Cut Public-Worker Benefits, Merge School Districts — Sweeney Panel Recommends

Commission assembled by Senate President proposes aggressive measures to address New Jersey’s fiscal problems. Teachers union responds in the negative, governor noncommital

Senate President Steve Sweeney, center, talks to reporters after press conference about commission's recommendations.
Cutting public-worker benefits and forcing some smaller school districts to merge with their neighbors are among the recommendations released yesterday by a group of fiscal-policy experts who were asked by New Jersey’s highest-ranking lawmaker to find ways to make government cheaper and more cost-effective.

Other proposals, among the dozens released by the 25-member panel, would allow the state to establish special toll lanes on federal highways in New Jersey and permit county governments to levy a sales tax to offset their reliance on property taxes.

Many of the ideas included in the group’s report offer a new twist on proposals that have been floated before in New Jersey, like offering public employees less generous healthcare coverage and moving some into a new retirement plan instead of maintaining them in the state’s grossly underfunded pension system. Some of the recommendations also incorporate bills that are already up for consideration in the Legislature, including creating a new state income-tax deduction for contributions made to charitable groups that are based in New Jersey.

Cutting worker benefits

But exactly how many of the recommendations can actually make it to the finish line and become law remains to be seen, as many proposals seem to conflict with the priorities of Gov. Phil Murphy, a first-term Democrat who has been reluctant to talk about cutting worker benefits or making drastic changes to education policy. Murphy — who chaired a similar blue-ribbon panel that looked at employee benefits in 2005 and made some similar recommendations — issued a statement yesterday indicating only that he is “ready to listen to any and all ideas.” Many of that commission’s suggestions were ignored, such as the call for full state-pension contributions, which is something Murphy himself did not do this year in his first state budget.

NJEA pension rally
Public-worker unions are likely to mount a significant effort to block any benefits reductions, and the state’s largest teachers union, the New Jersey Education Association, is already criticizing the panel’s work and Senate President Steve Sweeney, who assembled the group of experts in the first place.

Still, Sweeney (D-Gloucester) said he’s now planning to go throughout the state to sell the panel’s recommendations to make sure its report doesn’t get “put on a shelf” to gather dust.

“This is a conversation that has to be had,” Sweeney said.

Sweeney’s move

Led by Sens. Paul Sarlo (D-Bergen) and Steve Oroho (R-Sussex), the panel of experts includes former state cabinet officers, university professors, economists, accountants and infrastructure analysts, among others. It was officially convened by Sweeney in February, with a series of meetings being held before the final report was written. The group broke down issues into five categories: public-worker and retiree benefits, education, county and municipal government, tax policy, and infrastructure.

Perhaps the most consequential proposals are those related to worker benefits, including some that echo recommendations made by a benefits-study commission convened by former Gov. Chris Christie that disbanded earlier this year.

Like that panel, Sweeney’s group is recommending that public workers be moved from health plans that rank at a “platinum” level under federal Affordable Care Act standards to a “gold” level. Retirees would also be forced to contribute toward their health benefits.

Newly hired public workers and those with less than five years’ service would be moved out of the state’s troubled pension system and put into a new retirement plan that would more closely resemble a private-sector 401(k) account or a hybrid system with features of both. The New Jersey Turnpike would become an asset of the pension system itself under another proposal, mimicking a shift last year that put the state Lottery on the balance sheet of the pension system to improve its fiscal footing.

High occupancy toll lanes

Panel recommends high occupancy toll lanes as have been established in other states.
The state could also generate new revenue by establishing so-called high-occupancy or “HOT” toll lanes on the federal highways, something that Maryland and Virginia have done to raise additional revenue. Such lanes could be used for free by those participating in a carpool, but others would have to pay a premium to use them.

Payouts for unused sick time would be capped at $7,500 going forward, something that was already proposed this year in legislation sponsored by Sweeney and Assembly Speaker Craig Coughlin (D-Middlesex).

Among the recommendations on education is a proposal to force non-K-12 school districts to eventually merge with their neighbors to “improve the quality of education and promote efficiency.” The state would also create a pilot program that would allow two different counties to establish cross-county school districts. Changes to special-education policy and funding would also be made to prevent such costs from “wreaking havoc” on school-district budgets, the report said.

The panel is also recommending that Murphy’s newly appointed municipal shared-services “czars” be supplemented by a new unit to be created within the state Department of Community Affairs that would “promote and encourage” more shared services. The report also calls for more intensive studies of shared services among municipal governments and the revival of a long-dormant commission that was tasked with taking on such reviews.

Restructuring sales tax

In the area of tax policy, the group is recommending that the state take a new look at the structure of the sales tax for ways to bring in new revenue by eliminating some exemptions and for how other states in the region levy their sales taxes. The new revenue would be dedicated to providing aid to municipal governments that rely heavily on property taxes. County governments would also be permitted to levy a 1 percent sales tax to ease the burden on local property taxes.

Meanwhile, taxpayers would be offered a state income-tax deduction for contributions made to state-based charities, something Oroho and Senate Minority Leader Tom Kean Jr. (R-Union) have been trying to enact for years in a bid to encourage more charitable giving in New Jersey.

Oroho acknowledged that many of the proposals put forward yesterday have been proposed but stalled in the past, but he suggested the environment may be different now, given the state’s finances have continued to deteriorate.

“A lot of these suggestions have been studied before, but now we’re going to have the political will to do it,” Oroho said. “There is no option for inaction.”

NJEA accuses Senate President of siding with wealthy

Sweeney — who just squared off with Murphy over the state’s fiscal year 2019 budget — said he’s hoping to work with the governor, who is also a Democrat, to get some of the group’s recommendations enacted. But Murphy offered no promises in his statement yesterday and pointed to an effort underway within his administration that is also reviewing the cost of public-worker benefits.

“Over the next few months, we welcome the conversation about how best to jumpstart the economy and secure a better future for New Jersey’s middle class and working families,” Murphy said.

For his part, Coughlin signaled a willingness to look at the group’s proposals but stopped far short of endorsing any specific recommendations yesterday. “We will begin to take a thoughtful look at their proposals and seek input from our legislative members as to how to best move forward,” he said in a statement.
The NJEA was far less diplomatic, accusing Sweeney of siding with the wealthy over public workers.
“Asking school employees and retirees to pay even more, while further reducing the quality of their pension and health benefits, is unfair, unreasonable and unconscionable,” the union said.

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