State to cut Newark council members' expenses in half in effort to rein in city's spending

By Naomi Nix | NJ Advance Media for NJ.com
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on December 23, 2014

NEWARK — State officials plan to rein in Newark's expenses in exchange for giving the city $10 million in transitional aid to resolve a multi-million dollar budget crisis.

Newark Mayor Ras Baraka's administration would have to get all senior hires approved by the state Division of Local Government Services, according to a copy of the agreement between the city and the state given to NJ Advance Media. New city programs, including those that offer grants, must also get the state's approval.

Newark officials did not immediately comment on the agreement.

Faced with a $93 million deficit, the Baraka administration and city council agreed earlier this year to accept $10 million in transitional aid even if meant accepting state oversight.

Under the agreement, city council members must also cut by half the extra money they receive for expenses in addition to their salaries for the 2015 budget.

Council members are paid a $64,766 salary and $18,000 in payments in lieu of expenses each year while the city council president receives a $71,375 salary and $20,000 for expenses, according to the clerk's office.

When it approved Newark's 2014 budget earlier this year, the local finance board already cut more than $174,000 from the clerk's office and more than $170,000 from city council members' budgets.

At the time, finance board Chairman Tom Neff said councils in similar-sized cities, such as Jersey City and Paterson, have significantly lower salaries.

But under the latest agreement, the city clerk and the city council must also submit a plan to reduce expenses for the 2015 budget.

At-large councilman Carlos Gonzalez said today the council is discussing ways to handle the budget cuts.

"You cut the salaries of the people you employ or you let people go," he said. "I don't know what the solution is (but) I know we will have to cut."

The state did agree to drop a provision in an earlier draft of the agreement that would allow officials to dock the mayor's pay by $25 for ever day he submitted the budget late and the city council's pay if it adopts the budget late.

This is not the first time the state has attached strings to the aid it has given Newark.

The state issued similar requirements in 2008, 2009, and 2012, when it gave Newark $45 million, $12 million and $10 million in extra aid respectively.

But the agreement comes as there is increased state and federal oversight into Newark's government.

The state has controlled the city's school system since 1995, although it recently started to transition fiscal control of the district back to the elected school advisory board.

The department of Justice announced earlier this fall that it would be monitoring the city's police force. And the state agreed to shift Newark's finances into state supervision to allow the city to be more flexible in paying off its debt.

The state is currently looking for a company or consultant to assist a state monitor in overseeing the city's finances.

Dan O'Flaherty, a Columbia University economics professor and former business administrator for the city, said state oversight might help to stabilize Newark's finances.

Moody's Investors Services, which downgraded the city's longterm debt rating in May, has previously argued that state oversight of Newark's finances would be a "credit" positive" for the city.

“The good story is they make the city more careful. The bad story is they add bureaucracy,” O'Flaherty said of the state's involvement in Newark's finances. “

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