basis, the total liability breaks down to four times the burden for residents of the average New York state county outside Long Island. On average, those counties’ governments owe $188 per resident, compared with $738 per capita for Long Island as a whole.

Counties, towns, cities and villages owe $1.4 billion of the total or $239 per resident. That is nearly 12 times the statewide average for governments outside Long Island.

School districts owe $747 million, or an average of $1,819 per student. That is more than two times the statewide average.

The bills vary widely. The similarly sized Central Islip and Levittown school districts are an example. Central Islip owes $66.3 million in severance, $31.6 million more than any other school district in the state outside of New York City. Levittown owes nothing, because its labor contracts don’t allow employees to cash out compensation for unused time off.

Sources: New York State Comptroller, Municipal Securities Rulemaking Board

Because of such factors as where they live or own property, there will be wide variability in how much taxpayers will pay, but the per capita rates show just how much larger Long Island’s severance benefits are compared with other jurisdictions.

Even before the coronavirus pandemic blew massive holes in their budgets, both of Long Island’s counties and many other local governments had been struggling to balance their budgets against rising employee costs, including for severance. They had cut services, increased taxes, boosted fines and fees and even borrowed to make ends meet.

Mitchell Moss, Henry Hart Rice Professor of Urban Policy and Planning at New York University, has researched public policy for more than 40 years. He said a lack of fiscal discipline is reflected across Long Island “in the very high salaries and very high benefits” of public employees.

“I think the taxpayer’s revolt has yet to hit Long Island,” Moss said.

Newsday’s analysis of severance payments is based on the most recent financial reports more than 2,200 New York governments submitted by February to the state comptroller and — for the 500 largest governments — to a federal bond regulator, the Municipal Securities Rulemaking Board. The reports contain official estimates of what each government currently owes employees they expect to keep working until they become eligible for a severance payment.

While they are legally required to be accurate, the estimates include costs that may not come to pass, such as payments to employees who unexpectedly leave before becoming eligible for them. Even the expenses that do become due will be paid off over many years as employees leave.

The disparity with the rest of the state is widest in Long Island jurisdictions with police departments.

Many of the governments with police departments owe more on a per capita basis than any other like jurisdictions in the state. Those include both Long Island counties, the City of Long Beach, the towns of Southold, East Hampton and Shelter Island and 14 villages.

Nassau and Suffolk counties each owe a half billion dollars in severance obligations, 10 times higher than that of any county outside New York City.

Long Beach, which also employs full time firefighters, owes $31.1 million or $925 per person. That is seven times the statewide per capita average for cities and is higher than any other city in the state, including New York City, which provides far more services to its residents.

Just five large Long Island villages—Freeport, Hempstead, Rockville Centre, Garden City and Floral Park — account for a third of the severance owed by all of the state’s more than 500 villages. All five have police departments.

Long Island’s 13 towns owe $187.5 million, which exceeds by $33 million what is owed by the state’s more than 900 other towns combined. Of the five with police departments, the one with the smallest per capita burden of $166 per resident, Southampton, is still 20 times the statewide average for towns off Long Island.

While on a per capita basis some Long Island governments with police departments rank higher than others on Long Island, Newsday found that the levels of their law enforcement severance benefits were not greatly different from one another.

Instead, they ranked higher because they employ a comparatively high number of officers or were comparatively small jurisdictions, like Shelter Island. One reason for the consistent level of benefits, experts say, are state labor laws that result in a general norm in public safety benefits within a region.

For taxpayers, Long Island’s similar law enforcement severance benefits pack a double financial wallop.

The first involves the hundreds of paid days off law enforcement personnel regularly cash out when they leave service, far surpassing the total for most other New York public employees.

The second compounds this cost: those days are paid out at officers’ final salary rates after years of pay raises and seniority bumps. The salary rates are among the highest in the nation.

Base salaries and longevity bonuses for Suffolk officers with 10 years on the job are currently more than 40% higher than they are for equivalent New York City officers.

A Newsday analysis of the latest national U.S. Census Bureau data that includes overtime and most other wages, but not severance, found full-time Long Island law enforcement officers earn on average 75% more than their New York City counterparts and 82% more than the national average.

