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Moving teacher pension costs to districts means taxpayers pay more

Posted: Wednesday, June 17, 2015 2:41 pm

DIANE D'AMICO, Staff writer

Moving teacher pension payments from the state to local school districts could cost local taxpayers.

That cost could be just a few extra dollars annually, or more than $100 a year on their property tax bill according to a report released Wednesday on behalf of the New Jersey School Boards Association and the New Jersey League of Municipalities.

The report analyzes a proposal by the New Jersey Pension and Benefit Study Commission to create a new lower-cost pension plan for employees and to shift the employer’s share of teacher pension costs from the state to local districts. That proposal, “A Roadmap to Resolution” suggested the school district share for the new pension plan at a rate of 4 percent of pensionable salaries as a starting point.

The new report by Raphael Caprio of the Bloustein Center for Local Government Research at Rutgers Univeristy, estimated it would cost districts statewide about $93 million each year for each 1 percent of salaries charged to districts for the more than 133,000 employees in the teacher pension system. At 4 percent, the annual bill to districts would be almost $373 million.

The report also estimates the cost for reach individual municipality in the state in 1 percent increments. The annual 1 percent per household cost would range from a low of $2.48 on Avalon to $6.60 in Margate, $11.44 in Atlantic City, $24.45 in Egg Harbor Township, and $34.94 in Millville. The annual cost would be four times as much using the 4 percent calculation recommended by the Pension Study Commission.

The analysis also does not include post-retirement medical benefits, which are estimated to cost more than $1 billion in 2015-16. NJSBA executive director Lawrence S. Feinsod said those benefits were granted to members by the state in the late 1980s, and the state also agreed to pay pension costs more than 50 years ago.

The Study Commission report said proposed reductions in heath benefits costs could offset the increase in pension costs to districts.

But Brian Wahler, mayor of Piscataway and president of the N.J. League of Municipalities said their primary concern is whether the pension proposal really is cost neutral.

He said the report illustrates in real numbers what the shift would cost local property taxpayers.

“We are concerned that the proposed savings resulting from the health care proposal is unlikely to offset the shift of the unfunded liabilities to the local level,” he said.

New Jersey School Boards officials shared that concern, and also the impact on the property tax spending cap district operating costs.

“The most critical issue right now is what would happen to educational programs and local property taxpayers if school boards are required to take on these new costs today,” Feinsod said.

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