Report: Pension question would spike N.J. taxes
TRENTON - A panel appointed by Gov. Christie to study costs of retirement benefits for New Jersey's public employees warned Thursday that a legislative proposal to constitutionally mandate pension funding would likely "result in substantial, broad-based tax increases" and "draconian" cuts to services.
TRENTON - A panel appointed by Gov. Christie to study costs of retirement benefits for New Jersey's public employees warned Thursday that a legislative proposal to constitutionally mandate pension funding would likely "result in substantial, broad-based tax increases" and "draconian" cuts to services.
In a new report, the nonpartisan panel of experts instead called for various structural changes it said would save the state $2 billion in health-benefit costs annually and reduce pressure on the state's tight budget.
The report comes as Christie prepares to deliver his annual budget address to the Legislature on Tuesday.
Christie devoted most of his time over the last seven months to his presidential campaign. But after placing sixth among Republicans in New Hampshire's primary, he dropped out of the race Wednesday and returns to Trenton facing a problem he has tried to confront since he took office in 2010.
A year ago, Christie's commission proposed a plan that would reduce health benefits for public workers to comparable levels in the private sector and use the savings to pay down the state's $40 billion pension debt. The new report maintains that basic structure but adds wrinkles.
New Jersey's largest teachers' union initially agreed to discuss possible changes with the commission but backtracked after it said Christie had exploited the talks for political gain. In a conference call with reporters, commission member Thomas J. Healey said he had not spoken with the union but would like to do so.
"The new commission report is just a rehash of old ideas that didn't work last year and don't work this year," Wendell Steinhauer, president of the New Jersey Education Association, said in a statement.
Democrats, who control both houses of the Legislature, are advancing a proposed constitutional amendment that would require the state to contribute more to the pension system.
The Legislature approved the amendment late last year and can put it on November's ballot with a simple majority vote this session. Then voters would decide whether to approve the amendment.
The commission said in its report Thursday that contrary to some lawmakers' claims, the amendment would likely raise taxes not just on millionaires, but on less-wealthy taxpayers as well.
By 2022, the report said, the state would need about $2.8 billion a year in new tax revenue. A tax increase on income above $1 million, plus modest revenue growth, would not cover those costs, the commission said.
Senate President Stephen Sweeney (D., Gloucester) "fully" rejects the idea that the amendment would require such tax increases or cost-cutting, spokesman Mark Magyar said.
Magyar said revenue growth would cover the costs, adding that Sweeney would consider a tax on income above $1 million if necessary. Magyar said Sweeney had not reviewed the whole report - and was open to finding health-care savings - but took issue with a plan that would increase costs for public employees and provide less coverage.
Pension and health-benefit costs would consume 27 percent of the state budget, which the commission warned would "hurt the state's credit ratings, as it would deprive the state of the flexibility needed to respond to emerging public needs and weather economic downturns."
The report added that "the extreme preference given to pension funding under the amendment appears at odds with basic principles of public policy."
"The premise of the amendment is that funding employee benefits - not protecting the health, safety and welfare of the public - should have the first call on the state's funds. New Jersey expressly rejected giving such preferential treatment to public employee benefits when it adopted its 1947 constitution."
Democrats argue that the amendment is needed to make good on their commitment to New Jersey's 800,000 active and retired public employees.
A law Christie signed in 2011 required public workers to pay more toward their pensions and health benefits, but the governor reneged on the law's provision that the state also increase its share of the contribution. The state Supreme Court rejected a lawsuit filed by public-sector unions that challenged Christie's pension cuts.
Christie's panel, known as the New Jersey Pension and Health Benefits Study Commission, recommended scaling back benefits to the "gold plan" under the Affordable Care Act, one notch below the top-level platinum plan. The health-care law is set to impose a tax on employers who provide platinum plans.
Early retirees - public employees who retire before the age of 65 - should receive health coverage through private exchanges, the report said. The state would provide annual funding to help retirees purchase coverage for a gold plan.
Medicare-eligible retirees also should receive funding to purchase coverage through a private exchange rather than more-expensive state plans, the report said. Most of their health insurance is already covered by the federal government through Medicare.
Finally, the commission calls for some local funding of teachers' pensions and health benefits. Currently, the state funds all of those expenses. This wouldn't increase property taxes, the commission said, because local governments also could save money by adopting similar changes to funding retiree benefits.
Magyar, Sweeney's spokesman, said shifting these costs to school districts would add to the property tax burden.
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