The following is the text of a letter sent to Governor Deval Patrick by Lynnfield Town Administrator William Gustus and supported by other area town officials dated Feb. 27, 2012:
Dear Governor Patrick,
We are writing to ask your assistance in addressing some unfinished business with respect to your efforts at municipal finance reform. We are all grateful for your recent efforts in providing municipalities with additional tools to raise revenue and the recently passed health insurance and pension reforms that will save cities and towns tens of millions of dollars this year alone and stablize our benefit costs well into the future. However, some remaining municipal liabilities in the area of unemployment compensation seem unjust to us. We believe that in general, unemployment compensation was set up to provide people with "temporary financial assistance, after having lost a job through no fault of their own."
We regularly have to review unemployment claims made against our cities and towns. Recently, one of us was presented with a case that just seems to defy the laws of sanity. To our great surprise, we have come to learn through communication with each other that, this case is just the tip of a very large iceberg of unintended consequences leading to, in our view, the unjust enrichment of many individuals at the expense of their former and current municipal employers.
Unemployment compensation payments are a direct expense to municipalities. Given the relatively stable nature of public employment and the strong due process policies found in most municipalities, layoffs and wrongful terminations are unusual. Therefore most communities choose to self-fund unemployment, and, consequently, these types of cases are killing us financially. Herein-below are outlined a number of specific cases which highlight the types of situations we have faced in the recent past and continue to face on a regular basis.
In one community, a retired police officer is collecting unemployment under what we would consider to be an unfair application of the unemployment compensation law. This individual enjoys a healthy town-funded pension, and he is allowed to work details for the town to supplement his public pension by about $25K. Due to state law, he is restricted to this amount of extra income without having his pension reduced by earnings beyond this statutory limit. The retirement system requires that we notify him when he has reached his outside-income limit and that thereafter, for the remainder of the calendar year, he will be subject to a dollar for dollar reduction to his pension if he continues to work. So what does he do? He stops working and files an unemployment claim, and surprisingly, his claim is approved. The town asked for a hearing to dispute his claim and after this hearing, the hearing officer found that, because the law says he can't keep working for the town, that this is a loss of a job through no fault of his own and affirmed that he is entitled to unemployment compensation at the town's expense. Then to make matters worse, the retired officer starts taking details again in January, since the new year has begun and he can earn another $25k in details beyond his $37k/yr pension, but his unemployment claim remains open and for every week in which his detail earnings are less than his weekly unemployment benefit, the town has to pay him the difference as well.
Upon posting this on a list-serve we subscribe to made up of municipal finance officers across the state, we learned of many other questionable cases. We have learned that in many communities, when public safety employees reach the mandatory retirement age of 65 and retire on healthy pensions, many apply for unemployment and collect not only their full pension but also 99 weeks of at least partial unemployment benefits at the expense of the municipality. Once again the law has caused the loss of their job. This places communities in an impossible situation. On the one hand, state retirement officials tell us we can't continue to employ these individuals but, since they are now unemployed, we have to pay them unemployment compensation. As you know, most public safety officers who must retire at age 65 retire with pensions equal to 80% of what they were earning when they were actually working. In short, for this group, it is more lucrative to be retired. Is this really the "temporary financial assistance" contemplated by the authors of our unemployment compensation laws?
These inequities are not limited to public safety workers. We also learned that many school teachers avail themselves of unemployment compensation in ways we believe were not intended. As we understand it, teachers are given one-year contracts each September which run through the end of the following August. According to virtually every collective bargaining agreement and state law, if an individual teacher's contract is not going to be renewed, they must be notified on or before May 15 of any given year. Given the financial uncertainty over the past few years and the fact that municipal budgets are often not settled by May 15, many school districts must send out these notices to a number of teachers, just to protect themselves against the effects of budget cutbacks. However, once a teacher gets one of these notices, and despite the fact that the municipality must continue to pay them through the end of August and continue to provide health coverage, some of these teachers file a claim for unemployment. They then collect all summer and, after the budget is set, most of them are rehired for the next school year. They can do this because they have the option to take a lump-sum salary payment in June, for the whole summer. They then go down to the unemployment office and truthfully say they received a notice that their contract will not be renewed and they won't be seeing any more checks. So, for the entire summer, the town will have paid their salary and paid them unemployment as well.
