NJ Lawmakers Propose Pension and Health Benefit Cuts

February 9, 2010 (PLANSPONSOR.com) – New Jersey state senators have introduced a package of bills to cut government pensions and health benefits.

The legislation, reported the Philadelphia Inquirer, would roll back pension benefits for government workers and teachers, and make public employees at all levels pay 1.5% of their salaries toward health benefits, matching what state workers contribute. The proposals would, among other changes, roll back a 9%-pension increase approved in 2001, require new part-time workers to receive 401(k)-like plans rather than defined benefit plans, and raise the threshold to qualify for a taxpayer-funded pension to $5,000 in annual government pay, up from $1,500.

According to the Inquirer, to get a pension, new teachers and state workers would have to work 35 hours a week. State workers would have to work 35 hours a week to receive state health benefits; on the local level, the minimum would be 25 hours.

Other changes are aimed at preventing late-career pension boosts by calculating retirement payments on workers’ top five years of salary, rather than three. Those with multiple public jobs could choose just one for calculating retirement benefits. Sick-day payouts would be capped at $15,000.

In addition, a proposed constitutional amendment would require the state to make its full pension contributions. Full funding would be phased in over seven years, starting, at the earliest in the 2011-12 state budget.

Senator Stephen Sweeney indicated the plans are an attempt to solve the state’s long-term health-benefit and pension problems. At a budget hearing last week, nonpartisan legislative analysts said long-range pension and health-care liabilities had swollen to $112 billion, not counting amounts owed by local governments, according to the news report.

It is unclear when the proposals will be introduced in the state’s Assembly.

The Inquirer noted the legislation will face stiff opposition from labor unions, which argue that rank-and-file employees, from teachers to aides for the disabled, have already made sacrifices for the pension system and are being unfairly targeted.

The New Jersey Education Association pointed out that in 2008, teachers agreed to increase their pension contributions to 5.5% of their pay from 5%, while governors and lawmakers skipped nearly $6 billion of required pension contributions in the last 15 years. The Communication Workers of America noted that state workers took 10 furlough days last year and deferred a 3.5% raise until this year.