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Each measure cleared with 36-0 vote

BY TOM HESTER SR.

NEWJERSEYNEWSROOM.COM

UPDATED

The state Senate Monday overwhelmingly and with little comment approved three bipartisan bills that legislators describe as designed to reform the state's financially-struggling public employee pension and benefits system.

Each measure was approved by a vote of 36-0. They move to the Assembly where bipartisan support and quick action is also expected.

The bills, which were introduced Feb. 8, are described by legislators as an attempt to return the pension and benefits system to its original goal of ensuring the retirements of rank-and-file public employees and constitutionally require government to meet its annual pension obligations.

According to reports, the various state pension plans are underfunded by at least $30 billion after years of skipped or partial payments.

"These reforms are necessary to restore New Jersey’s long-term fiscal footing and return sanity to a pension and benefits system that was allowed to spiral out of control,” said Senate President Stephen M. Sweeney (D-Gloucester). “Without these changes, the state would soon have no option but to break its promise to career public servants.”

"New Jersey’s pension system is on life support,” said Senate Republican Leader Thomas Kean (R-Union). “If we don’t act now, it will be too late to avoid a crisis that would be costly to both taxpayers and government employees who depend on the system. These are common-sense reforms that have bipartisan support.''

The legislation adopts recommendations from the 2006 Special Session on Property Tax Reform's Joint Legislative Committee on Pension and Benefits Reform. That committee made 41 proposals for overhauling the public pension and benefits system to ensure its long-term viability for career state employees. Fifteen recommendations were enacted legislatively; other reforms were achieved through collective bargaining.

The first bill (S-2) would limit enrollment in the defined-benefit pension system to full-time employees who work at least 35 hours per week at the state level or 32 hours in local government and public schools. All other new employees earning at least $5,000 annually could enroll in a 401(k)-style defined contribution plan. Current employees with fewer than 10 years of service would be allowed to switch from the defined-benefit plan to the defined-contribution plan, or withdraw from the system altogether.

The bill also would reconfigure the equation used to calculate pension benefits for future employees by dividing the number of years worked by 60, rather than the current 55. Also, the number of "high salary" years used for calculating benefits for workers in the public employee and teacher pension systems would be raised to five years from the current three; enrollees in the police, fire and State Police systems would have their pensions based on their highest three years – up from the current one-year standard.

The bill also would designate a "one job-one pension" rule for multiple job holders, with only the highest-salaried position counting towards a pension.

The second measure (S-3) would require all employees - including current state, school district, and local employees – to pay at least at least 1.5 percent of their salary towards their health benefits after the expiration of their current contract, and would require all newly-hired employees to pay at least 1.5 percent of their base pension toward health benefits upon retirement. State employees would be required to work at least 35 hours per week to qualify for health benefits, with local and school employees having to meet a minimum 25-hour-per-week standard.

A third bill (S-4) to limit sick leave payouts for all new local and school employees to $15,000 – the standard currently in law for state employees. The bill also would allow new local government and school employees to carry over only one year's worth of vacation year-to-year and would eliminate the current sick leave injury program.

Senators Nicholas Scutari (D-Union) and Kevin O’Toole (R-Passaic) served on the pensions and benefits panel during the special session. They commented following the vote.

“If we are ever to repair this broken system, we must take a realistic approach to defining pension and benefit parameters,” Scutari said. “Past actions to boost pensions only increased the unfunded liability, placing at risk the retirement of career employees. Reform is vital to ensuring workers get the benefits promised and taxpayers are not left to shoulder excessive costs.”

“These common sense solutions are based on the findings of a bipartisan panel that spent the entire summer of 2006 taking testimony on the pension crisis,” O'Toole. “This is a good first step toward making our pension system a reward for dedicated service by career public employees, not a perk for the politically connected. These changes will bring employee benefits more in line with what taxpayers reasonably can be expected to pay.”

A remaining bill in the package, a proposed constitutional amendment (SCR-1), was not acted on Monday. It would require the state to annually meet its obligation for each pension plan it operates. If approved by voters in the November general election, the state would have seven years beginning with the 2011-12 fiscal year to catch up to its full obligation – starting with the 2018-19 budget, the full payment would be required every year.