High-profile collaborations between influential public-worker unions and some of New Jersey’s top elected officials are projected to save hundreds of millions of dollars just as government budgets are being socked by the novel coronavirus pandemic.
Among those in line to see significant savings, the officials said, are K-12 school districts and state government itself.
But seeing exactly how taxpayers will save money under separate deals struck with the New Jersey Education Association and the Communications Workers of America-New Jersey remains difficult.
Lofty estimates that have been touted by everyone from Gov. Phil Murphy to legislative leaders in recent weeks have not been backed up by the release of any actuarial reports or underlying financial projections.
In the case of its agreement with CWA, the Murphy administration has rejected formal requests for background material, saying records that would show the scope of taxpayer savings are advisory materials and therefore not subject to the state’s open public-records law.
Big savings … or opportunity lost?
Meanwhile, some have begun questioning whether the recent deals with the unions, even if well-intentioned, could eventually add to costs that will have to be covered by taxpayers. There have also been suggestions that New Jersey’s elected officials have squandered an opportunity to secure more significant reforms that could have addressed long-standing fiscal challenges that predate those triggered by the health crisis, including the state’s grossly underfunded public-worker pension system.
The deal with the NJEA was announced in March, and it will lead to a reform of health-care plans that are offered to thousands of teachers across the state. The deal was billed as a major breakthrough for taxpayers and teachers during a news conference in the State House hosted by Senate President Steve Sweeney (D-Gloucester) and NJEA president Marie Blistan.
Legislative sponsors projected that these changes to health plans for teachers and retirees, which Murphy recently signed into law, would save school districts more than $600 million annually. Teachers and other school employees were said to be expected to save an additional $400 million annually. And the state could see $40 million in annual savings, according to sponsors.
But no actuarial projections that demonstrate exactly how the plan-design changes will ensure those long-term savings for taxpayers were ever made public as the measure breezed through the Legislature and eventually won the governor’s endorsement.
Providing some security for taxpayers is a late amendment added as the bill gained the support of Assembly Speaker Craig Coughlin (D-Middlesex). The new provision requires a baseline of $300 million in annual savings to be generated by 2023, or new policy changes must be made. Still, the legislative baseline is far below the savings estimates that were initially touted by bill sponsors.
Jonathan Pushman, legislative advocate for the New Jersey School Boards Association, raised another concern during a recent committee hearing, noting the reforms allow teachers to change the way they make health-care contributions, moving from paying a percentage of their premiums to a percentage of their salaries.
Jettisoning a Christie-era reform
Teachers have been contributing as a percentage of their premiums since a 2011 reform law known as Chapter 78 was enacted by former Republican Gov. Chris Christie as part of an effort to give them more “skin in the game.” But teachers have long been critical of that reform, saying it has reduced their net take-home pay as premiums rose at a faster rate than salaries in the wake of the Great Recession of 2007-2009.
With the Chapter 78 contribution policy now due to be reversed, Pushman suggested school districts — and their taxpayers — will now be solely on the hook for covering the full cost of any future premium increases.
“We want to express some concern about that, and make sure we are doing everything in our power to keep the overall cost of health benefits down,” Pushman said.
A summary of the legislation’s potential fiscal impact that was included in a bill statement drafted last month by the Office of Legislative Services, the Legislature’s nonpartisan research division, noted that net annual savings from the health-care changes were “indeterminate.”
“The greatest savings are predicated on 100 percent migration to the new plans and various plan design changes,” the OLS summary said.
“These savings will be offset by reductions in employee contributions of those members who choose to migrate to the new plans,” the summary went on to say.
Sweeney’s office estimates savings
To be sure, making broad plan-design changes has the potential to lower costs across the board, even as teachers get a long-sought break from having to cover a portion of their premium increases. Such savings would be welcomed by school districts, which have seen overall state aid held flat as part of the Murphy administration’s response to the pandemic. And as health plans change, credible actuarial projections should be able to demonstrate whether the math is working out to benefit taxpayers.
Sweeney, back in March, indicated that his office’s projections would eventually be released, saying, “We’re not making it up, I can tell you that.” But an actuarial report was never made public, as NJ Spotlight and others have followed up with the Senate president’s office in recent days. Sweeney’s office did share with NJ Spotlight internal estimates that do demonstrate how savings that back up the Senate president’s claims can be achieved, at least initially.
During a recent conference call with reporters, Sweeney pointed to the amendment requiring there to be at least $300 million in annual savings when pressed on the issue of the actuarial data.
“I’m very comfortable with that,” Sweeney said.
Billed as yet another significant savings measure for the state and its taxpayers has been Murphy’s recent no-layoff deal with Communications Workers of America-New Jersey.
Announced late last month, the deal will result in CWA workers being furloughed for as many as 10 days throughout the end of this month. It will also delay some raises that were approved as part of the union’s most recent contract with the state.
Murphy, a first-term Democrat, said in a statement that the deal will save an estimated $100 million over an unspecified period. But his administration has not provided a detailed breakdown of its savings projections, including whether the delaying of pay increases will actually reduce costs, or just defer them into future budgets as occurred when a similar deal between the state and the same union was reached during the Great Recession.
No background documents
In a response to NJ Spotlight’s formal request for background documents, the Murphy administration provided a copy of the agreement but declined to share its more detailed cost-savings estimates on the grounds that they are considered “advisory, consultative, material,” and are thus protected from disclosure under New Jersey’s Open Public Records Act.
“The estimated $100 million in savings from the CWA agreement is from both furloughs and the deferral of planned cost of living adjustments,” Murphy press secretary Alyana Alfaro Post said in response to questions about the savings estimate that were sent via email.
Even if the $100 million estimate holds, some Republican lawmakers have criticized the governor for not requiring more significant givebacks from the union, given his administration has been saying the state is facing a multibillion-dollar budget deficit due to the pandemic and ongoing economic restrictions ordered to slow the rate of new infections.
Also hitting the bottom line for taxpayers, they say, was Murphy’s decision to delay sending to lawmakers until late last month a conditional veto of bipartisan furlough legislation that won final approval from the Legislature back in mid-May. That measure was designed to help local governments save hundreds of millions of dollars while also letting their workers take full advantage of increased federal unemployment benefits being offered through the federal Coronavirus Aid, Relief, and Economic Security Act.
While language added to the furlough bill as part of last week’s conditional veto facilitated the recent deal with the CWA, the timing of the governor’s action on the bill itself means unionized workers will be furloughed only over the next few weeks because the enhanced federal benefits are set to soon expire.
As the conditional veto won approval in the Democratic-controlled Senate last week, Sen. Steve Oroho (R-Sussex) said the new version of the bill represents “a huge missed opportunity.”
“What started out as a good, overwhelmingly bipartisan bill has been massively changed to the point where we believe it will cost New Jersey taxpayers more instead of saving a lot of money,” Oroho said.