Would Make State Approval of Municipal Budgets Contingent Upon Report Detailing Any Pending or Settled Litigation Costing More Than $50,000
TRENTON – Legislation sponsored by Senator Ronald L. Rice to improve the budget planning process for local governments, by requiring the reporting to the state of lawsuits that could dramatically impact the local spending plan, was approved today by the full Senate.
“Municipalities across the state are already operating under tough financial conditions. Any payout a town or city has to make to settle a lawsuit or to cover legal fees that are outside of the normal scope of business could have a dire impact on the budget and on taxpayers,” said Senator Rice (D-Essex). “This bill will ensure that any outstanding litigation involving a local government that may affect the budget is considered in advance of the process being finalized.”
Currently, all municipalities are required to submit their budgets to the state Division of Local Government Services (DLGS) within the Department of Community Affairs for approval. The bill (S-1400) would require towns and cities to submit to the state a report detailing any outstanding lawsuits or legal settlements that may have a significant financial impact on their spending plans. Specifically, a municipality must submit a report outlining lawsuits to which it is a party and that the local unit or authority expects will not be covered or defended by a liability insurer and has resulted in more than $50,000 in legal fees or in which the complaint has demanded damages of $50,000 or more.
The report would be required to comply with a format approved by the director and would include, but not be limited to, the following information:
- The number of lawsuits filed by the local unit or authority, with a list summarizing all claims contained within each complaint, and, when appropriate, the dollar amount awarded to the local unit or authority, unless the amount is rendered confidential by court order, during the reporting period;
- The number of lawsuits filed against the local unit or authority, with a list summarizing all claims contained within each complaint, and when appropriate, the dollar amount awarded to the plaintiff, unless the amount is rendered confidential by court order, during the reporting period;
- The number of lawsuits that were settled out of court, with the dollar amounts of each settlement, during the reporting period;
- The number of pending lawsuits, with a list summarizing all claims contained within each complaint, during the reporting period;
- The name of the attorney or law firm that represented the local unit or authority in each lawsuit, the dollar amount paid to the attorney or law firm for representation, and an explanation of the attorney’s billing practice, indicating whether the attorney or law firm received a set fee per hour or arranged another manner of billing, during the reporting period; and
- An indication whether the local unit or authority is self-insured or contracts its liability out to an insurance provider, during the reporting period.
The bill would require the Director of the Division of Local Government Services to make a copy of each report available on the division’s website for a period of at least one year. The “reporting period” would be defined as the previous January 1 to December 31 for any local unit operating under a calendar fiscal year, or the previous July 1 to June 30 for any local unit operating under a State fiscal year, or the twelve month period preceding the submission of the budget for approval for any local authority. Municipalities would only be required to report to DLGS information about pending legal actions that would already be public information.
“This is about making sure that certain future costs, stemming from pending lawsuits against a local government or required settlements, are taken into account at the time the budget is being crafted and not put off until it is too late to properly plan for the impact the litigation could have on local taxpayers,” said Senator Rice. “Having this type of process in place is the responsible thing to do. But it becomes that much more important in a tough economy, when municipalities have fewer resources available and fewer places to cut their budgets to make up for unexpected expenditures.”
The Senate approved the bill by a vote of 39-0. It now heads to the Assembly for consideration.