Christie Signs Pensions & Health Benefits Reforms Into Law
Tuesday, March 23, 2010
by Kevin McArdle
Governor Chris Christie has signed his first bills into law. Last night, Christie signed the three measures designed to save taxpayers billions by making pensions and health benefits for government workers less generous.
"The passage of today's set of bills is a solid start to reforming our pension system and I applaud the Senate and Assembly Leadership and the entire bipartisan efforts of the legislature for taking this necessary first step," says Christie. "It is clear that our state can no longer afford a system that is rife with abuse, that promises substantial payouts with little buy-in, and that provides benefits that are wildly out of proportion with the private sector."
To hear full audio of Christie's press conference go www.nj.gov and click on the Governor's page.
The first piece of legislation will require all public employees to pay at least 1.5 percent of their salary toward health benefits after the expiration of a current contract; require all newly-hired employees to pay at least 1.5 percent of their base pension toward health benefits upon retirement; require that any changes negotiated by the state - such as higher co-pays - with its employees be applied to every government entity participating in state health benefits programs; prohibit multiple coverage in state health benefits programs; require new state workers to work at least 35 hours per week to qualify for health benefits; and require new local and school employees to work at least 25 hours per week to quality for health benefits.
The second measure will limit sick leave payouts for all new local and school employees to $15,000, just as it already is for state employees; prohibit local government and school employees to carry over only one year of vacation time year-to-year; and eliminate the ineffective sick leave injury program.
The third bill will limit pension system enrollment to new full-time employees who work at least 35 hours per week for the state or 32 hours for local government and schools; require all workers with more than one public job to receive a pension for only one job, with only the highest-salaried position counting toward a pension; allow new employees earning at least $5,000 annually to enroll in a 401(k)-style plan; change the equation used to calculate pensions for new employees by dividing the number of years worked by 60, rather than 55, thus reversing for new workers the 9 percent benefit enhancement enacted in 2001; base pensions for new public workers and teachers on the five highest salary years, rather than the highest three; base pensions for new police and firefighters on the three highest salary years rather than the highest single year; impose a pensionable salary cap for new employees of the Police and Firemen's Retirement System and the State Police Retirement System. Salary earned under the cap - the base salary equivalent to the maximum wage contribution base for Social Security, or for 2010, $106,800 - would be counted toward PFRS or SPRS membership. Salary over the cap could be included in a 401(k)-type program; repeal 2003 legislation that allowed a police or firefighter to retire at any age with 25 years of service credit on a special retirement allowance of 70 percent of final compensation, if the retirement system reached a funded level of 104 percent; and eliminate the non-forfeitable right to pension benefits after five years in the system for new employees.
"This is a key step toward fixing our broken pension and benefit system with a comprehensive bipartisan package that's been studied and analyzed to ensure it will eventually save taxpayer money," says Assembly Speaker Sheila Oliver. "Our system is unsustainable for both taxpayers and public workers, but with this expanded and sweeping package we will bring real reform and relief to taxpayers and create a reliable system for public workers."
"The bills represent the first step towards achieving important and necessary reforms to the state's pension and health benefits program," says Assembly Republican Leader Alex DeCroce. "Everyone acknowledges the current structure cannot be supported by taxpayers alone and needs to be revamped. We are past the point of talking about the problem and I am pleased that the long overdue changes the system requires are finally becoming a reality."
Christie says the legislation has far-reaching savings. Two of the bills are projected to save $8 billion over 15 years. The third bill, which requires a health care contribution from all workers, is projected to save local governments and school boards $315 million in the coming year alone.
Proponents say the reforms will help keep the pension system solvent. Opponents blamed the state for the system's fiscal problems, saying years of missed or greatly reduced state contributions have resulted in a system underfunded by about $46 billion. Christie's budget proposes that the state skip its entire $3 billion contribution in the fiscal year that begins July 1. Clearly the bills were signed into law over the objections of the unions representing state workers, teachers, police officers and firefighters, all of whom argued that the reforms infringed on collective bargaining.
All day, members of New Jersey's largest teachers union crowded into the State House to voice opposition to the bills. The teachers says they were worried about being able to retire and concerned cafeteria aides and bus drivers considered part-time employees will be left without benefits.
Though most of the reforms are for new employees, not existing workers, Morristown teacher Kerri Lee Farrell says she's worried about a run on the pension system by teachers and others who have worked enough years to retire and who fear a loss of benefits if they remain in the system.
The Assembly also was concerned about the solvency of the system. It insisted on killing a provision that would have allowed employees with less than 10 years in the system to opt out in favor of a 401(k)-style plan. The debate over removing the clause caused the vote to be delayed by over six hours.
The toughest testimony in the process came last week from Bill Lavin, president of the State Firefighters Mutual Benevolent Association, which represents municipal firefighters. He says firefighters and police perform high-risk jobs every day and their pension system is already fully funded, "So we're different. We don't belong in these bills. We never belonged in these bills. We negotiate………To have a Governor (Chris Christie) of this state stand up like a rodeo clown for Christ's sake and talk about the amount of dues that people (union members) pay. What business is that? It's no different than the amount of cheeseburgers that he eats in a week for crying out loud."
