A New Jersey report suggests pension abuse is still rampant in local governments

Five years after the New Jersey Legislature cracked down on abuse of state pension benefits by local government lawyers and other professionals, little has changed, according to a scathing report released by the state comptroller Tuesday.

In a review of just 58 of the state's more than 1,000 municipalities and school districts, investigators found that all but one had failed to properly pull those disqualified from receiving benefits from their pension rolls.

In Magnolia, officials relied on the borough lawyer to determine his own pension eligibility until one official threatened to quit, according to the report. Another lawyer, with contracts in towns across Camden County, is set to earn more than $10,000 a year in pension benefits he is not entitled to, the report says.

In just the municipalities and districts the report surveyed, illegal pension and health benefit costs could amount to $2.2 million a year, according to Comptroller A. Matthew Boxer.

"There were some cases where the local officials intentionally misapplied these rules and allowed this to happen," Boxer said. "There needs to be more policing and more aggressive policing."

The 34-page report documents numerous instances of municipalities failing to complete the basic analysis required under the 2007 changes to determine whether those who work for them are employees qualified for state pension benefits upon retirement and not part-timers or independent contractors.

It also says the Division of Pension and Health Benefits, which is charged with overseeing the system, employs just one person whose primary task is to investigate compliance with pension laws, and recommends that state officials undertake a comprehensive review of every local government entity and commit more resources to policing.

Following the report, Gov. Christie asked Department of Community Affairs Commissioner Richard Constable to put stricter controls in place.

"We didn't go through the exercise of achieving hard-fought, critical reforms of the pension system to ensure its long-term health and solvency only to have it abused and disregarded by those who want to do favors for their political or business connections and cronies," Christie spokesman Michael Drewniak wrote in an e-mail.

The Comptroller's Office has submitted to the division for review the names of 202 people it has determined to be independent contractors. The majority of these individuals are lawyers for local governments, but among them also are engineers, health-care professionals, and an auditor.

State pension officials will begin reviewing the names immediately and submit their finding to the state's pension boards, said treasury spokesman Andrew Pratt.

"We take these allegations very seriously, and we're going to look at all these 202 names and if any of them are deemed ineligible - partially or fully - for pension credits, they're going to take action," he said.

Besides Magnolia, the report cites municipalities from across the state as remiss, including Audubon, Barrington, Gibbsboro, Gloucester City, Haddon Township, Somerdale, Pennsauken, Brooklawn, Merchantville, and Oaklyn in South Jersey.

One unnamed lawyer who serves as public defender in six municipalities in Camden County should have been pulled from pension rolls, the report says. But because he was not removed before the 2008 cutoff mandated by legislators, he is scheduled to receive more than $10,000 a year in pension benefits when he retires.

Officials in Pennsauken and Magnolia did not return phone calls for comment. Nor did all but one of the South Jersey lawyers cited in the report during the years in question.

In Magnolia, the report says, the borough attorney advised officials in 2008 that he was still eligible for pension benefits until the chief financial officer threatened to quit if the lawyer was not removed from the rolls.

Salvatore Siciliano, the lawyer in question, said that he had told the borough the law was unclear and that he needed further clarification before offering an opinion.

"Nobody had any idea what they were doing in 2007. It was so confusing," he said. "I tried to reach out to the state to clarify and never could get through to anybody."

The financial officer could not be reached; neither she nor Siciliano currently works for Magnolia.

A number of local government officials simply "misunderstood or misapplied the law or got confused," Boxer said.

"It's important we be as clear as possible about who can be in the system and who can't, so when someone plays games they can't just claim they were confused."

The analysis released Tuesday dealt with a fraction of New Jersey's famously long list of local government entities, everything from cities to school districts to water authorities.

For its survey, the comptroller's office selected entities of varying geography and size but also based on a reputation for pension abuse.

That could mean the rate of abuse might not be as high as the report indicates, Boxer said.

But on Tuesday calls for reform rang our from around the state.

Assemblyman Declan O'Scanlon (R., Monmouth), who sponsored legislation last year to further reduce pension misconduct, said the time had come to stop relying on towns to follow regulations.

"If the state has to withhold local-aid payments, so be it. There needs to be real consequences for their lack of compliance," he said in a statement.