Pension Recommendations Need to Recognize Strength of Local Pension Funding
The Officers of the League of Municipalities, working closely with our counterparts at the New Jersey Association of Counties, recently submitted a statement to Governor Christie’s Blue Ribbon Pension and Health Benefit Study Commission. In that statement, we urged the Study Commission to not, in any way, weaken the vitality of the local plans.
The Governor, Senate President Sweeney and former Speaker Sheila Oliver, as well as other state policy-makers, deserve credit for the bipartisan pension and benefit reforms that were enacted in 2010 and 2011. Coupled with the consistent payments made by responsible local governing bodies, these reforms are delivering on the promises made by their advocates. The actuaries who have studied the systems have confirmed these facts.
At the risk of delving too far into the weeds, it is important to note that when analyzing the fiscal health of public employee pension and benefit systems, experts always make a distinction between local commitments for local employees and retirees, and state government’s responsibility to provide funding for current and retired State employee benefits. In fact, one of the 2011 reforms included the separation of the systems - one for the State and another for the locals. According to the latest valuation reports, the local government Public Employees Retirement System (local PERS) and the local Police and Fire Retirement System (local PFRS) are actuarially sound, in large part due to the fact that municipalities and counties have made full employer contributions as required under the law for over a decade. The local PERS is currently funded (comparing assets to liabilities) at 73.9% and the local PFRS is currently funded at 76.9%. The State PERS, on the other hand, is currently funded at 48.1%, and State PFRS is a little better, at 50.8%.
These numbers matter, because they are used to determine the annual responsibility of the municipality or county – the amount that each unit of government is expected to pay into the system.
We recognize and appreciate the underlying State’s funding crisis, and we commend the Governor and the Commission for their attention to these issues. Our concern, however, is the Commission may propose solutions for the State system that could result in new problems—and higher costs---for the local property taxpayer. That is an unintended consequence that no one wants and should be avoided.
If anyone can appreciate the challenges faced by State budget decision makers, it is local elected officials. We recognize and appreciate the challenges faced by State decision makers, as well the challenges that lie ahead.
Over the past six years, local officials deserve credit for making the tough decisions in tough times. We have pruned budgets, pursued savings, engaged in tough negotiations, reduced the workforce, shared services, cut spending, applied best practices, emptied reserve accounts and deferred investments. We did this as property values declined, tax appeals increased, development and economic activity stalled, employment slumped and property tax relief funding was diverted to the State budget.
Through all that, and an unprecedented series of natural disasters, local governments have continued to balance their budgets and deliver essential services, while funding numerous state mandated responsibilities and meeting all their public employee pension funding obligations.
With this in mind, the League of Municipalities respectfully requests that the New Jersey Pension and Health Benefit Study Commission recognize that the local pension systems are healthy, and that municipalities and counties have met their obligations as employers. We are committed to advocating for legislation, regulations and policy directives that empower local governments to operate more effectively and efficiently. The League remains dedicated to advancing innovative programs and initiatives that enhance the level of service provided and save valuable taxpayer dollars.
We understand the State’s budget problems and we are anxious to help in any way we can. But we cannot help in any way that shifts new burdens to our property taxpayers and our dedicated public servants.
Suzanne M. Walters, Mayor, Stone Harbor, President League of Municipalities
Gerald J. Tarantolo, Mayor, Eatontown, 1st Vice President League of Municipalities
Joseph Tempesta, Jr., Mayor, West Caldwell, 2nd Vice President League of Municipalities
Brain C. Wahler, Mayor, Piscataway, 3rd Vice President League of Municipalities