Governor Freezes Struggling Cities Aid In Gambit For Health Benefit Savings

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Gov. Chris Christie issued an Executive Order June 30 that will hold funds in reserve until the health benefit plan design committees for educators and public workers figure out how to cut $250 million from employee and retiree health care costs that the Governor had projected as part of his proposed FY2017 budget.  As of today, no meetings were scheduled for the plan design committee to meet.

The budget bill had included language that said the plan design committees “may review potential cost-savings” of $250 million.

In response to that language, the Governor wrote in Executive Order 209 (EO), ‘The permissive nature of the Legislature’s budget language, considered in conjunction with the historical reluctance of some members of the Plan Design Committees to embrace even the most modest of common-sense reforms, calls into question whether the Fiscal Year 2017 health benefits savings embedded in the Legislature’s budget is realistically likely to be achieved,”

Pursuant to the EO, the Administration plans to reserve the budgeted funds and task the Treasurer with  monitoring the work of the plan design committees to ‘update the Governor as the savings are achieved.’  In the meantime, the action will impound $53.68 million meant for municipalities in financial crisis (a 50 percent reduction in aid) – a surprising decision that could require some of the state’s most vulnerable communities to swiftly trim budgets.

It’s unclear how Christie will disperse this cut to “transitional aid,” which is meant to be a temporary cash injection for struggling municipalities.  According to the governor’s office, 13 municipalities received transitional aid for Fiscal Year 2016. Of the $128.73 million in aid, Camden received $12 million, Newark was granted $10 million, and Union City got $17.8 million.  The partial freeze on funds could also complicate finances in Atlantic City, as local officials scramble to develop a cost-cutting plan. For FY 2016, Atlantic City was given $13 million and the school district allotted $20 million in transitional aid.

The governor’s budget proposal in February called for the plan design committees to find $250 million in savings by trimming public employee and retiree health care costs. But members of the state teachers union refused to agree to some of the proposals. Meetings that were scheduled for June were ultimately canceled.

Christie also directed the state treasurer and Attorney General to determine what steps would be needed to withdraw New Jersey from the reciprocal income tax agreement with Pennsylvania. That move could potentially generate $180 million in revenue for the state, according to an op-ed written by former state treasurer Andrew Sidamon-Eristoff.

The budget did include a $1.86 billion payment into the state’s pension system. The payment would be lower than Christie agreed to under reforms he signed in 2011, but the highest ever made by the State.