The Governor signed legislation S-21 / A-3868 (Codey Roberts Cryan) March 18th allowing New Jersey towns and school districts to delay half their payments to the public employee pension system.
The legislation passed in the Senate and Assembly on March 17th after a somewhat contentious debate without a single Republican vote. The bill was approved 21-17 in the Senate and 42-36 in the Assembly.
Gov. Corzine proposed the pension-fund deferral bill last year as a way to help towns and schools avoid increasing property taxes but the legislation stalled in the Senate in December.
The bill would allow municipalities counties and schools to avoid paying half their public employee pension debts to the Public Employees’ Retirement System (PERS) and the Police and Firemen’s Retirement System this year; instead paying it back over the next 15 years on top of additional payments. The bill further eliminates these payments from the calculation of the tax levy cap for schools and the municipal cap law for municipalities.
Schools and municipalities will have the option of making their full payment in this fiscal year (2009) or deferring up to half of that obligation. The New Jersey League of Municipalities estimates that as many as half of New Jersey’s 566 municipalities would opt to defer half the pension payment due in April.
The bill signed into law was significantly amended from its original version after protest from various organizations including NJPSA. The governor’s initial proposal would have allowed schools and towns three years of reduced pension-fund payments instead of one year. The original bill also would also have allowed schools and towns to take 30 years to make up the missed payments. The amended bill provides for a lesser deferment a shortened repayment schedule and local option to defer not a mandatory requirement. NJPSA Director of Retirement Services testified in opposition to the original bill urging full funding of state pension obligations for school employees.
Companion legislation S15 / A3650 (Buono Greenwald Schaer) which would permit the Commissioner of Education to withhold state aid payments to a school district in the amount of the deferred PERS payment for that district has been conditionally vetoed. That legislation will require further legislative action. The total amount of state aid that would be put into a reserve account under this bill is $75 million for the current fiscal year.