Saying New Jersey has run “out of time” to address its major fiscal problems, Senate President Steve Sweeney urged local government leaders yesterday to fully support his proposal to cut government costs by changing public-worker retirement and health care benefits.
Speaking to a packed room at the New Jersey League of Municipalities conference in Atlantic City, Sweeney (D-Gloucester) said the state’s strained finances are now hampering its ability to respond to serious challenges, including the declining reliability of New Jersey Transit and rising concerns about lead pollution in drinking water.
“The problem is, we’re out of time,” Sweeney said. “Unfortunately, we’re the ones that are here to deal with it.”
To free up the cash needed to address those and other big problems head-on, Sweeney is backing a series of cost-saving reforms, including making significant changes to public-worker benefits. They include moving all public workers into cheaper health care plans, and creating a new retirement system for some groups of workers that have fewer than five years of service with state and local-government employers.
But Sweeney’s proposals have faced major resistance from public-worker unions, and Gov. Phil Murphy, a fellow Democrat who maintains close ties with union leaders, has not embraced them either. The governor has instead sought to slowly up ramp up state pension contributions while also finding ways to work cooperatively with public-worker unions to find incremental health care savings.
After stressing that more urgency is needed, Sweeney made it clear while speaking to reporters after yesterday’s event that putting his own benefit-reform proposals directly before the state’s voters in 2020 is still an option.
“We’ve got to fix it. It’s just reality,” Sweeney said.
In all, Sweeney and other lawmakers have drafted more than two-dozen cost-saving measures following the release last year of “Path to Progress,” a major report compiled by a nonpartisan group of fiscal-policy experts.
Sweeney tasked the group’s members with studying some of the state’s most difficult financial challenges. They included New Jersey’s highest-in-the-nation property taxes and the grossly underfunded public-worker pension system, which a major Wall Street credit-rating firm recently named the nation’s worst-funded state retirement plan.
Though complicated in nature, the group’s recommendations were all aimed at cutting the cost of government, from the local level on up to the state. They include a plan to significantly alter retirement benefits for thousands of new government workers and those with less than five years on the job.
While police officers, firefighters and judges would be spared, 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.
The new retirement plan would guarantee a 4% annual return for workers, and also offer a chance to do better based on general pension-fund investments’ performances. Workers would also be required to continue making their full contributions into the retirement system, a feature specifically designed to avoid the funding problems that other states that have gone away from a traditional plan have experienced.
Unions are strongly opposed
But public-worker unions have strongly opposed Sweeney’s proposals, and he acknowledged yesterday that it would mean cutting benefits for thousands of state and local-government employees.
“New workers will get less benefits. That’s just the reality,” Sweeney said. But he added that it could also open the door to better benefits in the future, whereas prolonged inaction would only dig the financial hole deeper. (Sweeney’s office has projected $17 billion in savings over 30 years for the state, and another $7.5 billion for local governments.)
“We need to change,” he said. “New Jersey is stuck in the ways of ‘This is how we’ve always done it, and this is how we’re always going to do it.’”
The cost-savings initiatives have already picked up bipartisan support in the Legislature, and Sen. Steve Oroho (R-Sussex) joined Sweeney at the event in Atlantic City yesterday to make the pitch for significant reform. A certified public accountant, Oroho served on the fiscal-policy group that drafted last year’s Path to Progress report.
“We need your help, we really do, because we’re all in this together,” Oroho said as he addressed the local-government leaders.
Earlier this year, a legislative committee approved several Path to Progress bills, including those seeking to cut the cost of public education in New Jersey through consolidations and other measures. But many others have yet to advance at all.
Sweeney suggested yesterday that there could be some more movement in the lame-duck legislative session that began earlier this month in Trenton. He also addressed a piece of legislation backed by Assembly Speaker Craig Coughlin (D-Middlesex) that has won support from the powerful New Jersey Education Association, the state’s largest teachers’ union.
That measure, among other things, would seek to lower the cost of providing employee health care by about $300 million annually, spread out between state and local government, according to sponsors’ estimates. Sweeney yesterday labeled Coughlin’s bill “a good start.” But that means it’s essentially already dead in the Senate.
The employee health care proposals included in the Path to Progress report would go further by moving all government workers out of what are considered “platinum” level health plans into “gold” level plans, pushing savings estimates into the billions of dollars.
If the governor remains dug in on employee benefits and no compromise can be reached, that’s where Sweeney’s threat to put the pension and health-care proposals directly before voters as early as 2020 comes into play. Proposed constitutional amendments have already been introduced in the Senate, and Murphy wouldn’t need to approve them for the amendments to get on the November ballot.
Asked for a response to Sweeney’s comments following the event in Atlantic City, Murphy spokeswoman Alyana Alfaro cited the Governor’s Office’s general policy of not commenting on pending legislation.