State Senate OKs Benefits Reform Bill

The New Jersey State Senate approved a bill Monday afternoon aimed at increasing contributions to health benefits and pension payments for public employees, by a margin of 24-15.  The bill makes various changes to the manner in which the Teachers’ Pension and Annuity Fund (TPAF), the Judicial Retirement System (JRS), the Public Employees’ Retirement System (PERS), the Police and Firemen’s Retirement System (PFRS), and the State Police Retirement System (SPRS) operates and to the benefit provisions of those systems, according to a press release from the Senate.

Gov. Chris Christie released a statement commending the passage of the bill.

“I am encouraged by the bi-partisan Senate vote today and the continued display of support for common-sense pension and health benefits reform," Gov. Christie said via a press release. "This is a watershed moment for New Jersey, proving that the stakes are too high and the consequences all too real to stand by and do nothing. As a result of Democrats and Republicans coming together to confront the tough issues, we are providing a sustainable future for our pension and health benefit system, saving New Jersey taxpayers hundreds of billions of dollars and securing a fiscally responsible future for our state.”

Unions representing teachers and other public employees have been rallying supporters in Trenton for several days to oppose the measure, which now goes to the state Assembly, where passage seems likely. The legislation has been a top priority for Gov Chris Christie and Senate Majority Leader Steve Sweeney (D-Gloucester).

The bill provides for increases in the employee contribution rates to their pension funds:

from 5.5 percent to 6.5 percent, plus an additional 1 percent phased-in over seven years beginning in the first year, meaning after 12 months, after the bill’s effective date for TPAF and PERS (including legislators, Law Enforcement Officer (LEO) members, and workers compensation judges); from 3 percent to 12 percent for JRS phased-in over seven years; from 8.5 percent to 10 percent for PFRS members and members of PERS Prosecutors Part; and from 7.5 percent to 9 percent for SPRS members, according to the bill.

The bill also repeals earlier legislation that provides a member of PERS or PFRS the ability to retire while holding an elective public office covered by PERS or PFRS, while continuing to receive the full salary for that office.

The bill states that the automatic cost-of-living adjustment will no longer be provided to current and future retirees and beneficiaries.

As for health benefits reform, the bill requires all public employees and certain public retirees to contribute toward the cost of health care benefits coverage based upon a percentage of the cost of coverage. Under the bill, all active public employees will pay a percentage of the cost of health care benefits coverage for themselves and any dependents, according to the Senate press release. Lower compensated employees will pay a smaller percentage and more highly compensated employees will pay a higher percentage. The rates will gradually increase based on an employee’s compensation, at intervals of $5,000.

Click here for more information on senate bill S-2937.

"We have no problem paying [a larger contribution] for healthcare benefits,"said Bob Grundfest, president of the Madison Education Association, which represents district teachers. "But let's negotiate it."

The MEA during 2010 contract talks in response to pleas from the Board of Education agreed to shift their healthcare coverage from private insurers to the less expensive state health benefits plan. "That's how it should be done," Grundfest said. "We don't mind contributing more, but let's negotiate it and keep it a local thing. [The bill] has taken it out of our hands."

Grundfest said teachers would now be paying as much as $5,000 to $6,000 each for healthcare based on premiums paid by the school board. The conundrum, he noted, is that as healthcare costs continue to rise, the state-mandated 2% tax levy cap will limit how much the teachers' contributions will help the BOE bring down costs, if at all.

"The state is shifting the burden from the school board to teachers," Grundfest said. "How can middle class teachers help when increased contributions mean our salaries go down, and when we are limited by the 2% cap?"

"We pay for groceries, and gas, and all the other things that are becoming more expensive. If we have to pay for 30% of our healthcare premium, we are going to be in for some serious hurt."