Police union officials say the salaries are justified, given the high cost of living on Long Island, the need to attract high-quality candidates and the around-the-clock schedules demanded by a difficult job. They also point out that high overtime costs can be reduced by hiring more officers.

“Our compensation is a result of the high cost of living on Long Island. We pay the same school and property taxes as everyone else that lives here,” Long Beach Police Benevolent Association president Brian Wells said.

Long Island’s generous severance benefits have their roots in the state’s 1967 Taylor Law, which gave municipal unions official recognition and a contract negotiation process but allowed for large fines and the threat of jail for their leaders if they struck.

The law led to labor agreements in New York City that became models for contracts in nearby suburbs. But reforms enacted during the city’s near bankruptcy in the 1970s roped in its labor agreements while Long Island’s costs surged.

Overall, New York City’s liability for severance comes out to $571 per person. Long Island’s $738 average is nearly 30% higher.

The Long Island police negotiations were led by lawyer Richard Hartman, a math wizard and son of a state senator who would eventually be hired by police unions in Nassau and Suffolk. Hartman, who was later convicted in a kickback scheme involving New York City unions, leveraged expert negotiating skills, political savvy and campaign contributions to win contracts with ever-larger pay increases.

By 1975, Nassau and Suffolk officers had become among the highest paid in the nation, with policing costs in Nassau alone multiplying by 2 1/2 times. In 1978, Nassau officers won another 24.5% salary increase over three years.

The contractual disparities in severance payments have continued to today.

Nassau County officers on the job for 10 years receive 12 holidays, five personal days, 28 vacation days and 26 sick days each year. When they retire, they can receive up to two years’ pay at their final salary rates for their unused days. Other Long Island officers receive similar benefits.

New York City officers with similar experience receive one fewer holiday, one fewer vacation day, no personal days and unlimited sick days (with penalties for any sick leave abuse). But the officers receive no payment for those days when leaving service except in rare circumstances, like being laid off. The only severance they typically receive is a “terminal leave” bonus, which for 20 years of service comes out to three months’ pay — far less severance than Long Island contracts allow.

Amendments to the Taylor Law have locked in benefits and blocked efforts to reduce costs, even during times of economic hardship and nation-leading property tax bills, officials and experts say

Even so, some unions have agreed to substantial severance modifications and other concessions in recent negotiations.

Union officials defend the severance benefits as having been earned over decades-long careers and say they have actually saved governments money. They say the severance pay was often increased in tradeoffs made years ago, such as accepting smaller, less-costly raises during times of economic hardship in exchange for a larger severance payment at retirement.

Kevin Black, president of the Nassau County Superior Officers Association, said the benefits also discourage employees from using sick, personal, vacation or other days off, which reduces overtime paid to those who would have covered their shifts.

“The county has saved millions of dollars over the years as my members have accumulated these days,” Black said. “Now that the time comes to pay the debt accrued, suddenly severance pay is exorbitant.”

Calls seeking comment for this story were not returned by Nassau County PBA president James McDermott, Suffolk County PBA president Noel DiGerolamo, the Suffolk County Superior Officer’s Association and the Nassau and Suffolk detectives’ associations.

E.J. McMahon, research director of the fiscally conservative Empire Center for Public Policy, said taxpayers need local officials to push back against the severance payments in negotiations and state legislators to reform labor law provisions that lock in additional costly benefits, such as lifetime health insurance, even at times of great fiscal stress.

"Right now,” McMahon said, “you have neither."

“Local politicians and state politicians all over New York are fearful of public employee unions, but nowhere, absolutely nowhere, is this fear more pronounced than on Long Island,” he said. “Nobody will take them on.”

Thom Reilly, a public policy expert and former county manager who has published multiple books on public sector compensation, pointed out that while salary, health insurance and pension costs usually eat up  larger slices of the budget than severance payments, cash-outs can creep up on officials.

“Ultimately, it’s reduced services,” Reilly said. “That’s the choice governments have when they are faced with these employee costs.”

For the 10-year period that ended in 2018, Nassau and Suffolk counties reduced their full-time workforces by nearly 2,600 employees and cut services while locked into salary and benefit costs, including severance. Both counties reduced public bus services. Suffolk County closed its only public nursing home.

