Governor Christie and Senate President Stephen Sweeney reached an agreement yesterday on pension and health care benefit reform in New Jersey. But the proposal to freeze the COLA for retirees, increase contributions for pensions and health benefits from workers was given a "chilly reception" by the Assembly.
The state reports an unfunded liability in its pension system of $54
billion. But, when discounting the liability correctly that liability
figure increase five-fold. Health care benefits are completely unfunded
and represent a liability of $66.7 billion. In other words,
these proposed reforms as
modest relative to the size of the problem. Interestingly, while unions are voicing strong opposition
to the proposal, the New Jersey State League of Municipalities (NJSLOM) has a
different perspective. On the local level, pension and health care
costs are putting immense pressure on budgets. Senate President Sweeney notes that health benefits and pensions for public safety workers can amount to an average of $47,000 per employee annually for a municipal government. NJSLOM would like to see local workers contributing more to their health benefits with costs up 11 percent and pensions costs up 22 percent.
In a forthcoming paper we look at the costs of salary, health care and pensions in New Jersey local budgets and indeed we find the same pressures mounting. A big lesson from our analysis is official budget numbers only tell part of the story. Government accounting assumptions and decades of pension policy changes meant that these risks were not recognized, ultimately contributing to the magnitude of the problem.
In a forthcoming paper we look at the costs of salary, health care and pensions in New Jersey local budgets and indeed we find the same pressures mounting. A big lesson from our analysis is official budget numbers only tell part of the story. Government accounting assumptions and decades of pension policy changes meant that these risks were not recognized, ultimately contributing to the magnitude of the problem.
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