N.J. Gov. Christie, lawmakers propose sweeping pension, health care changes for public employees
By Claire Heininger/Statehouse Bureau
February 07, 2010, 5:58AM

Gov. Chris Christie and lawmakers of both parties will unveil a series of sweeping pension and benefit reforms Monday that could affect every public employee in New Jersey while saving the state billions of dollars, according to four officials with direct knowledge of the plan.

The proposals would require workers and retirees at all levels of government and local school districts to contribute to their own health care costs, ban part-time workers at the state and local levels from participating in the underfunded state pension system, cap sick leave payouts for all public employees and constitutionally require the state to fully fund its pension obligations each year.
Details of the four-bill package to be introduced Monday were provided to The Star-Ledger on the condition of anonymity because the four officials were not authorized to speak in advance.

The proposals go further than several past efforts at reining in taxpayer-funded pension and benefit costs, and if enacted would represent a major early victory for the new Republican governor and Democrats who control the state Legislature. But supporters anticipate an angry response from public employee and teachers unions that wield considerable power throughout the state — though lawmakers argue rank-and-file workers would have safer pensions than before.

Christie’s office declined to comment, as did top Democrats and Republicans involved in crafting the bills.

All sides had made their feelings clear last month, when Senate President Stephen Sweeney (D-Gloucester) announced the upper house’s intentions to fix a system that would otherwise "go bankrupt." Lawmakers of both parties pledged their support, with Christie saying "bipartisan action is critical to reforming a broken pension and benefits system."

Hetty Rosenstein, a state director of the Communications Workers of America, which represents 60,000 state and local workers, said she was still studying the bills but believes the reforms are misguided.

For most rank-and-file employees, benefits are "not extremely lucrative...They are not out-of-whack," Rosenstein said Saturday. "This interferes with the collective bargaining relationship and it’s not going to save any kind of significant money."
Steve Baker, spokesman for the 200,000-member New Jersey Education Association, said Saturday the teachers union is still reviewing the bills and had no immediate comment.

The state pension system, which includes accounts covering more than 700,000 working and retired state, county and municipal employees and teachers, was underfunded by about $34 billion as of the last official count in 2008. Retired workers and beneficiaries receive a total of $6.1 billion a year. Health insurance costs have also skyrocketed of late, with a 2009 study projecting health care would cost $1.78 billion for state workers and retirees this year. For local employers in the state plan, costs were expected to hit $856 million, and for school districts, $1.84 billion.

"Unless we take action now, New Jersey’s pension system will implode, leaving thousands of rank and file workers penniless in retirement," Sweeney, an ironworkers union leader who has clashed with public employee unions, said in his announcement. There are 467,872 current public employees enrolled in the retirement systems.

THE REFORMSThe four officials could not provide a formal estimate of the savings, but said the amount would reach billions over the next decade. The reforms to be proposed Monday include:
&bull Requiring all current public employees to contribute at least 1.5 percent of their annual salaries toward their health benefits, and all future retirees to contribute at least 1.5 percent of their base pension to their health benefits. State employees were required to contribute at that rate beginning in 2007 under then-Gov. Jon Corzine, but many local governments and school districts do not require any health care contributions. The minimum threshold would be incorporated into upcoming local contracts, and governing bodies could try to negotiate it higher.
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 Offering for voter approval a constitutional amendment forcing the state to fully fund its pension obligations in each year’s budget. While the requirement would not yet be in effect, a full payment for the upcoming budget would be about $2 billion out of a budget in the $28 billion range. Payments have dwindled to cope with budget woes, including Corzine eliminating this fiscal year’s contribution entirely. Corzine also allowed local governments last year to postpone part of their pension payments, arguing that covering the full cost would drive up property taxes in a recession.
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Changing how pension payments are calculated, and who qualifies for a pension, for future employees at all levels of government. That includes repealing a 9 percent increase in benefits put in place in 2001, factoring in the highest five years of salary instead of three years to determine pension payouts, and banning part-time workers from participating in the pension system. State employees would have to work 35 hours a week and local employees 32 hours a week to qualify.
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 Enrolling future part-time employees at all levels of government in a defined-contribution plan instead, and raising the minimum annual pay to participate to $5,000 from $1,500. Current part-timers would continue in the pension system as long as they remain continuously employed.
&bull Capping payouts for unused sick leave at $15,000 for all public employees, mirroring the limit already in place at the state level, and limiting stored vacation time. Retirement packages have sparked taxpayer outrage, including a 2008 deal to give a former Keansburg superintendent $740,000 in severance pay, including $184,586 for unused sick leave.

CORZINE BLAMEDMany of the concepts were put forward in 2006 during a special legislative session on reducing property taxes, and pushed since then by Sweeney and Sens. Barbara Buono (D-Middlesex), Nicholas Scutari (D-Union), Kevin O’Toole (R-Essex) and others. But lawmakers said Corzine stymied efforts.

Unions have long pushed for the state to cover its pension obligations. But groups wary of the new governor — especially the New Jersey Education Association teachers union — have already voiced strong resistance to some of Christie’s ideas on the basis that they interfere with the collective bargaining process.