Senate President Releases Additional Details on Pension & Benefit Bill

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Senate President Stephen Sweeney released additional details June 13 on his pension and benefit legislation. The materials provide a brief summary of the bill’s provisions; offers comparison to the Governor’s as well as Sweeney’s original proposals; and offers a revised health benefits premium rate table. A hearing on the legislation is scheduled for June 16.

Hearing June 16

Sweeney reached a deal with Gov. Christie last week (Possible Deal Between Governor & Senate President on Pension & Health Benefits June 8 2011). The compromise measure will go before the Senate budget committee June 16 at 10:00 AM as segments of both democratic caucuses continue to dissent to the health benefits proposal in particular.

Assembly Democrats have voiced stiff opposition to the health benefits portion of the plan during a closed-door meeting with Speaker Shelia Oliver (Essex). In reponse the Speaker proposed a sunset to the mandatory imposition of premium contribution in 2014.

The Sweeney Plan

Among the information shared by the Senate Majority Office June 13 is a comparison chart that shows the differences between Sweeney’s initial reform offering Gov. Chris Christie’s initial reform proposal and the final compromise bill that they both regaled last week.

Proposed Pension Changes

  • An increase in the employee contribution rate for members of the Teachers’ Pension and Annuity Fund (TPAF) and Public Employees’ Retirement System (PERS) by one percent effective July 1 2011. Police and firefighters would pay an additional 1.5 percent (since their retirement formula is based upon a shorter service time). Additionally public employees of all systems will have to pay another one percent increase in the contribution rate to be phased in over a seven year time period.
  • The state would pledge to increase its pension contributions to legally required levels.
  • A new tier of the pension formula will be enacted for new members of the pension systems who join their respective funds after the effective date of the legislation. This tier will include an increase in the retirement age to age 65 and other changes in the retirement formula for new members only.
  • The proposal appears to freeze the cost of living adjustment (COLA) for current retirees. Competing version of the original proposals sought to eliminate the COLA for future retirees or eliminate additional COLA upon retirement for future retirees. It is unclear which COLA proposal will eventually appear in the legislation that moves. We will keep you informed as information becomes available.
  • Changes will be made to the governance of each retirement fund which includes the establishment of appointed not elected boards to address funding levels and future changes to the respective pension systems.

Health Benefits Impact

With regard to health benefits the proposal seeks to set premium sharing by income level with a phase in over a four-year period. The Senate Majority Office released a revised contribution grid that reflects a premium sharing obligation ranging from 3% to 35% based upon defined income levels. Employees with lower salaries would pay less.

Employees would also have the ability to reduce their premium costs by selecting a lower cost health care plan. The revised contribution grid is based upon the current State health benefits plan. Actual costs under any new plans that would potentially be offered would vary.

The summary released June 13 articulates that employees with 25 years of service credit on the date the legislation is effective would receive free health benefits in retirement as would those currently retired. The impact on those employees with less than 25 years on the legislation’s effective date is less clear – the summary addressed those with 23 or 24 years of service only.

Adding to the uncertainty is a recent proposal floated by Assembly Speaker Oliver June 13 which would statutorily set health benefit contributions for the next four years but sunset that requirement in 2014. The Senate President supports that compromise according to several published reports.

Dissention in the Caucuses

Sources say Assembly Speaker Sheila Oliver (Essex) has South Jersey Democrats Republicans and herself lined up in support of pension and health benefits reform. But she lacks support elsewhere in the caucus and doesn’t have Essex in line a delegation that includes her labor leader district-mate Assemblyman Tom Giblin (Montclair) and others uncomfortable with transgressing collective bargaining in favor of Gov. Chris Christie-backed reforms.

According to recent reports Essex County Chairman Phil Thigpen convened a meeting June 13 to try to pull the Essex County Democratic Party delegation together and help unite it behind the Speaker but even the Essex delegation remains deeply divided over a proposed health benefits overhaul. Sources say that Assemblyman Al Coutinho Assemblywoman Grace Spencer Assemblyman Kevin Ryan and Oliver support a health benefits compromise proposal championed by the speaker but Assemblyman Tom Giblin Assemblyman Ralph Caputo Assemblyman John McKeon Assemblywoman Cleopatra Tucker and Assemblywoman Mila Jasey do not.

And there’s more than the reform package at stake here and Oliver knows it. She told caucus members she wouldn’t back a deal without the caucus behind her and right now it’s not – a situation that threatens the speaker’s leadership status. If Oliver can’t bring at least her home county delegation to heel sources say the caucus could permanently lame duck her and potentially unseat her next year in exchange for a front line opponent of the Norcross/Divincenzo/Christie axis.

Sources are also reporting that an alternative pension bill that addresses the specific needs of public safety employees could be released as early as June 14. The alternative pension bill is sponsored by Majority Leader Joe Cryan (Union) and Assemblyman Jason O’Donnell (Hudson).

For his part Sweeney has the votes in the upper house to pass pension and health benefits reform. Support in the Democratic Senate caucus for the plan remains divided largely along geographic lines. Senators in the southern portion of the state where public sector unions do not hold the type of sway they do in the north are lining up behind Sweeney a source familiar with the negotiations told the Star Ledger while senators from the north are hesitant about angering organized labor. Sweeney likely needs no more than six Democratic votes for the plan which has the blessing of Gov. Chris Christie and by extension the bulk of the Republican caucus.

The plan has many Democrats nervous over agitating their base with legislative mid-terms less than five months away. Many say they would rather hold off on passage of any legislation until the lame duck session in order to pull pensions and health care out of the debate come election time. Even more say that the two bills should be segmented – preferring to just move the pensions piece.

But Gov. Chris Christie said June 9 that he will not sign a pension reform bill unless it includes a health benefit overhaul as well.

"I'm unwilling to s
eparate them I want them co-joined" the governor told reporters in Camden.

With the June 30 budget deadline fast approaching pressure will continued to mount to resolve the issue.

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