July 16, 2009
RE: 2010 State Health Benefit Premium Increase To Be Approved Next Week
When it meets next week, the New Jersey State Health Benefits Commission will have little choice but to approve a 16% premium cost increase for local government active and retired employees. Absent that approval, the SHBP will lack sufficient funding to meet its obligations.
The Division of Pensions and Benefits has confirmed to us the press reports on this that have appeared over the past few days. Division Director Fred Beaver has provided us with a copy of the consultant’s recommendation concerning the increase for the “Local Government Group.”
An increase of this magnitude will leave municipalities with no options for quick action. You can either absorb the increase, or you can switch plans. Changes in health plans need to be negotiated. “Comparison shopping” would require a minimum of three months work. And putting any change in place would take at least six months. That is assuming that you can get a better rate and the employee representatives don’t object.
That increase will need to be absorbed in next year’s budgets. Absent State action, it will, inevitably, lead to tax increases and/or service cuts and layoffs.
We are contacting the Administration and Legislative Leadership to advise them of this impact. We will also remind them that this is only the most recent in a series of unprecedented blows to local budgets. And we will ask them to work with us on initiatives that will provide some relief to our property taxpayers next year.
In just the past twelve months, we have had to deal with the impact of the current recession. As the foreclosure and unemployment rates rise, the tax collection rate falls. And no matter what our collection rate is, remember that the county and the school district will get 100% of the property tax portions they levy. Any declines in the collection rate are borne entirely by the municipality. As the economy stalls, new construction slows with it. We cannot rely on new ratables. As the market and interest rates fall, the rate of return on our reserves falls with them. On top of these challenges, the State has cut municipal property tax relief funding by over $200 million (over a 10% cut), down from its FY 2008 budget.
Please let your State Legislators know about the continually mounting challenges you face.
If you have any questions, please contact Jon Moran at 609-695-3481, ext. 121.
Very truly yours,
William G. Dressel, Jr.