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Murphy’s First High-Profile Conditional Veto Draws Applause from All Quarters

Unions like the way governor collaborated on bill affecting cops and firefighters’ retirement funds

murphy
Credit: NJTV News Online
Gov. Phil Murphy

Gov. Phil Murphy has conditionally vetoed a bill that would give New Jersey police officers and firefighters more direct control over the management of their retirement funds, making it the first high-profile piece of legislation he’s sent back to lawmakers for changes.

Murphy’s decision to request revisions on a bipartisan labor bill threatened to upset the influential unions that represent cops and firefighters, who strongly backed his run for office last year.

But labor officials issued statements yesterday praising Murphy for working closely with them to address his concerns, and to resolve any differences in a collaborative way.

Sweeney on board

Senate President Steve Sweeney, a primary sponsor of the legislation, also signaled yesterday that Murphy’s changes, would be accepted by lawmakers, easing concerns that the first-term Democratic governor was running the risk of seeing his first veto override in the Democratic-controlled Legislature. The changes Murphy asked for are all technical, relating to both retirement-fund investments and benefits rules.

Outspoken opponents of the bill also praised Murphy, a former U.S. ambassador to Germany, for taking into consideration several key issues they raised about the risk the original bill posed for taxpayers.

The conditional veto should also push back some concerns that Murphy would sign almost any bill advocated by public-sector unions, after he endorsed raises for state workers represented by the Communications Workers of America.

First introduced last year, the goal of the pension legislation was to better insulate the Police and Firemen's Retirement System (PFRS) from more drastic policy changes that may be needed to save the retirement systems for other public-employee groups, like judges and teachers. Those funds rely more heavily on contributions from state government, which has a long history of making only partial pension payments, or in some years, no contributions at all. In fact, the PFRS is in the best shape of the state’s pension plans, funded at about 70 percent, according to the latest official actuarial reports.

A key feature of the bill, which easily passed both houses of the Legislature earlier this year, is the creation of a new board of trustees to oversee the PFRS retirement assets and benefits. The bill calls for half of the new board to be made up of active police officers and firefighters and gives the governor the power to appoint another four members, as long as they either serve or have served as an elected official or have worked as a top official for a municipal or county government, such as administrator or chief financial officer. The final seats would be filled by a retired police officer or firefighter and a representative of state government, giving the current or retired workers a clear, seven-five majority.

Making it tougher to make changes

But among the changes listed in Murphy’s conditional veto is a provision that would make it harder for the board to make any benefits enhancements by requiring eight members to sign off on those types of changes. The governor is also seeking to have any benefits changes, including a restoration of cost-of-living adjustments that were frozen in 2011, be subject to the analysis of an actuary. His recommendations also prevent the actuary from being an employee of the board itself, and would require the actuary to be an active member of the American Academy of Actuaries.

Among the other technical changes is a requirement that the state treasurer would continue to control the assumed rate of return for pension-fund investments, and the Division of Investment would continue to manage assets instead of putting them under the direct control of the new board.

Murphy said in a statement yesterday that the changes reflect both his understanding of the unions’ desire to see the state reform how the PFRS funds are managed, while also ensuring “the reforms are implemented in an appropriate manner that protects both the stability of the fund and New Jersey taxpayers.”

“I want to commend the sponsors and many stakeholders involved in this process for their commitment and hard work in recognizing the unique nature and circumstances of the PFRS system,” Murphy said.

A statement issued by Patrick Colligan, president of the New Jersey State Policemen's Benevolent Association, praised Murphy for working with the unions on a solution that all sides could agree on. The same bill had been conditionally vetoed by former Republican Gov. Chris Christie last year, and his recommendations were never accepted by lawmakers.

“With this bill competent professionals and a focused Board of Trustees will protect the fund from abuse and control investment decisions designed only to grow the value of the PFRS,” Colligan said.

Good for the unions, good for the state

Eddie Donnelly, the president of the New Jersey Firefighters Mutual Benevolent Association, said the version of the bill recommended by Murphy would be good for union members and “good for the State of New Jersey.”

“After eight long years of working under a governor who had no interest in engaging in reasonable dialogue, the manner in which Gov. Murphy and his team went about the changes he offered through his conditional veto is just as meaningful as the changes themselves,” Donnelly said. “This was open, frank, and forthright dialogue.”

Also winning praise from union leaders yesterday was Sweeney (D-Gloucester), who worked with Senate Minority Leader Tom Kean Jr. (R-Union) to get the bill to Murphy’s desk with veto-proof majorities. Sweeney said in a statement that Murphy’s revisions would be adopted.

“I want to commend the union leaders and members for their constructive contributions in crafting a plan to allow them to take the responsibility for managing their own pension funds,” Sweeney said.

Meanwhile, Sen. Declan O’Scanlon, who was one of the original bill’s loudest critics, credited Murphy’s approach, including the insertion of the language that will make it harder for the new board to reestablish cost-of-living adjustments and to make other benefits enhancements.

“This was a big test,” said O’Scanlon (R-Monmouth). “The Murphy administration deserves praise for resisting what I am certain was tremendous pressure from unions, standing up for taxpayers, and vastly improving this legislation.”

Also praising Murphy for adding some additional taxpayer protections was the New Jersey State League of Municipalities, which had raised concerns about the makeup of the board, since the police officers and firefighters hold a majority on the new board even though taxpayers generally contribute more toward their retirements.

“The governor deserves credit for the action that he’s taken,” said Michael Cerra, the organization’s assistant executive director. “His recommendations improve the bill.”

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