February 9, 2010
League Welcomes Legislative Pension and Benefits Reforms.
Hopes for More Attention to PFRS Expenses
The New Jersey League of Municipalities expressed strong support for the vast majority of the bi-partisan public employee pensions and health benefits reform bills, introduced yesterday in the State Senate. The proposed reforms will, among other things, cap payments for unused sick leave at the time of retirement to $15,000 for newly hired employees; require employee contributions of at least 1.5% towards the cost of health benefits; require future retirees to contribute at that rate towards health benefit costs; base retirement payments on average compensation over five years for PERS and three years for PFRS (up from three years and one year, respectively); increase annual compensation requirement for membership in the Defined Contribution Retirement Plan; impose a 32 hours per week duty requirement for PERS membership; and apply all health benefits changes negotiated with State employees to local employees covered by the SHBP.
The League is, however, concerned with the prospective “one job for one pension” provisions in S-2. While this reform aims at some real abuses, it could have unintended consequences for local taxpayers.
State law limits certain municipal appointments to individuals holding State certifications. Consequently, there can be a high demand for a limited number of qualified applicants. State law also forbids a municipality from reducing the salary of some of these State certified officials.
Due to size and characteristics, many municipalities do not need these certified officials on a full time basis. It can be beneficial to the taxpayers to hire them on a less-than-full-time basis and permit them to independently contract with another municipality.
Meeting this past Summer, the New Jersey State Health Benefits Commission approved a 16% premium cost increase for local government active and retired employees. Also last Summer, the various Boards of Trustees for pension systems approved Annual Actuarial Valuation Reports as of June 30, 2008. Local PERS payment will see a 12.7% increase and Local PFRS payment will see a 19.5% increase, on average.
Though the reforms proposed yesterday will not reduce those burdens, they will help contain future increases.
The vast majority of State employees hold membership in the PERS. School employees are, most often, members of the TPAF. Municipalities, however, employ a much higher percentage of uniformed personnel, who are members of the PFRS. Over the years, the Legislature has mandated more generous pension provisions for PFRS members. That is reflected in 7% difference between PERS and PFRS increases. And the fact that municipalities employee a much higher percentage of police and fire fighters puts further weight on our property taxpayers. Accordingly, the League was disappointed with the scope of proposals dealing with the high costs, and resultant impact on property taxpayers, of the Police and Firemen’s Retirement System (PFRS).
“We thank and commend Senators Sweeney, Kean, Scutari, O’Toole, Buono, Doherty and Whelan for the proposals put forward today,” said League Executive Director Bill Dressel. “And we hope there are more to come. We will continue to share the municipal perspective on the pension and benefits crisis, especially emphasizing the impact of PFRS costs on our property taxpayers.”
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For further information contact: William G. Dressel, Jr., Executive Director at (609)695-3481, extension 122 or 609-915-9072.