Inter-Party Alliance Forces NJ Pension Reform Proposal

Who?  Me?  (TV Screen shot/Bergeron)

Yesterday, at the State House in Trenton, NJ, a rare event occurred:  A coalition of Democratic and Republican state legislators witnessed the passing of a committee resolution that is scheduled to go to the floor of the full Senate on Monday for an up or down vote.

Also on Monday, a similar committee headed by Assembly Speaker Sheila Oliver will consider this highly controversial proposal.  The New Jersey Education Association and other public unions are fiercely opposed to these measures.

Should the NJ Senate approve the bill and should New Jersey’s Assembly concur, it will be presented to Governor Chris Christie for approval and codification into law.  Under the State Constitution, a budget must be passed by June 30.

On Friday, Governor Christie was the target of highly caustic, personal invectives by union demonstrators.  Senate President Steve Sweeney and Assembly Speaker Sheila Oliver, both Democrats, were not far behind in experiencing similar union pressure to break away from Christie on this issue – to no avail, so far.

 The plan voted out of the Senate Budget and Appropriations Committee by a 9 to 4 margin yesterday, calls for the following changes which would affect the pensions and health benefits for teachers and other school workers.  The impact on other public unions is not discussed in this post, although certain of these conditions may apply to them as well.

PENSIONS:

• Contributions to the retirement plan increase from 5.5% to 7.5%.
• COLA (Cost of living adjustments) are eliminated for current and future employees into the foreseeable future.
• Retirement age for new school employees is increased from 60 to 65 years of age, and their early retirement eligibility rises from 25 to 30 years.
• Pension contributions by the state become mandatory; unions are allowed to sue if these are not made.
• Establishment of a Management/Labor Board with authority to determine rates, retirement ages, and benefits, but conditioned upon the financial stability of the pension fund.

HEALTH BENEFITS:

• Salary levels become the basis for a new, tiered system of payments for health care premium contributions by employees.
• Retired employees would not be affected by that change.
• Employees now on the payroll and with at least 20 years of service also would not be affected by this change upon retirement.  However they would be required to pay health care premiums based upon the tiered payment system while still on active service.
• Health premium contributions may be renegotiated, but only after employees have paid higher rates under the new structure for at least four years.
• By January 1, 2012, a new board will be required to determine new health plans.  These may be similar to those now in private industry – fewer benefits in exchange for lowered premiums; a high-deductible plan; and a potential change to co-pays and prescriptions.

Public union employees assemble. (TV Screen shot/Bergeron)

These proposals are historic in the sense that they have been hammered out between a Republican Governor and a legislature controlled by Democrats facing the head winds of a multi-million dollar union campaign.

They also break the mold because they employ legislation instead of negotiations to determine what in prior decades has never been able to get accomplished, to wit, the reform of a public pension and health benefits structure in New Jersey which is severely underfunded and facing possible future collapse.

(Note:  Data from various sources were used for this post.)