Politicians Could Punt To Voters On How To Put NJ’s Fiscal House In Order

Locked in bitter dispute with governor over budget, senate president proposes a referendum on cuts in public-worker benefits

Credit: NJTV News
Senate President Steve Sweeney
New Jersey voters could soon be dragged into an ongoing and increasingly bitter dispute over how best to address the biggest fiscal challenges that continue to dominate the latest state budget discussions in Trenton.

Under a plan unveiled yesterday by Senate President Steve Sweeney (D-Gloucester), a series of proposed public-worker benefits cuts that are designed to free up cash for other items and also ease the burden on local property-tax bills would be put before voters in the form of proposed constitutional amendments, as early as this year.

Sweeney said he’s introducing the ballot questions — which would change both healthcare and pension benefits for thousands of workers — sometime today.

And to add another wrinkle, the same proposals were introduced as legislation yesterday. That sets the stage for a potential compromise with Gov. Phil Murphy, a fellow Democrat who has strongly opposed making any public-worker benefits cuts. But it also puts on the table the direct threat of using the ballot questions to simply go around the governor.

“The time to act really is now, and we’re not going to be stonewalled by an administration either,” Sweeney said during a news conference yesterday in Trenton.

All of the proposals were originally part of the “Path to Progress” report issued by a nonpartisan group of fiscal-policy experts that Sweeney assembled last year in the wake of a series of federal tax-policy changes enacted in 2017.

Murphy says he’ll look for ‘common ground’

Murphy issued a statement yesterday in response to Sweeney’s announcement stressing the need for a balance of spending cuts and tax increases to address the state’s fiscal challenges, including an unfunded pension liability that tops $100 billion by some calculations.

“I will carefully review the bills introduced today to see where we can find common ground, but the bottom line is that savings alone will not help us meet the entirety of our obligations,” Murphy said.

Meanwhile, the formal introduction of the new proposals drew praise yesterday from business-lobbying groups who’ve long supported benefits reform. And they were loudly opposed by unions representing the public workers who would be directly impacted.

While Sweeney has been touting the pension and healthcare cuts for nearly a year, Murphy has favored a proposed millionaire’s tax to help cover the rising cost of worker benefits. Though popular with voters and embedded into his $38.9 billion budget proposal for the coming fiscal year, the governor’s tax on the wealthy has been a nonstarter for both Sweeney and Assembly Speaker Craig Coughlin (D-Middlesex).

Time is running out for legislative action

With a little over a month left before June 30, when the next state budget must be enacted, there’s little time to advance all of the proposals unveiled by Sweeney yesterday. The broader package of reform bills also includes measures seeking to encourage consolidation among local school districts and municipal governments.

Among the most complicated elements of Sweeney’s benefits-reform proposal is a plan to radically alter retirement benefits for thousands of new workers and those with less than five years on the job. While police officers, firefighters and judges wouldn’t be impacted, teachers and other government workers would receive a traditional, “defined-benefits” pension on only up to $40,000 of salary.

For any additional earnings, the affected workers would be enrolled in a hybrid “cash-balance” savings plan that would not require a matching contribution from the state. That savings plan would guarantee a 4-percent annual return for workers and offer a chance to do better based on how general pension-fund investments perform.

The same proposal would also move back the retirement age for the same group of workers from 65 to 67, and change investment-return assumptions and the amortization schedule for the broader pension system, one of the worst-funded state-retirement plans in the country.

Based on actuarial estimates distributed yesterday, Sweeney assumes his plan would save the state $17.1 billion over 30 years, and local governments another $7.5 billion over the same period.

“A new pension plan is just common sense,” said Sweeney.

Union sees bid to pit public against workers

Credit: NJTV News
Hetty Rosenstein of the CWA
But union leader Hetty Rosenstein, state director of the Communications Workers of America, called the proposal “shameful” while speaking to reporters yesterday moments after Sweeney’s announcement.

She said the pension reforms target worker groups that are predominantly “women and people of color” while sparing those dominated by white men.

“I think it is designed to (pit) the public versus public-sector workers, and that is shameful,” she said.

The proposed healthcare changes could save another $1 billion or more annually, in part by moving workers at all levels of government in New Jersey from what would be considered “platinum” level coverage under the federal Affordable Care Act to “gold” coverage. The precious-metal classifications generally connote how much of the cost of coverage is picked up by the patient, with platinum-level coverage leaving 10 percent or less to the patient and gold level leaving 20 percent.

The change would be made either through legislation or constitutional amendment, and Sweeney said any ballot question would also require healthcare savings at the local level to be returned to property taxpayers.

“We’ll be in line with many states that have gold healthcare plans now,” Sweeney said.

More savings from additional changes

Meanwhile, to achieve more savings, Sweeney is also backing legislation that would disband the School Employees Health Benefits Program and move those currently enrolled in that benefits system into the generally cheaper State Health Benefits Program.

Other education-spending proposals would require consolidation of non-K-12 school districts and shift some the cost of funding what’s known as “extraordinary” special education onto the state.

A statement issued by Marie Blistan, head of the state’s largest teachers’ union, said New Jersey Education Association officials were still reviewing the bills introduced yesterday. But she also said teachers should not be “scapegoated” as the state struggles with fiscal challenges largely created by its long history of underfunding the pension system.

“It is time for New Jersey to prioritize the interests of middle-class families over millionaires,” Blistan said.

Among other bills unveiled yesterday as part of the same reform package are those that would generate municipal and county government savings by capping payments for unused sick time and by establishing a permanent commission to review savings opportunities and make regular recommendations to the Legislature.

Murphy favors a mix of savings and taxes

Murphy has been backing an approach that involves negotiating cost-savings measures directly with unions such as the CWA and NJEA while also relying on revenue from the millionaire’s tax and other tax-policy changes to boost state revenues.

Credit: NJTV News
Phil Murphy
Murphy’s FY2020 budget proposal counts on $1.1 billion in spending cuts. And the latest revenue projections from the Department of Treasury assumes $536 million would be generated by applying the top-end rate of 10.75 percent on earnings between $1 million and $5 million, now only in place for incomes of more than $5 million. That added-revenue projection is nearly the same figure as the annual savings estimate from Sweeney’s hybrid pension proposal.

“My budget is about putting New Jersey on a new trajectory for the long term, and I am committed to working with the Legislature to do just that,” Murphy said.

The last time the Democratic-controlled Legislature enacted major public-worker benefits changes was 2011, when Republican Chris Christie was in office. Those changes, which likewise curbed healthcare and pension benefits, created a rift in the Democratic Party, especially in the Assembly.

Asked whether he’s concerned about the new proposals upsetting party unity just as the Assembly is up for re-election this year, Sweeney — who was flanked by two Republican lawmakers yesterday but none from his own party — responded by talking about the appeal that potential cost savings could have with voters.

“Everyone’s weary of property taxes,” Sweeney said. “This is an opportunity to run for election (saying) we’re cutting property taxes — cutting them for real.”

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