Governor’s pension plan reform would have big local impact

UNION COUNTY, NJ — What happens to taxpayers if and when Gov. Chris Christie’s plan to reform the public employee pension system is approved has stakeholders deeply concerned.

According to both the School Boards Association and New Jersey League of Municipalities, if the governor’s plan is approved, it could cost school districts hundreds of thousands of dollars a year. This is based on a report that was released last week by lobbyists working on behalf of both entities.

The report looked into how the draft pension reform plan by Christie’s Pension and Benefit Study Commission would fare for teachers and state employees. In part, it said the governor’s proposed plan would shift the cost of pensions from the state to local school districts, which would seriously impact taxpayers.

In February, the New Jersey Pension and Health Benefit Study Commission issued a report, “A Roadmap to Resolution,” which recommended system-wide changes to public employee benefits, including the creation of a new pension system and changes in the level of health benefits for active and retired employees.

A central element of the proposal was to shift the employer’s share of teacher pension costs, as well as retirement medical benefits, from the state to local school districts.

It is expected the impact of this potential shift for post-retirement medical benefits alone would total more than $1 billion statewide in 2015-2016, an impact that some stakeholders maintain could adversely affect taxpayers.

Former Cranford Schools Superintendent Lawrence Feinsod, now the New Jersey School Board Association executive director, explained why the board is dead-set against such a move.

“The public’s trust demands development of a well-thought-out, workable, long-term solution to New Jersey’s pension deficit issue, one that does not adversely affect education programs or local property taxes,” Feinsod said.

The NJSBA joined forces with the League of Municipalities, Feinsod said, because they share the league’s concern that any pension and benefit reform plan “be cost-neutral for every local school district and local government.”

Feinsod also pointed out that post-retirement medical benefits were granted to members of the teachers union in the late 1980s by the state, not local school districts.

“The state agreed to pay the cost of teachers’ pensions more than 50 years ago,” he said, noting the most critical issue now is what would happen to educational programs and local property taxes if school boards are required to take on these new costs.

“Without a guarantee of cost neutrality for all school districts, or a new source of non-local revenue, the outcome of shifting pension and retirement health benefit costs to local school districts could be devastating to educational programs and place an additional burden on local property taxpayers,” Feinsod stressed.

The New Jersey League of Municipalities reacted similarly, sending a letter on Wednesday, June 17, to all member mayors in the state, explaining the impact this could have on taxpayers.

The letter explained how the league hired Raphael Caprio, director of the Bloustein Center for Local Government Research at Rutgers University, to provide a neutral analysis of what this impact would be on each municipality.

Their research found that, if school districts only have to take on the share of teacher pension costs and not retired employee’s medical benefits, the financial impact on the average property owner would be approximately $162.50.
League President Brian Wahler, mayor of Piscataway, was livid about this potential impact.

“Once again, the mayors across the state are being asked to bail out the state and take the political heat for what the state leaders aren’t doing,” he said, adding “It’s plainly obvious that’s what the game plan is here.”

Those supporting Christie’s proposal, though, said shifting costs to school districts is only half of the plan. It also calls for health care plans that have workers pay a larger share of their pension and medical benefits.

The savings to local municipalities, the governor’s report noted, would be more than enough to offset any cost to property owners without raising taxes.