The cuts fell short of covering increased expenses. During the 10-year period, Nassau’s employee benefits and police salary costs rose $259.2 million and Suffolk’s rose $410.6 million, according to State Comptroller’s Office data.  Officials in both counties responded by raising revenue, including through property tax hikes totaling 10% in Nassau and 23% in Suffolk. Both counties also more than tripled revenue from fines, such as those for red light camera violations, and fees, including those for filing documents at the county clerk’s office.

Even with those moves, both counties have failed to balance their budgets as their employee benefits and police salary costs increased twice as fast as their expenses overall. The counties have made up the difference by tapping reserves and, in the case of Nassau, borrowing. Nassau had borrowed $184.3 million for severance payments by September 2019 and expects to pay $61.9 million in interest on that debt. Suffolk unsuccessfully sought state authority to pay for severance with borrowed funds in 2017.The state comptroller’s office has identified Suffolk as the most fiscally distressed county in the state. Nassau, which the comptroller ranks second-most distressed, has been under a state-appointed financial control board for two decades for its fiscal failures.

The counties’ situations have become even more dire since the comptroller’s report, and not just due to expected reductions in sales tax, state aid, traffic tickets, gambling fees and other revenue resulting from the coronavirus pandemic.

In separate decisions this year, Supreme Court justices ruled against two of the fees both counties use to pay their rising costs. In May, an increased fee Nassau charges for verifying property maps was ruled unconstitutional. In April, a fee Suffolk tacks onto red light camera tickets was ruled void. Both counties generate tens of millions of dollars from the fees and are evaluating appeals of the decisions.

Not all governments have experienced as much trouble budgeting for Long Island-sized severance benefits. Freeport Mayor Robert T. Kennedy said that in the last seven years the village has absorbed all employee benefit cost increases while keeping property taxes essentially flat, boosting its reserves and increasing its bond ratings.

“We have cut back, obviously, as much as possible over the last seven years,” Kennedy said. Village cuts have been across the board, including to other lines in the police department budget.

One category that local officials have successfully targeted for savings — up to a point — is benefits to nonunion employees.

Suffolk County nonunion employees can receive no more than 150 days’ severance. Nassau County reduced what new nonunion employees could receive to just 60 days from up to 290 days for older employees in December 2018. Most private sector jobs offer no severance except during layoffs.

The City of Long Beach has a similar cap in its code for nonunion employees but was recently enveloped in controversy over a failure to abide by it that, according to a state comptroller’s report, cost the city $112,131 for seven employees retiring in one year.

Suffolk negotiated a reduction in sick days for new police officers from 26 days to 13 in late 2019. At the same time, the county reached an agreement for all active employees to contribute up to 2.5% of their pay, up to a maximum of $4,000, toward health insurance through at least 2025. Previously, only newly hired employees contributed to health insurance premiums.

In negotiations concluding in December, the Nassau detectives’ union also struck a deal that requires its members to contribute up to 2.5% of their pay toward health insurance. Amid other concessions, the union also agreed to members working at least five more shifts a year and to reductions in sick days, vacation days and severance for some members.

In exchange, the Nassau detectives received a 16% increase in base pay over six years and other financial inducements designed to eliminate a detective shortage.

Many school district unions have also made concessions in the face of the state’s 2011 property tax cap. The law limits tax increases to 2% or the inflation rate, whichever is lower, unless 60% of voters approve a larger increase. School taxes increased an average of 6% per year for the 30 years before the cap, according to the Empire Center for Public Policy, compared to just 2.2% per year after.

Richard Iannuzzi, a former president of the Central Islip teachers union and the state teachers union, said the tax cap has put pressure on districts to reduce employee benefit costs, but it has also led them to make other cuts, too.

“The tax cap has unquestionably impacted negotiations, and not necessarily in positive ways,” Iannuzzi said, “it absolutely has lowered the size of contract settlements.”

By Matt Clark

Matt.Clark@newsday.comMattTheJourno

Matt Clark is an investigative reporter, data analyst and computer programmer who has been a member of Newsday's investigative team since 2013. He worked on the 2013 police misconduct series that was a Pulitzer Prize finalist for Public Service.