Amid Funding Shortfall, Lawmakers OK Pension Boost for Cops, Firefighters

John Reitmeyer | March 6, 2020 | Budget
Change would allow retirement at half pay for police and paid firefighters with 20 years on the job, regardless of age; cost concerns raised by local government officials
Credit: Skeeze from Pixbay
Representatives of local government said the change could put new pressure on the state’s already high property-tax bills.

A proposal to allow New Jersey police officers and firefighters to retire with half pay after 20 years of service cleared a Senate committee on Thursday after union officials told lawmakers it should help prevent stress-induced burnout and even suicides.

“It’s a tough job we do,” said Robert Gries, executive vice president of the New Jersey Fraternal Order of Police. “Some of us see things that no human being should have to see.”

But others spoke out against the proposed change, which would allow any police officer or firefighter, regardless of age, to collect half of their final compensation as an annual retirement benefit once they’ve been on the job for 20 years, instead of having to wait until they turn 55, as they do now.

Representatives of county and municipal governments said the proposal could worsen the unfunded liability for pension funds covering thousands of police officers and paid firefighters across the state. It could also put new pressure on the state’s already high property-tax bills, they warned.

“Taxpayers do have a vested interest in making sure the pension funds are solvent and strong,” said John Donnadio, executive director of the New Jersey Association of Counties.

While New Jersey has one of the worst-funded state-worker retirement systems in the country, not all of the pension funds operate under the same rules or are in the same condition. For example, there are different contribution rates for workers depending on whether they are teachers, judges, police officers and firefighters, or other government workers.

‘Stress of the job’

The proposed change — approved unanimously Thursday by the Senate State Government committee — would bring the rules for the Police and Firemen’s Retirement System (PFRS) back in line with a policy enacted under former Gov. Christie Whitman and halted under former Gov. Chris Christie, according to Rob Nixon, a lobbyist for the New Jersey State Policemen’s Benevolent Association. At the time of its initial adoption, the “20-and-out” provision was known as the “burnout bill” since it specifically aided officers and firefighters toward the end of their careers, he said.

“In some ways, it’s a frustration that we’re even here talking about this,” Nixon said. “This bill basically recognizes the stress of the job.”

Gries, the state FOP official, also raised the burnout issue in his own testimony, pointing to statistics showing an uptick in police suicides in recent years.

Having an “early-out” option would “likely save some lives of some of our heroes in blue,” Gries said.

A fiscal estimate prepared earlier this year by the nonpartisan Office of Legislative Services raised concerns that the policy change — however well-meaning — could further erode the fiscal health of the PFRS, which remains underfunded even though it is in better shape than other state retirement funds.

If all 6,881 employees eligible for the early-out benefit were to use it, the combined retirement allowance for those employees would increase pension payments by more than $400 million, according to the OLS estimate. But the nonpartisan analysts also cautioned that it is “not likely that all eligible members would retire under the new benefit.”

Potential savings also seen

The OLS fiscal estimate also noted the policy change could provide some savings for the state and some local governments since pre-55 retirements occur before employees become eligible for government-funded post-retirement medical (PRM) coverage. But a firm estimate for those potential savings was not available from OLS.

Still, the cost concerns were among a host of issues raised during Thursday’s hearing by both Donnadio and Lori Buckelew, senior legislative analyst with the New Jersey State League of Municipalities, as they voiced their opposition to the bill.

While employees contribute about $350 million to PFRS annually, county and municipal governments pay more than $1 billion annually to cover required contributions as employers, according to a review of the bill prepared by Buckelew’s organization late last year. She also noted the long-term actuarial projections for all pension funds in New Jersey, including PFRS, will soon be influenced by a lower “assumed rate of return” for pension-asset investments that the state will begin using in fiscal year 2021.

“We are concerned about providing an enhanced benefit before the fund is stable,” Buckelew said.

Donnadio pointed to recent data released by the state Department of Community Affairs that indicated the average New Jersey property-tax bill rose last year by nearly $200, to a record-high of $8,953. The increase came even as Gov. Phil Murphy has tried to hike aid to local school districts and encouraged more local governments to cut costs by pooling services.

“We hit an all-time high this past year,” Donnadio said. “This bill really doesn’t help.”

An identical version of the bill, which is sponsored by Sens. Vin Gopal (D-Monmouth) and Joseph Lagana (D-Bergen), has been introduced in the Assembly, but it has yet to come up in committee during the current legislative session.