Pension and Health Care Reform Bill Heads to Assembly

With major changes for their health care and pensions likely, public employees are expressing worry and frustration.

Proposed legislation to increase contributions by public employees to their health care and pension costs is expected to be approved by the state Assembly Thursday, clearing its final hurdle before heading to Gov. Chris Christie to be signed into law.

The state Senate adopted the pension and health care reform bill on Monday by a margin of 24-15, with 16 Republican Senators and eight Democrats voting in favor of bill S-2937.

The bill would require teachers, state and local government workers to pay an additional 1 percent of their salaries toward their pensions as of July 1, and an additional 1 percent phased in over the next seven years for a total of 7.5 percent.

Police and firefighters would pay an additional 1.5 percent of their salaries toward their pensions for a total of 10 percent, as of July 1.  The bill would move the retirement age for new teachers and non-uniformed employees from 60-years-old to 65. To be eligible for early retirement, the employees would now have to work 30 years instead of 25.

The bill would also require the state to make its annual payment into the pension system or unions could sue to force the state to make its payments. Gov. Christie withheld a $3 billion payment from the pension fund last year, which is underfunded by approximately $54 billion.

The bill would also eliminate the automatic cost-of-living adjustment (COLA) for retired police, firefighters, teachers, state and local government employees in New Jersey's six pension systems. 

Firefighter Joseph Popolo, President of Springfield’s FMBA, said he was most frustrated by the bill’s impact on how public unions can negotiate with municipalities. He noted the concessions his union has made during during the current budget crunch, including a and agreeing, along with other public employees unions, to shift to the .

"Our issue is the fact that it's now being dictated by the state," Popolo said.

Popolo said that while the lawmakers are now increasing public employees’ benefit payments, they had previously voted to allow municipalities to take “pension payment holidays,” creating the current underfunded pension situation.

“What’s aggravating for me is that they keep saying the pension system is in dire straits,” Popolo said. “What they fail to mention is that the state created the problem.”

The attitude, Popolo said, was indicative of how he believes public employees are being unfairly vilified in this budget battle.

“We’re getting the blame for everything,” he said. “We didn’t cause it. It’s really a shame.”

Mike Bukowsky admits to being worried. The physical education teacher at Washington School said Gov. Chris Christie’s proposal to change public employee pension and health care benefits, slated for a vote in the state Assembly Thursday afternoon, is the cause of his worries.

Bukowsky has been a teacher for 10 years. His wife, Lisa, a third grade teacher at Washington, has been a teacher for 11 years. Under the new proposal they will have to pay an additional one-percent of their salaries towards their pensions starting on July 1, and an additional one-percent over the next seven years for a total of 7.5-percent.

“I’m worried about my future,” Bukowsky said Wednesday afternoon at the Westfield Diner. “I am at a loss because I am worried about what it will do to us in the future."

U.S. Senator Frank Lautenberg (D-NJ) criticized the legislation for having a detrimental impact on working families.

“The health and pension reform deal that passed in the State Senate is an attack on collective bargaining and a dramatic setback for middle-class New Jersey families," Lautenberg said via press release.  "The State House should be a place where the Governor and Legislature work to improve the lives of working families, not take away benefits from New Jersey's teachers, police, firefighters and other public employees.  Instead of balancing the budget on the backs of middle-class New Jerseyans, the Governor and Legislature should be working to make sure the wealthiest few are paying their fair share to help fix the state’s problems.”

Gov. Christie said on Monday that the legislation would save New Jersey taxpayers "hundreds of billions of dollars." About 60 percent of the projected $122 billion total pension savings comes from the elimination of COLA, however the measure may not hold up in court.

NJSpotlight reported that both the non-partisan Office of Legislative Services (OLS) and the state Attorney General’s Office previously issued strongly worded opinions during the summer of 2006, which warned the bipartisan Joint Legislative Committee on Public Employee Benefits Reform that the state legislature had established a clear record of legislative intent that previously approved pension benefits should not be reduced.

The bill would have a more significant impact on the cost of health benefits, as it would require 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. Public employees could see current health costs at least doubled, or tripled in some cases.

Under the bill, all active public employees pay a percentage of the cost of health care benefits coverage for themselves and any dependents. Lower compensated employees would pay a smaller percentage, while more highly compensated employees would pay a higher percentage. The rates would gradually increase based on an employee’s compensation, at intervals of $5,000.

Public employees currently paying 1.5 percent of their healthcare premium cost would pay 3 percent for those earning under $25,000, and up to 35 percent of their healthcare premiums for those making up to $100,000, on a sliding scale that is based on employee compensation.

The increase to health costs would not affect current retirees, and active employees with at least 20 years of service would pay the increased contributions while still active, but would not be affected upon their retirement.

The bill currently contains two options for public workers, one where public employees could buy health insurance that would cover out-of-state treatment, or a cheaper option that would restrict employees to New Jersey hospitals, unless their case could only be handled by an out-of-state doctor.

The overall impact of the increased pension and health care contributions would range from $1,142 for a public employee making $25,000 per year, to $6,058 for an employee earning $65,000, according to the Communications Workers of America (CWA).

"This will cost families thousands of dollars per year and the legislation does nothing to control the cost of health benefits, it simply shifts the costs to families already struggling in this economy," said New Jersey Education Association spokesman Steve Baker.  "This should remain a subject of collective bargaining."

The New Jersey State Policemen's Benevolent Association said the proposals ask far more of the members of the Police and Firemen’s Retirement System (PFRS) than it does of other pension systems and that it dramatically curtails collective bargaining for health benefits.

"We do not suggest that changes should not be made to strengthen our pension system or that our members are unwilling to offer local property tax relief," said State PBA President Anthony Wieners in a press release. "But we do believe strongly that police and firefighters must not be punished for the failure of government to adequately fund our pension system. We also maintain that negotiations for health benefits at the local level are already yielding significant savings for taxpayers and don’t require the Legislature’s intervention."

Popolo noted that changes to pension plans can be particularly stressful for firefighters and police officers.

“I think that what a lot of people don’t understand is that police and firefighters don’t receive Social Security benefits,” Popolo said. “Our pension is all we have.”