N.J. board approves Newark budget but admonishes city officials

By Brent Johnson | NJ Advance Media for NJ.com
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on October 14, 2014

TRENTON — New Jersey officials approved a nearly $800 million city budget for Newark this morning — but not before warning that next year's financial picture is dire and admonishing the city for not collecting payments that employees are legally required to pay toward their health care premiums.

Newark faced a staggering $93 million deficit heading into the 2014 budget cycle, causing city officials to argue for months over how to plug the gap. Finally, the city council voted last week to sign off on a spending plan proposed by recently elected Mayor Ras Baraka.

But because Newark applied for state aid — receiving $10 million in the process — the city's finances were placed under state oversight. That required the state Local Finance Board to approve the budget before it took effect. The board voted unanimously this morning to adopt the plan after chopping an additional $1.3 million from it.

Still, Tom Neff, the board's chairman, warned that Newark faces a $60 million budget deficit in 2015.

"That’s a very large structural imbalance — probably the largest in the state," Neff told city officials. "It's going to require a lot of action sooner rather than later to take care of it."

Neff also criticized the city for not following a state law that Gov. Chris Christie signed as part of 2011 pension reforms requiring all public workers to contribute more toward their health care premiums. He said the city hasn't collected those payments from its workers, causing taxpayers to make up the difference.

"We would strongly suggest this city needs to begin collecting those payments ASAP," Neff said.

Newark officials at the meeting told the board that it took the city several months to update its payroll system in the wake of the law and that they did not know why the payments weren't collected last year.

But Neff noted that most municipalities are already in their third year of collecting the payments. He also said the board has asked the city for weeks for information showing how much every employee should be paying compared to what they are paying but has not received those figures.

"I find that absolutely mind-boggling and frustrating," Neff said. "These funds aren't being collected like the law requires. It's not right. It's not fair."

"We don't think taxpayers in Newark or in the state should be subsidizing that," he added.

In response, Neff said the board cut $1 million from Baraka's budget for health care.

Danielle Smith, the city's acting finance director, declined comment as she left the meeting. Sakina Cole, a spokeswoman for Barak's office, said the mayor still needs to review the final budget and didn't offer further comment.

Newark Councilman Anibal Ramos Jr. sent a letter to the city clerk today calling for an explanation of why the city didn't collect payments. He also wrote that the city should retroactively collect the payments from directors and managers

“However, the working men and women of the city should not be penalized for the city’s oversight and we should request that the DCA waive retroactive payments from other city workers,” Ramos wrote.

Baraka, who took office in July, avoided layoffs in his budget by reducing city spending by $16 million and spreading the payment of Newark's 2013 debt over the next 10 years. His administration also applied for $31 million in state aid but received only a third of that.

Though analysts at Moody's Investors Service downgraded Newark's credit rating in May amid the budget crises, the Wall Street firm said Monday that state supervision of the city's finances was a "positive" thing.

But the local finance board made a few more cuts — including a more than $174,000 salary reduction to the clerk's office and a more than $170,000 reduction to salaries for city council members.

Neff said those branches of Newark's government are paid higher than those in cities of similar size in New Jersey — such as Jersey City and Paterson.

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