Sweeney Delivers the Senate

Mark J. Magyar | June 21, 2011 | Budget
A new majority coalition easily passes the controversial pension reform and healthcare bill and ships it over to the Assembly. Last stop: New Jersey's High Court?

Credit: Ed Murray/Star Ledger
Senate President Stephen Sweeney (D-Gloucester).
Legislation to increase public employee pension and healthcare contributions sped through the Senate headed for final Assembly passage Thursday — but not without raising new questions.

Union leaders asserted that the elimination of cost-of-living increases for pensioners would not stand up to a challenge in New Jersey courts – a critical issue because it is supposed to account for 60 percent of the total pension savings They also sharply questioned the impact on patients of a hastily introduced bill that would set up a health insurance plan for public employees that would limit enrollees to in-state hospitals and doctors.

Nevertheless, Senate President Stephen Sweeney (D-Gloucester) stood triumphantly at the podium as the Senate voted 24-15 to approve legislation he has been seeking since 2005 to require state and local government workers, teachers, police and firefighters to pay significantly more toward their pensions and health insurance costs. If signed into law, the bill would make New Jersey the fourth state this year — following Wisconsin, Ohio and Massachusetts — to effectively strip public employees of the right to bargain over healthcare benefits.

A New Coalition

The Senate vote stamped the emergence of a new majority coalition consisting of Governor Chris Christie’s 16 Republican senators plus eight Democratic senators aligned with three Democratic power brokers who have appeared at rallies with the governor in recent months: South Jersey Democratic leader George Norcross, Essex County Executive Joseph DiVincenzo and Union City Mayor and state Senator Brian Stack (D-Hudson).

Sweeney, who defended his childhood friendship with his political mentor Norcross after the vote, and the five other South Jersey Democratic senators who depend on Norcross’ fundraising prowess were joined by Senator Teresa Ruiz (D-Essex ), who is employed as deputy chief of staff to DiVincenzo, and by Stack in putting the legislation over the top. Their votes were more than enough, even though 15 of the 24 members of the Democratic Senate majority voted against the bill (one senator was absent).

Assembly Speaker Sheila Oliver (D-Essex), another DiVincenzo aide, is relying on a similar coalition of Norcross-DiVincenzo-Stack Democratic allies to join a unanimous Republican minority Thursday to give final passage to the legislation, which would double and in some cases triple public employee payments toward their pension and healthcare costs.

This particular coalition of “Democrats and Republicans coming together to confront the tough issues” that Christie praised could very well reemerge in future months to pass other controversial legislation, including bills to provide school vouchers and expand charter schools in the cities — the issues that brought Christie and Norcross together on stage in Camden earlier this month.

But Christie’s assertion that the new legislation would be “saving New Jersey taxpayers hundreds of billions of dollars” could be torpedoed by the courts, as union leaders repeatedly noted during a contentious seven-hour Assembly Budget Committee hearing.

Cutting Out COLAs

Sixty percent of the projected $122 billion in savings comes from a plan to eliminate annual cost-of-living adjustment increases (known as COLAs) for the almost 300,000 retired teachers, police, firefighters and state and local government workers in the six state pension systems.

However, similar laws seeking to eliminate cost-of-living increases for retirees in Colorado, Minnesota and South Dakota have been challenged in court, and New Jersey’s record of legislative intent seems clear. Both the non-partisan Office of Legislative Services (OLS) and the state Attorney General’s Office issued strongly worded opinions during the summer of 2006 warning the bipartisan Joint Legislative Committee on Public Employee Benefits Reform that the New Jersey legislature had established a clear record of legislative intent that previously approved pension benefits should not be reduced.

During negotiations with Republican Governor Christine Todd Whitman’s administration on a controversial pension refinancing plan in 1997, the state’s public employee unions won a key concession by persuading Whitman and the GOP-controlled legislature to agree to a new law that “confers on a public employee a non-forfeitable right to pension benefits established by law after the employee has served for five years.”

Through that 1997 law, the New Jersey legislature made it clear that it intended to establish pension benefits as contractual rights. Thus, the provisions in the United States and New Jersey Constitutions prohibiting the impairment of a contract would prevent any reduction in pension benefits for retirees or current employees vested in the pension system, OLS counsel Peter Kelly ruled.

While Christie’s Attorney General’s Office might reach a different conclusion than his Democratic predecessor Jon Corzine’s Attorney General did, OLS nonpartisan opinion is unlikely to change. The case would undoubtedly head to the New Jersey Supreme Court, which showed its independence this spring by overturning Christie’s school aid cuts, or possibly to the United States Supreme Court, perhaps in conjunction with the Minnesota, Colorado or South Dakota pension challenges.

While the ability of the legislature to impose a minimum 30-year freeze on cost-of-living adjustments for retirees is subject to court challenge, there is no question that the legislation would have a major impact on the living standards of current public employees.

