LEGISLATIVE FISCAL ESTIMATE
SENATE, No. 2289
STATE OF NEW JERSEY
222nd LEGISLATURE
DATED: SEPTEMBER 10, 2026
SUMMARY
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Synopsis: |
Encourages sharing of services; makes appropriations. |
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Type of Impact: |
Potential annual expenditure decrease for local governments; potential one-time expenditure impact for local governments; potential one-time revenue increase for local governments; potential annual State expenditure increase. |
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Agencies Affected: |
Local governments; Civil Service Commission; Local Unit Alignment, Reorganization, and Consolidation Commission; Public Employment Relations Commission; Department of Community Affairs; Department of the Treasury. |
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Office of Legislative Services Estimate |
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Fiscal Impact |
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Potential Annual Local Expenditure Decrease |
Indeterminate |
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Potential One-Time Local Expenditure Impact |
Indeterminate |
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Potential One-Time Local Revenue Increase |
Indeterminate |
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Potential Annual State Expenditure Increase |
Indeterminate |
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· The Office of Legislative Services (OLS) concludes that local government units that undertake shared service agreements because of this bill would achieve indeterminate reductions in the annual costs of delivering those services.
· These units would also incur an indeterminate one-time net impact on their expenditures composed of additional non-recurring costs to implement shared services agreements and reduced non-recurring costs from the repeal of the current requirement that terminal leave payments be awarded to employees whose positions are eliminated because of a shared services agreement.
· The units would also receive additional non-recurring revenue from the State to cover the extraordinary implementation costs of a shared services agreement, and to reimburse local units for expenses incurred in required consultation sessions and public hearings held as part of a Local Unit Alignment, Reorganization, and Consolidation Commission (LUARCC) study.
· The bill's repeal of tenure protections currently afforded to police officers and to certain local health services personnel, in the context of shared services agreements and joint contracts, removes what has been a historical barrier to sharing or consolidating these services, and may allow for a greater degree of net local savings, particularly for police departments, than is achievable under current law.
· The bill would also likely result in increased costs incurred by certain State agencies, including the Civil Service Commission, the LUARCC, and the Public Employment Relations Commission in the performance of enhanced duties, and the Department of the Treasury, in connection with the review and approval of new appropriations for the LUARCC's operating and local implementation costs.
BILL DESCRIPTION
This bill modifies the Uniform Shared Services and Consolidation Act and the laws governing the LUARCC to encourage and facilitate the provision of local and regional services through shared service agreements and joint contracts.
With respect to the Uniform Shared Services and Consolidation Act modifications, the bill would change or add requirements related to: personnel, tenure, and terminal leave payments; review of employment reconciliation plans; the transfer of employees between local units; local unit decision making; alternative dispute resolution processes, including mediation and arbitration; State oversight; and employment termination. Most notably: (1) local units would no longer be required to provide employees terminated for reasons of economy and efficiency with a terminal leave payment; (2) the Civil Service Commission would no longer be required to review employment reconciliation plans; and (3) certain provisions of Title 11A, Civil Service, of the New Jersey Statutes, could be relaxed by the Civil Service Commission upon request by the parties to the agreement.
The bill also repeals several provisions of current law that provide tenure protections to police officers and to certain local health services personnel in the context of shared services and joint contracts. The bill additionally creates a new stratified layoff process that local units may apply to the Civil Service Commission to use, under which affected employees are assigned to an executive, managerial, or non-managerial band and may invoke seniority only within their assigned band.
With respect to the law governing the LUARCC, the bill would change or add requirements related to: the conduct of the LUARCC studies; consolidation consultation requirements; substantive and procedural requirements applicable to consolidation and shared services proposals; potential reductions to State aid for municipalities that do not implement shared service agreements; and appropriations to cover extraordinary expenses of local units needed to implement a consolidation plan or shared service agreement proposed by the LUARCC. The bill appropriates from the General Fund and the Property Tax Relief Fund such amounts as may be necessary for the operating expenses of the LUARCC and for certain non-recurring expenses of local units to implement consolidation plans and shared services agreements.
In conducting a study, the LUARCC must hold at least five on-site consultation sessions and, where a sharing of services is recommended, at least two public hearings in each local unit being studied. The bill requires the LUARCC to reimburse local units for expenses incurred in connection with these sessions and hearings. The bill also eliminates the requirement that a consolidation or shared services recommendation be submitted to, and approved by, the voters of each affected municipality at a general election. Instead, a local unit may approve a shared services recommendation by resolution or ordinance, or by placing the recommendation before the voters. Consolidation recommendations are no longer subject to any State aid penalty for non-implementation, and no consolidation question may be submitted to voters.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
Local Impact
The OLS concludes that local government units that share services as a result of this bill would achieve indeterminate reductions in the annual costs of delivering those services. These units would also incur an indeterminate one-time net impact on their expenditures composed of additional non-recurring costs to implement shared services agreements and reduced non-recurring costs from the repeal of the current requirement that terminal leave payments be awarded to employees whose positions are eliminated because of a shared services agreement. Under current law, a terminal leave payment is required to equal one month of the employee’s base salary multiplied by each five-year period of employment. The units would also receive additional non-recurring revenue from the State to cover the extraordinary implementation costs of a shared services agreement.