Sources tell us that at least one key democrat told Lavin and law enforcement union leaders that a deal was worked out to exclude them from the bill. The agreement evidently fell apart and Lavin alluded to that by saying, "Because we have a new king (Christie) in town our democratic friends tuck and run and we have deals cut and we think we have friends left……..I understand the Republicans have to do what they do. There's a new boss in town. I understand that. So, as the Democrats waltz with this new Governor on the front lawn I hope you're proud of yourselves."
"These reforms are necessary to restore New Jersey's long-term fiscal footing and return sanity to a pension and benefits system that was allowed to spiral out of control," says State Senate President Steve Sweeney. "Without these changes, the state would soon have no option but to break its promise to career public servants."
Senate Republican Leader Tom Kean says, "New Jersey's pension system is on life support. If we don't act now, it will be too late to avoid a crisis that would be costly to both taxpayers and government employees who depend on the system. These are common-sense reforms that have bipartisan support."
"If we are ever to repair this broken system, we must take a realistic approach to defining pension and benefit parameters," says State Senator Nick Scutari. "Past actions to boost pensions only increased the unfunded liability, placing at risk the retirement of career employees. Reform is vital to ensuring workers get the benefits promised and taxpayers are not left to shoulder excessive costs."
"Our present system is no longer sustainable," says Senate Majority Leader Barbara Buono, a prime sponsor of one of the bills. "The reforms approved will enable us to fulfill our promise to provide a dignified retirement for our hardworking, full-time career public servants while creating the long-term, cost-saving changes needed to shore up our system for future employees."
Lavin says, "We're willing to give our lives and health to protect the communities we serve," explains Lavin. "We think in return, at the very minimum, we should get a health plan that would mitigate any injuries."
Bill Dressel, executive director of the New Jersey League of Municipalities, says the reforms would help control property taxes, which, at an average of $7,045 per household, are the highest in the country. He says, "Bar none, there is no other mandated costs outside of pension costs and health benefits costs that drive up property taxes. We have to get this under control."
Christina Genovese, a spokeswoman for the Southern New Jersey Chamber of Commerce, says the changes were overdue. "This four-bill package plugs several holes," she says, "and, we believe, will result in meaningful, cost-saving changes to our state employee pension and benefit system."
"These common sense solutions are based on the findings of a bipartisan panel that spent the entire summer of 2006 taking testimony on the pension crisis," says State Senator Kevin O'Toole. "This is a good first step toward making our pension system a reward for dedicated service by career public employees, not a perk for the politically connected. These changes will bring employee benefits more in line with what taxpayers reasonably can be expected to pay."
Bob Master with the Communications Workers of America, District 1 says, "We have the State Health Benefits Plan (SHBP) which is a very large plan which has a relatively low cost because it's large and essentially has a single payer which is the state."
In a special address to the legislature last month, Governor Chris Christie asked that the bills be made stronger. He said, "The total unfunded pension and health benefit costs are $90 billion." He added that the state offers health benefits, "That are 41% more expensive than the average fortune 500 company's costs….."
Yesterday, The Senate also passed a resolution that would require the state to begin making its annual pension system contribution. The constitutional amendment requires voter approval.
Two other reform bills, both originating in the Assembly, were held. One would bar quasi-government employees from enrolling in the pension system. The other would apply pension reforms to employees of authorities, boards and commissions. Oliver says those bills would be worked on over the next couple of months and returned for consideration when the Legislature returns from a break in May.
Plug Could Be Pulled On NJ Stars Scholarship Program
by David Matthau
Tuessday, March 23, 2010
Governor Christie, in his proposed state budget, is calling for a one and a half million dollar increase in state aid for the Student Tuition Assistance Reward Scholarship program, known as NJ STARS.
The bad news, however, is that there is no money allocated for new students to enroll in NJ STARS next fall, and it seems the program may soon be completely eliminated….because Jersey is so totally broke.
Jacob Farbman, spokesman for the Jersey Council of County Colleges, says "Community College presidents will be meeting in the next few weeks to look for ideas that would keep the program sustainable for incoming freshmen in the fall of 2010, and the long term - so that's our goal, is to sustain the NJ STARS program for student in the future."
He says "the STARS program was created to keep the best and brightest high school students in New Jersey - because as you know, New Jersey leads the nation in brain-drain…students go to colleges outside of New Jersey, they get jobs outside of New Jersey and therefore all that money that we pay to support K through 12 public education - there is no return in investment for it....the STARS program is a terrific incentive to tell young people and high school students - hey if you work hard in high school, there's a reward for that…scholarships to County colleges where you live."
Farbman adds "NJ STARS is such a tremendous asset- and it's such a great incentive to inspire excellence in our young people….this is really worth fighting for."
So far the Governor has not directly said the NJ STARS program will be completely phased out, but there are indications that could happen unless the state's financial situation dramatically improves.