There is another little-known way that some retired teachers are able to collect unemployment. It is possible, and it actually occurs pretty regularly, where a teacher can retire and, if they teach in an area of critical need, may return to teach after they retire at full pay without any income limitations or pension offsets. While this may be necessary in some instances, what seems to us to be unnecessary is that, after the school district finally finds someone to fill the position, someone who is not retired and collecting a full pension and a full salary, the retiree is now eligible to collect unemployment for losing a job as a critical employee.
There is also a class of school bus drivers that regularly collect unemployment for the whole summer, all school vacations, professional development days when the schools are closed, and even the day after Thanksgiving. These school bus drivers are paid out of the town side of the budget instead of the school budget. If they were paid by the school department, they would be ineligible for unemployment but, since they work for the town, they may collect, and, do collect unemployment compensation. In our view, a school bus driver is a school bus driver and their ability to collect unemployment should not be based on whether they are paid out of the school budget or the town budget.
Many communities have been charged for unemployment compensation paid to call firefighters who have lost their full-time jobs. This is a considerable expense to the cities and towns that have call or combination fire departments. Call firefighters work for the town on an as-needed basis. They usually have full-time jobs as well. Due to a quirk in the unemployment law, when call firefighters lose their full-time jobs and file for unemployment, the municipality gets billed for a portion of their unemployment compensation, even though they continue to perform and get paid for their call firefighter work. In a similar case, we have heard of a community that hired a number of unemployed people for part-time jobs in an effort to help some local residents ride out the recession. When their prior employers failed, the town ended up paying their unemployment as well, even as they continued to work part time for the community.
The frustration of local finance officials regarding all of this is real, and we respectfully request your assistance in addressing these concerns. In one last example, we offer the case of a community that decided to hire a reserve police officer as a full-time patrolman. After he was hired, they paid him as a full-time officer and then paid for his training and full salary as a recruit at the police academy for probably close to six months. Unfortunately for the town, their investment was wasted, since the officer did not receive a passing grade from the academy. This individual was then returned to reserve officer status. He then applied for, and was granted, unemployment benefits because he was deemed to be "underemployed."
We stand ready to assist you in any way possible to provide documentation of these cases and to work with you to find sensible solutions to these issues. Thank you for your consideration in this matter.
Lynnfield Town Administrator
Listed below are a number of local officials who have indicated support for these reforms and have authorized me to add their names to this letter:
Kathleen Benevento, Director of Finance, Town of Boxford
Linda D. Carr, CGA, Town Accountant, Town of Southwick
Robin Neal Craver, Town Administrator, Town of Charlton
Mary C. Day, Treasurer/Collector, Town of Lincoln
Joanne DeGray, Town Accountant, Town of Wilbraham
James Del Signore, Director of Finance, City of Worcester
William Keegan, Town Administrator, Town of Dedham
Suzanne Kennedy, Town Administrator, Town of Medway
Elaine Markham, Town Accountant, Town of Sturbridge
Susan Milne, Director of Finance, Town of Yarmouth
Thomas Moses, Finance Director, City of Lowell
Mariellen Murphy, Finance Director, Town of Dedham
Kevin Paicos, Town Manager, Town of Foxborough
Melanie Phillips, CMMT, Finance Director, Town of Medway
Sandy Pooler, Finance Director, Town of Amherst
Patricia Schaffer, Director of Finance, City of Peabody
Randy Scollins, Finance Director, Town of Foxborough
Dennis P. Sheehan, Asst. Treasurer-Collector, Town of Andover
Sheryl Strother, Finance Director, Town of Wellesley
Brian Turbitt, Finance Director, Town of Millbury
Carl Valente, Town Manager, Town of Lexington
David Withrow, Finance Director, Town of Orleans
Susan Wright, Finance Director, Town of Northampton