South Brunswick Officials say Pension, Health Reform Will Devastate Employees
Bill will equate to a pay cut of thousands of dollars for public employees.
South Brunswick officials have mixed feelings on the pension and health care benefits reform bill that was approved by the state senate on Monday and passed by the Assembly Thursday evening by a margin of 46-32. While hopeful the reforms would help with escalating pension costs, Mayor Frank Gambatese said the legislation would be devastating to public employees.
"I'm not thrilled with this settlement because I don't like what they're doing with the health benefits," he said. "I think it could save the township money, but this is not fair treatment of public employees. We have great problems with our pensions and that does need to be straightened out, but the health care reform has some things that should've been taken out. The average person making $50,000 to $60,000 per year is taking a terrible hit."
The legislation is expected to be signed into law by Gov. Chris Christie Monday, June 27, according to the governor's office.
The state Senate adopted the pension and health care reform bill on Monday by a margin of 24-15, with 16 Republican Senators and eight Democrats voting in favor of bill S-2937.
The bill requires teachers, state and local government workers to pay an additional 1 percent of their salaries toward their pensions as of July 1, and an additional 1 percent phased in over the next seven years for a total of 7.5 percent. Police and firefighters will pay an additional 1.5 percent of their salaries toward their pensions for a total of 10 percent, as of July 1. The bill moves the retirement age for new teachers and non-uniformed employees from 60-years-old to 65. To be eligible for early retirement, employees now have to work 30 years instead of 25.
The bill also requires the state to make its annual payment into the pension system or unions could sue to force the state to make its payments. The pension reform alone will provide savings to New Jersey taxpayers of over $120 billion over the next 30 years, and an additional $3.1 billion over the next 10 years from health benefits reform, according to Gov. Christie.
"We are once again showing the people of New Jersey that our state is leading the way on the biggest challenges before us and remains unafraid to do what is hard, but necessary," Gov. Christie said via release. "Instead of just talking about reform, New Jersey has come together in a bipartisan way, put our heads down and actually gotten the work done. We are fixing our pension and health benefit systems in order to save them and in the process bringing fiscal sanity to our state.”
South Brunswick Township's pension costs are about $3.7 million this year, an increase of about $3.6 million over the last six years and an increase of about $2 million over the last two years alone. Gambatese said over the last two years the township's pension costs have increased by about $2.2 million and health costs have increased by about $700,000.
The South Brunswick School District also faces a projected increase to health benefits (includes health, dental and prescription) of $1.8 million or about 10.5 percent and a pension cost increase of about $89,000 or 4.8 percent, according to Business Administrator Anthony Tonzini.
South Brunswick School District Superintendent Gary McCartney said he would have to reserve comment on the impact of the reforms until he sees how it actually plays out once in place.
"I don't know what the final implications will be for individual districts because it depends on how all of this will be phased in," Dr. McCartney said. "I'm anxious to see what they come up with in the end. Clearly any time pension costs are reduced there are two organizations that benefit, the state and the school districts, so I'll have to wait and see where the final ball drops."
While concerned about the impact of health reform on employees, Dr. McCartney said he would also reserve judgement on that issue because the legislation lacks clarity due to the discord between many Democratic legislators and party leadership.
"The last analysis I saw makes changes to both pension and health benefits that will have a significant impact," he said. "I understand the state needs to do something, and I'm onboard with change, because we're in difficult economic times. I'll reserve my final thoughts because we have to wait and see the outcome. The strangest things can happen in the dark of night in Trenton, so I'll wait until we get some analysis on the final outcome of this."
Earlier this week, South Brunswick Education Association President Christopher Hines said the legislation would have a significantly detrimental impact on public employees.
"Public employees are paying the same taxes as everyone else," Hines said. "This legislation would result in a pay cut of several thousands of dollars for every one of us here. Like everybody else, many of our members are struggling to get by as is, this legislation would only make the struggle harder."
He added that the current health benefits for teachers were the result of many years of work through the collective bargaining process.
"The current health benefits we have are the legacy of decades of negotiation with the Board of Education," Hines said. "Now that could all be undone by legislation that renders null all those years of collective bargaining."
Public employees currently paying 1.5 percent of their healthcare premium cost would pay 3 percent for those earning under $25,000, and up to 35 percent of their healthcare premiums for those making up to $100,000, on a sliding scale that is based on employee compensation. The rates will gradually increase based on an employee’s compensation, at intervals of $5,000.
The increase to health costs will not affect current retirees, and active employees with at least 20 years of service will pay the increased contributions while still active, but will not be affected upon their retirement.
The overall impact of the increased pension and health care contributions will range from $1,142 for a public employee making $25,000 per year, to $6,058 for an employee earning $65,000, according to the Communications Workers of America (CWA).
New Jersey PBA President Anthony Wieners reacted angrily to the bill's passage.
"I hope and pray that no American worker whether it be police officer, firefighter, plumber or iron worker ever has done to them and their families what was done to us today," he said via release on Thursday.
Gambatese said the legislation will lead to increased retirements from public employees throughout the state.
"We just had four more people retire this week," he said. "They're saying I'm not going to continue to have to pay this kind of money. I'm glad this vote is over with, but it's become very burdensome for municipalities to get back the talent we're losing because of people retiring. We're losing too many good people who feel forced into retirement because they can't afford to work any longer."
Gambatese added that the state created its own mess by continually failing to make its payments into the pension system, which created a $54 billion shortfall in the pension accounts. Gov. Christie withheld a $3 billion payment from the pension fund last year.
"At this point I think everybody is willing to sit down to try and solve some of the state's problems," he said. "But a lot of these problems are the state's fault. They blame the employees, but it's the state's fault. They don't make their contributions into the pension plan, they took the money and now they don't want to put it back. I don't know how this will affect us, because we have new contracts with our unions, so I'm not sure what the impact will be on the township budget over the next year, but this will really hurt our employees."