N.J. pension, health changes sail through Senate

TRENTON - Pension and health-care changes meant to cut public employee benefits and save the state money easily cleared the New Jersey Senate yesterday, despite objections from labor leaders.

State workers and teachers are likely to have more of a say in the Assembly, however, where two leaders say they expect to offer additional proposals to address the state's massive health and retirement fund deficits.

Their plans signal a possible break with the Senate on measures that had appeared to be on a fast track toward approval.

The Senate bills "provide a firm foundation for rectifying the problem, but by themselves they do not solve the problem," said Assemblyman Louis D. Greenwald (D., Camden), chairman of the Budget Committee. He plans to hold a hearing on the state's ailing retirement system next week and said the Assembly would consider additional steps.

Yesterday, however, senators basked in the smooth approval of the changes two weeks after they were introduced.

Each part of the three-bill package was approved 36-0. One Republican was absent and three lawmakers did not vote.

The vote represented an early triumph for the new leadership team of President Stephen M. Sweeney (D., Gloucester) and Majority Leader Barbara Buono (D., Middlesex), who championed the pension and benefit changes.

"These reforms are necessary to restore New Jersey's long-term fiscal footing and return sanity to a pension and benefits system that was allowed to spiral out of control," Sweeney said in a news release.

New Jersey's pension system was underfunded by $34 billion at last check. A recent Pew Center on the States report put the state's long-term shortfall for health benefits at $69 billion.

It will take years for the state to feel the most significant effects of the measures approved yesterday, since most apply to new hires. The largest immediate impact comes from requiring all government workers to contribute 1.5 percent of their salaries toward health benefits, a move that would save local governments around $314 million next year and grow over time, according to the nonpartisan Office of Legislative Services.

The approval was hailed by Democrats and Republicans as a sign of bipartisan cooperation. Members of each party cosponsored the three measures, and leaders from both sides held a joint news conference in Buono's office after the vote.

The bills still have ground to cover before they reach Gov. Christie, who has been generally supportive.

Assembly Democrats have signaled their intentions to move slower and hear out labor union objections more fully. Greenwald was confident the measures would win Assembly approval but said lawmakers wanted to have a "dialogue" with state workers.

Assembly Democrats met with union officials before yesterday's Senate vote to discuss the issues and other possible changes to the benefits system. The Assembly plans to introduce its version of the Senate bills Thursday, but some of the measures may be altered, according to Greenwald and another key Democrat who requested anonymity.

Additional proposals also are expected, including a measure to make the state pay its full pension contribution faster than in a Senate proposal, Greenwald said.

Unions argue that the state's failure to contribute nearly $6 billion in pension payments over 15 years is a key reason the retirement system is ailing.

Labor leaders sounded more optimistic about the chance to make an impact with the Assembly, whose members initially balked at the last attempt to cut pensions, in 2008.

"My sense is they are moving more carefully, trying to get a sense of what the actual impacts are of the legislation. They're not taking the same approach of ramming this through in a very short period of time," said Robert Master, regional political director for the Communication Workers of America.

CWA members and school workers with the New Jersey Education Association showed up in large numbers to protest the vote.

Master said the changes just "point the finger at our benefits" and wouldn't help property taxes.

But many changes would offer long-term savings that the state badly needs, sponsors said.

"By definition, it's a long-term fix. It's not a quick fix," Buono said. Immediate savings would require changing the rules for current employees, a step lawmakers largely avoided.

The most significant change would reduce pension benefits by 9 percent for new hires, reversing a 2001 increase that is widely seen as having expedited the pension fund's steep decline.

Public employees on the local level would have to contribute 1.5 percent of their pay toward health benefits. Payouts for unused sick days would be capped at $15,000, and part-time workers would be barred from the pension and health benefits system.

Another bill scheduled for a Senate hearing next week would propose a constitutional amendment to require the state, over seven years, to begin making its full contributions to the pension system. It has been years since a governor made a full payment for what the state promised its workers, saving money in the short term but adding to the long-term pension deficit.

If the state continues to defer contributions at its current pace, it will owe $18 billion a year in 18 years, Greenwald said.

Christie has offered support for the Senate bills but recently called on lawmakers to do even more.