Salaries and Pensions

Under the legislation that passed the Senate yesterday and is expected to clear the Assembly Thursday, teachers, state and local government workers would pay an additional 1 percent of their salaries toward their pensions as of July 1 and an additional 1 percent phased in over the next seven years for a total of 2 percent. Police and firefighters, whose pension system is more solvent, would pay an additional 1.5 percent of their salaries as of July 1.

Healthcare benefits would also become quite expensive for some. Public employees, who currently pay 1.5 percent of the cost of their healthcare premiums, would pay from 3 percent for those earning under $25,000 up to 35 percent of their healthcare premiums for those making up to $100,000 on a sliding scale based on salary.
The impact of the combined pension and health care contributions would range from $1,142 for a worker making $25,000 to $6,058 for an employee earning $65,000 and more for higher-paid workers, according to Communications Workers of America (CWA) statistics.

CWA officials and other union leaders were negotiating last week with Democratic leaders on a plan that would have capped public employee contribution to 3 percent of their healthcare premium for those choosing the lowest-cost plan from among those to be developed by the state under the Sweeney legislation. But those negotiations fell apart over the insistence by union leaders that details of the new healthcare plans be spelled out in the legislation, leading to heated confrontations between union leaders and Sweeney and other Democratic supporters of his pension and healthcare legislation.

Assembly Budget Committee Chairman Lou Greenwald (D-Camden) yesterday listened to almost seven hours of testimony by union leaders criticizing the financial impact on their members and the elimination of collective bargaining on healthcare issues, and questioning by public employees who worried that their children would no longer be able to go out of state for specialized healthcare coverage.

Charles Wowkanech, president of the New Jersey State AFL-CIO, chided Greenwald for his support for the Sweeney legislation. “I remember how I would go as a young union member to the Camden County Central Labor Council and listen to your mother [former Cherry Hill Mayor Maria Barnaby Greenwald] talk about the benefits of organized labor.” Wowkanech said passionately.

Leaders of the New Jersey Education Association (NJEA), the three major state government unions, and various police and firefighter unions repeatedly urged Greenwald’s committee to pass the pension legislation as a standalone bill separate from healthcare benefit issues. They noted that Sweeney had acknowledged publicly that the only reason they did not separate pensions and health benefits into two bills was that Christie had said he would not sign the legislation unless it came in as a single bill.

In-State Medical Care

A second bill did emerge, however, that would give Sweeney at least one state health plan designed to restrict enrollees to use of New Jersey hospitals and doctors in most instances.

Sweeney’s original legislation would have limited health insurance coverage for all public employees to New Jersey hospitals and doctors without written authorization that the service required could not be performed by an in-state healthcare provider.

Sweeney and Greenwald defended the provision as being aimed at promoting greater use of New Jersey hospitals, 19 of which closed in recent years due to low patient counts. They defended the legislation as similar in intent to a bill requiring public employees to live in New Jersey to support the state’s economy. Greenwald asserted that every dollar spent with a New Jersey health provider generated three dollars in total economic spinoff.

But the “New Jersey first” provision was attacked last week as the “Norcross provision,” with union leaders and rival Democratic legislators asserting that the Sweeney provision was intended to benefit Norcross’ insurance business and to steer patients to Camden’s Cooper Medical Center, which Norcross chairs, rather than going across the river to Philadelphia.

Yesterday, a hastily written bill emerged that was intended to end off those charges while preserving Sweeney’s original goal.

Greenwald, who, like Sweeney. is a Norcross ally, spent much of yesterday’s hearing trying to explain the provisions of the bill. The legislation evidently requires a state board by January to develop at least one low-cost plan, at least one in-state plan that would require enrollees to use New Jersey healthcare providers, and at least one out-of-state plan, which Greenwald and Christie administration officials said might or might not be more expensive. Christie has said previously he would like to see up to nine different plans offered.

Greenwald contended that even the in-state plan, which has yet to be written, would allow parents to take their children to specialty hospitals out of state, if necessary, although union officials countered that the new law would put pressure on primary care physicians to refer virtually all cases to in-state providers to avoid having to challenge the cost-conscious officials overseeing the program.

Sens. Joseph Vitale (D-Middlesex) and Shirley Turner (D-Mercer) warned that the higher premium payments that would presumably be required for the out-of-state program would discourage lower-paid public employees from opting for a plan that would enable them to take advantage of the best healthcare providers both inside and out of New Jersey.
Sweeney’s bill requiring the establishment of both in-state and out-of-state healthcare plans was also approved yesterday by the full Senate, and Sweeney dismissed the controversy over the approach in a subsequent press conference by saying he “didn’t explain it very well” at Thursday’s Senate Budget Committee hearing.

Sweeney bristled at repeated charges that the bill was intended to help Norcross. “George Norcross is responsible for North Jersey health care systems and for the boogeyman coming out the corner and all kinds of stuff,” the Star-Ledger quoted Sweeney as saying sarcastically at the press conference.

However, he added, “I will never walk away from a friend. George is a friend mine. Been a friend of mine since I was a child,” the Star-Ledger reported.