Posted: Friday, 19 March 2010 5:06AM
Pension Reform Bills Clear Assembly Panel
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A package of public worker pension and health benefit reform bills has been approved by the Assembly Appropriations Committees and is set for a vote in the full Assembly this Monday. The full State senate Passed the bills last month. Among other things, the legislation would rollback the 9% pension increase put in place in 2001.
"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 approved at today's committee hearing 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."
The toughest testimony of the day came 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."
When the full upper house voted on the bills last month, Hundreds of public employee union members lined the State House halls to voice their staunch opposition to the bills, but in the end it didn't matter. It takes 21 votes for a bill to pass the 40-member State Senate. Each of the bills up for a vote had more than 21 co-sponsors -- the minimum number needed to get through the Senate -- virtually assuring passage.
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."
Public worker unions still want to put the brakes on the bills. Representatives of local governments applaud the reforms, which would save towns money. The bills would reduce New Jersey's future obligation to its beleaguered pension system. It could become insolvent if fixes aren't made.
"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."
The measures require public workers to pay a portion of their health benefits cost, limit the number of unused sick days retiring employees can cash out and eliminate pension eligibility for part-time workers. 41 reforms were first proposed in a special legislative session in 2006, but only 15 ever enacted.
The first measure limits enrollment to defined benefits plans to full-time employees. Full-time= 35 hours per week for State employees that are in the Public Employee retirement System (PERS). Full-time= 32 hours per week for local government and education employees and political subdivisions. Employees working less than these hours prior to the law going into effect would continue in the pension system as long as they remain continuously employed.
The legislation requires all new part-time employees (as defined above) that no longer qualify for defined benefits plans to go into the Defined Contribution Retirement Plan. The bill also increases compensation requirement to $5,000 (currently $1,500) to join the Defined Contribution Retirement Program.
The bill also changes pension calculations to highest 5 years for future employees (currently 3 years), changes pension calculation to highest 3 years for PFRS, and State Police for future employees, designates one job for one pension. (The position with the highest compensation would be used), for new hires, repeals the statutory non-forfeitable rights provision for all employees in State-administered retirement systems and allows current employees or employees with less than 10 years to opt in to the Defined Contribution Retirement System or opt out from the retirement system all together.
The second measure requires all active State, school district, and local employees to pay at least 1.5% of their base salary towards health benefits after expiration of current contract and requires all newly-hired State employees, school employees, and local employees to pay at least 1.5% of their base pension toward health benefits when they retire. It also eliminates the waiver of the 1.5% for participating in the Wellness Program for future retirees, allows local governments the ability to negotiate a coverage plan offered by the Health Benefits Commission through collective bargaining agreements, requires all changes made with the State employees' health benefit coverage through negotiation be applied to local government employees covered by the SHBP (e.g., co-pays), requires State employees to work 35 hours per week to qualify for the State Health Benefits Program, requires new local and school employees to work at least 25 hours per week to qualify for health benefits (the local employer could decide to impose a higher amount of required hours, but the minimum is 25 hours).
If the second bill becomes law, current financial incentive to waive SHBP coverage would be limited to 25% of the cost or $5,000, whichever is less and duplicate coverage under the State Health Benefit Program and School Employees Health Benefits Program would be prohibited.
Bill #3 limits sick leave payout to $15,000 for new local government and school employees, allows only new local government and school district officers and employees to carry one year's worth of vacation time over year to year, eliminates the sick leave injury program and replaces ordinary disability and accidental disability pension benefits with private disability insurance coverage.
The final measure is a resolution requiring the State to pay each year the full amount of their contribution obligation for each pension plan operated by the State. Starting in FY 2012, the State would be required to pay 1/7th of the required amount. Every year, this would increase by 1/7th of the required amount until reaching the full required amount.
The fourth bill -- requiring the state to make its annual contribution to the pension funds rather than skip or reduce the payments, as has become customary -- needs a public hearing before it can be voted on by the Legislature and put to voters in November.
Four years ago lawmakers were going to enact several pieces of legislation, but then-Governor Jon Corzine asked them to hold off because he was going to address the issue at the bargaining table with the State worker unions.
That never happened, and the pension system is currently under-funded by more than 30 billion dollars.
Sweeney says the 9 percent increase in benefits - enacted in 2009 - must be rolled back for new State hires, and he's also looking at "changing the way we calculate pensions - from 3 years to 5 years…and we're also looking at the ability to opt out of the pension system - believe it or not, people cannot opt out."
He says "when you tell these members, you know, your pension is close to going bankrupt (they respond) what do you mean? It can't go bankrupt - well, yeah, it can, and it will - it's happened in Orange County California, it happened in New York City - pensions can go broke if you don't run them properly."
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….."
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