Thursday, October 23, 2014
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Analysis: Retiree Health Benefits Easier To Cut Than Pensions

While Gov. Chris Christie cut $2.4 billion in pension payments as a short-term fix for his latest budget shortfall, the GOP governor is more likely to propose deep cuts in retiree healthcare costs than accrued pension benefits when he unveils his long-term plan to deal with the state's $90 billion in unfunded retiree liabilities.

Analysis: Retiree Health Benefits Easier To Cut Than Pensions

Gov. Chris Christie likely to propose deep cuts in retiree health-care costs over accrued pension benefits when he unveils his long-term plan to deal with the state’s $90 billion in unfunded retiree liabilities. (AP Photo/Cliff Owen, File)
Gov. Chris Christie likely to propose deep cuts in retiree health-care costs over accrued pension benefits when he unveils his long-term plan to deal with the state’s $90 billion in unfunded retiree liabilities. (AP Photo/Cliff Owen, File)

While Gov. Chris Christie cut $2.4 billion in pension payments as a short-term fix for his latest budget shortfall, the GOP governor is more likely to propose deep cuts in retiree healthcare costs than accrued pension benefits when he unveils his long-term plan to deal with the state’s $90 billion in unfunded retiree liabilities.

Even though no state has succeeded in cutting the actual monthly pension benefits earned by retirees, courts across the country have upheld the authority of state and city governments to cut retiree healthcare benefits, notably including an Illinois law that ended free lifetime healthcare coverage for retirees with more than 20 years of service.

For Treasurer Andrew Sidamon-Eristoff, who told legislative budget committees that New Jersey is looking to other states for examples of how to cut soaring retiree costs, the Illinois law provides a legal precedent to end New Jersey’s guarantee of free lifetime healthcare coverage for teachers, police, firefighters, and state and local government employees with 25 years of service.

The May 2012 law requiring Illinois’ 80,000 state government employees to begin paying part of their annual healthcare premiums was pushed through by Democratic Gov. Pat Quinn and championed by Democratic House Speaker Michael Madden. It is just one of a series of initiatives that have cut retiree healthcare benefits in more than 30 states since 2011.

Whether Senate President Stephen Sweeney (D-Gloucester) and the Democratic-controlled Legislature would work with Christie to cut retiree health benefits or make over the state’s pension system -- perhaps by transitioning to the hybrid defined-benefit/defined-contribution model implemented by Rhode Island that Sidamon-Eristoff praised -- is another question.

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