In addition, the bill requires the LUARCC to reimburse local units for expenses incurred in connection with the five required on-site consultation sessions, where subject to the Open Public Meetings Act, and at least two public hearings required for municipalities that receive a shared services recommendation. This would result in an additional, indeterminate non-recurring revenue increase to affected local units.
The OLS cannot determine the net local savings that may result from the enactment of this bill because any savings would be determined by the specific provisions of each potential agreement. Several factors that may affect the degree of local savings include the following: (1) the size of the local units; (2) the type of service to be shared (e.g., code enforcement, health services, property assessment, law enforcement, etc.); and (3) the applicability of civil service protections and collective bargaining agreement provisions for the affected employees. Moreover, the provisions of the bill that require the continuation of civil service protections for certain transferring employees who previously held those protections may reduce the amount of initial savings that result from certain shared services agreements.
Conversely, the bill's repeal of tenure protections previously afforded to police officers and to certain local health services personnel removes a barrier that has been identified as limiting the use of shared services and consolidation, for police departments in particular. Because police services often represent one of the largest components of a municipal budget, this repeal may allow for materially greater net local savings from shared service agreements than would be achievable under current law. The OLS cannot quantify this effect because it depends on the number and nature of future agreements involving these services.
Additionally, because the bill no longer requires that a consolidation or shared services recommendation be submitted to the voters of an affected municipality for approval, and instead permits a local unit to approve a recommendation by resolution or ordinance, affected municipalities may realize a modest, indeterminate reduction in local election administration costs relative to current law, which requires a mandatory public referendum. A municipality retains the option to place a shared services recommendation before the voters and would incur the associated election costs only if it elects to do so.
State Impact
The bill would likely result in increased costs incurred by certain State agencies, including the Civil Service Commission, the LUARCC, and the Public Employment Relations Commission, in the performance of their enhanced duties.
The bill expands the responsibilities of the LUARCC in its conduct of studying local unit shared services and consolidation and reports of such studies, including a requirement to conduct five on-site consultation sessions in each local unit being studied and hold at least two public hearings in certain cases. The LUARCC would be permitted to request resources from the Department of Community Affairs to fulfill its obligations pursuant to the law and to contract for the services of professional, technical, and operational personnel, to be reimbursed by the department. The bill appropriates such funds as may be necessary to the department for the operating expenses of the LUARCC.
As noted above, the LUARCC's obligation to reimburse local units for consultation session and public hearing expenses will also increase the LUARCC's operating costs, in addition to the direct costs of conducting the additional required sessions and hearings.
The Civil Service Commission may also incur additional costs as a result of the bill, including personnel and litigation costs, associated with the processing of certain terminated employee appeals that arise from shared service agreements as well as with processing local unit applications to employ a stratified layoff process as detailed by the bill. Potential cost increases also could be offset to some extent by the removal of the requirement that the Civil Service Commission review the employment reconciliation plan of each shared service agreement.
Additionally, the Public Employment Relations Commission may incur additional costs as a result of the bill, including personnel and litigation costs, in the event of any conflict in the operation of collective bargaining agreements of the affected local units as it pertains to employment decisions. If a dispute cannot be settled by the parties using mediation, the commission would conduct a binding arbitration. Similarly, if disputes between local units entering into a joint meeting or regional service agency cannot be resolved through advice and mediation, the Public Employment Relations Commission would determine the appropriate units for purposes of collective negotiations and would conduct secret ballot elections in such units to permit employees to select their majority representative. The OLS cannot determine the amount of State costs or savings that would result from this provision of the bill.
The OLS is unable to anticipate the number and nature of any circumstances affecting the Civil Service Commission or the Public Employment Relations Commission as are permitted by the bill and is therefore unable to estimate the exact increase in costs each may experience as a result of the bill.
Finally, the bill appropriates unspecified amounts
from the General Fund to the Department of Community Affairs for the LUARCC's
operating expenses and from the Property Tax Relief Fund to the department for
non-recurring local implementation costs. Because these appropriations are open
ended, the OLS cannot determine the resulting increase in State expenditures,
which will depend on the number and scope of the LUARCC studies undertaken and
shared service agreements implemented under the bill.
State Aid
The bill provides that if a local government unit fails to approve or make a good faith attempt to implement a shared services recommendation made by the LUARCC within certain timeframes, it will incur a decrease in its allocation of Consolidated Municipal Property Tax Relief Aid (CMPTRA). Consolidation recommendations, by contrast, carry no such penalty. However, the State has not allocated CMPTRA to municipalities in accordance with statutory requirements since FY 2002, including the most recent three fiscal years in which the entire CMPTRA appropriation was transferred to the Energy Tax Receipts Property Tax Relief Aid program in the Department of the Treasury. To the extent that the State resumes CMPTRA allocations to municipalities, this provision will result in decreased revenue to municipalities and decreased expenditures to the State.
The bill also provides that a municipality would not be subject to a reduction in its CMPTRA allocation if it approved a shared services recommendation, but implementation failed due to the action or inaction of another local unit. To the extent CMPTRA allocations resume, this would limit the circumstances in which a municipality's State aid could be reduced under the bill, relative to what might otherwise apply.
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Section: |
Local Government |
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Analyst: |
Senior Fiscal Analyst |
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Approved: |
Thomas Koenig Legislative Budget and Finance Officer |
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).