Public employees in New Jersey with less than five years of work experience could soon see major changes to their pensions under a new system proposed by a bipartisan committee in the state Legislature.
The committee, spearheaded by Senate President Steve Sweeney, is proposing the state move to a “hybrid pension system” that would keep the first $40,000 of yearly income pensionable and establish a “cash balance account,” similar to a 401(k), that guarantees a minimum return of 4 percent for anything above the $40,000 threshold.
On Monday, Sweeney told The Press of Atlantic City there is still discussion on whether the state would match money put into the cash balance account like a traditional 401(k) plan, but touted the proposal as a way for the state to climb out of its crushing pension crisis.
“Pension and health care costs alone eat up all of our ratable growth,” said Sweeney, D-Salem, Gloucester, Cumberland. “We’re not looking to cast blame … we’re looking to sit down and talk to (public unions). We can’t fund anything anymore.”
The proposal, officially unveiled earlier this month, drew quick criticism from public unions throughout the state — including the powerful New Jersey Education Association. The NJEA, the largest teachers union in the state, spent millions of dollars last year trying to unseat Sweeney in favor of a Trump Republican named Fran Grenier amid a longstanding feud between the senator and the union over pension payments.
“It’s unfortunate, but not surprising, that Sen. Sweeney’s hand-picked group came up with recommendations that reflect the approach he has taken throughout his decade as Senate president,” Marie Blistan, president of the NJEA, said in a statement. “The report glosses over the state’s failure to meet its obligations and get its fiscal house in order, and instead proposes making public employees pay more for reduced benefits.”
According to the Governmental Accounting Standards Board, New Jersey’s combined pension and retiree health benefit liabilities are $151.5 billion, four times the size of the state’s annual budget.
About $3.2 billion of the FY 2019 state budget has been dedicated to pension payments for teachers and state employees, according to the report. That number will reach $6.6 billion by 2023 and $7.1 billion in 2030.
Without changes to the current system, New Jersey will not be able to cover other services, such as school funding or NJ Transit, Sweeney said Monday.
Part of the changes could also include public employees getting “gold” health care packages instead of “platinum” packages, which could save another $587 million for the state budget and $69 million for current state workers on their premium cost-sharing payments in 2020.
New Jersey’s current health care system for state employees and teacher and state government retirees covers 97 percent of total health care costs — the highest percentage of any government health care system in the nation, according to the report.
Current employees pay an average of 21 percent of the cost of coverage, which is about nine times as much as retirees pay.
The committee also recommended establishing “silver” and “bronze” plans for state employees if they want cheaper options.
It also looked at some of the state’s largest assets, such as the New Jersey Turnpike, and recommended they be utilized for more revenue to help pay off the existing liabilities.
One idea is to let private developers expand the turnpike with “fast lanes” and charge people extra money to use them to circumvent traffic. The state would then theoretically get a cut of the money people pay to use the lanes, Sweeney said.
Sweeney’s biggest fight in reforming the pension system could come from someone in his own party — Gov. Phil Murphy.
Murphy, a Progressive Democrat, has advocated raising taxes — including a millionaire’s tax — to pay for his initiatives and solve some of the state’s financial problems.
Sweeney said the government can’t just keep raising taxes and expect people to still live in the state.
State Sen. Chris Brown, a Republican, said he sees the bipartisan committee as a step in the right direction and said all options need to be on the table when it comes to fixing the pension crisis.
“Anyone who is trying to raise a family or simply retire in Atlantic County will tell you New Jersey doesn’t have a revenue problem, it has a spending problem,” Brown said in a statement. “In order to make our state more affordable all options developed by the bipartisan committee should be thoroughly reviewed to ensure they are feasible and fair.”
Assemblyman Vince Mazzeo, a Democrat, said its time to stop kicking the can down the road when it comes to New Jersey’s pension problem.
“We have to do better in helping to control property taxes in New Jersey. The pension system is part of the conversation,” Mazzeo said in a statement. “I look forward to reviewing the Senate President’s plan and hope that it will help reduce the property tax burden to our residents.”
Contact: 609-272-7260 JDeRosier@pressofac.com