N.J. Latest State to Move on Pension, Health Care Changes

By Sean Cavanagh — June 24, 2011 3 min read
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Legislation that will result in major increases in pension and health care costs for New Jersey teachers and other public workers was approved by the state’s General Assembly on Thursday, despite angry opposition from many Democrats and educators.

Republicans, including Gov. Chris Christie, strongly backed the plan, but it created sharp divisions among Democrats, who control both legislative chambers in the state.

Assembly lawmakers amended a companion bill that is part of the proposal. As a result, the legislation will have to go back to the Senate next week, according to legislative staff, before it can be sent to Christie’s desk.

New Jersey faces major unfunded pension liability, and Christie and others have argued that the state needed to take bold steps to reign in public workers’ benefits and make them more comparable to those offered by the private sector. New Jersey would become the latest state to require teachers to contribute more to their retirement and other benefits. Other states include Florida, Wisconsin, and Ohio.

The measure has moved quickly through the statehouse, in large part because Christie secured the backing of some top Democrats, including Senate President Steve Sweeney. Sweeney has been attacked by the state’s leading teachers’ union for getting behind the plan.

Educators would face major cost hikes in their pensions and health care under the plan.

Teachers’ pension contributions would rise to 6.5 percent of salary, from 5.5 percent now, and by an additional 1 percent over seven years. Police and firefighters’ contributions would increase to 10 percent, from 8.5 percent, immediately. Automatic cost-of-living adjustments would be suspended for current and future retirees and their beneficiaries.

According to the Associated Press, the measure would require half a million public workers, including teachers, police, and firefighters, to have their health-care premium costs tied to their income. The cost hikes would be steep: the annual payments for an employee earning $60,000, who currently pays $900 toward health insurance, would rise to $2,056 for single coverage or $3,230 for a family plan, after a four-year phase-in. Current retirees, and those with at least 20 years on the job, would continue get free health care in retirement.

“My goal throughout this process has been to balance the unique pressures facing both employees and taxpayers to create a plan that is fair to everyone,” Sweeney said in a statement. “I believe this legislation does just that. In the long run, it will save taxpayers more than $120 billion, while protecting the pensions and health benefits of lower- and middle-income workers.”

But the changes were strongly opposed by many Democrats and workers, who said the proposal was rushed through after being crafted behind closed doors.

The New Jersey Education Association, in a statement that carried echoes of the debate over taxes on different income-earners at the federal level, blasted the proposed changes.

“A legislature and governor who will raid the pension checks of retirees and the paychecks of middle-class workers but lack the courage or integrity to ask the very wealthy to share the sacrifice of even a modest tax increase are not the representatives of the people who elected them,” NJEA president Barbara Keshishian said.

“Politicians who think it is acceptable to ask middle-class families to pay $5,000 more out of pocket for drastically reduced benefits, but refuse to ask a $5,000 sacrifice from taxpayers earning $750,000 a year have failed in their obligation to represent the interests of all their constituents.”

A version of this news article first appeared in the State EdWatch blog.