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December 10, 2008

S-7 Hearing Tomorrow (Pension Payment Deferral)




Dear Mayor:

Though the legislation is not yet available to the public, the State’s proposed pension deferral initiative will be considered by the Senate Budget and Appropriations Committee in Committee Room 4 on the First Floor of the State House Annex tomorrow at 10:00 A.M.

The Administration and the sponsor, Senate President Codey, hope to see this bill enacted by the end of this year, or in early January. Accordingly, a companion bill could be up soon in the General Assembly, and the Senate could pass the bill (if it is released from Committee tomorrow) as early as next Monday.

We have been able to review a draft of certain sections of this bill. While it does not allow municipal officials to opt to make full contributions to the pension funds; it gives them the option to invest the difference between the revised billing and any amount up to what would have been the full pension contribution in a new investment fund. The plan calls for a 50 percent reduction in the “normal and accrued” liability payment (the core pension amount, excluding life insurance and any early retirement costs) in the first year, 40 percent in the second year, and 20 percent in the third year, before returning to a full pension contribution. Municipal officials also can do what they are allowed to do under current law, which is to put the difference in the Cash Management Fund.

It appears that the bill will provide both expenditure and levy cap relief for pension liabilities (in the case of the levy cap, for those in excess of a 4 percent increase) through 2012. We thank the Administration and Senator Codey’s office for working with us on these provisions.

We expect to have a copy of the bill by the end of the day and we will provide you with our analysis, as soon as possible. We will monitor tomorrow’s hearing and keep you advised of any developments on this.

Given the current state of the economy and the current state of State finances, this could be the surest form of property tax relief available to the citizens of many municipalities in 2009. We expect many will use the reduced billing to relieve pressures elsewhere in the budget that would otherwise drive bigger property tax increases and levy cap waiver requests.


                                                                        Very truly yours,


                                                                        William G. Dressel, Jr.
                                 Executive Director



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