Law and Politics, National, topslot

Senator’s Pension-Cut Proposal Infuriates N.J. Unions

May 17, 2019

By Steve Wishnia

State Senate President Stephen Sweeney’s “hybrid” pension scheme doesn’t fly.

TRENTON, N.J.—A top New Jersey politician’s proposal to set up a two-tier pension system for government workers and cut their health benefits immediately infuriated public-sector unions.

State Senate President Stephen Sweeney (D-Gloucester) introduced a 27-bill package May 16 that would move non-uniformed public-sector workers on the job for five years or less to a hybrid pension plan that would only pay defined benefits on the first $40,000 of their income. Workers’ contributions on income above that would go into a 401(k)-style plan. 

Another bill in the package would switch all of the state’s more than 70,000 workers from a “platinum” level health-care plan, in which they pay 10% of costs, to a “gold” plan, with 20% copayments and a higher deductible.

Sweeney said in a statement that the bills would provide “the path to real, sustainable tax relief in a state with the highest property taxes, the second-largest unfunded pension liability, the second-worst credit rating, and the fifth-highest overall tax burden in the nation.”

“Our pension funds are at risk for one reason and one reason only: 25 years of state government’s failure to pay their annually required contribution. In fact, New Jersey has underfunded its pension worse than any state in the nation,” state AFL-CIO President Charles Wowkanech responded in a statement. “Over the past ten years, multiple reforms have been signed into law that reduced the amount of workers’ pensions, removed the cost of living adjustments for workers, increased the retirement age, and significantly increased worker contributions. This was done in exchange for a commitment from the Legislature and various governors to fund their fair share. Time and time again, workers have sacrificed while the Legislature has walked away from its commitment.”

State workers were equally vocal when Sweeney hosted a town hall at Rutgers University in New Brunswick that evening, chanting “millionaires’ tax” and heckling a speaker who told them that the plan would not affect workers already vested in the system. As Sweeney began to speak, Twisted Sister’s “We’re Not Gonna Take It,” a 1980s hard-rock song that’s been adopted as a union anthem, began playing from a speaker hidden underneath the stage. Audience members, many wearing red Communications Workers of America T-shirts, laughed, then began clapping and singing “No, we’re not gonna take it.” 

The senator left the stage two slides into his presentation, reported.

“Right now, there are two visions of what happens in this year’s state budget,” the CWA-New Jersey said on its Website. “There is Governor [Phil] Murphy’s proposed budget that makes investments in public education and services, and funds public worker pensions and our state employee contract while asking millionaires to pay their fair share in taxes. Then there is Sweeney’s ‘Path to Progress’ report that calls for ending the current public worker pension system for state, county, and municipal government employees and shifting billions of dollars of health-care costs on to workers—all while protecting billions of dollars of tax cuts for the super-wealthy and corporations.”

The CWA, which represents more than 40,000 state workers and 15,000 county and local government workers, is planning to hold a rally in Trenton June 13.

The hybrid pension plan, cosponsored by Senate Budget Chair Paul Sarlo (D-Bergen), Republican Senate Budget Officer Steve Oroho (R-Sussex) and Assembly Majority Leader Lou Greenwald (D-Camden), would cover teachers and non-uniformed state, county, and municipal employees. The 401(k)-style part would be a “cash balance” plan that would guarantee at least a 4% return on workers’ contributions, with any excess being returned to the system. The bill would also raise the retirement age from 65 to 67.

New Jersey’s pension plans for teachers and general employees are both less than 60% funded. Former Gov. Chris Christie twice vetoed measures to require the state to make quarterly contributions. Sweeney, a union ironworker who describes himself as having “sponsored and supported measures to protect the rights of workers and support organized labor,” allied with Christie to raise the retirement age and freeze cost-of-living adjustments.

Gov. Murphy’s 2020 budget proposal would contribute a record $3.8 billion to the state’s pension funds, up from $3.2 billion last year. The Moody’s credit-rating service projects that payments will surpass $6 billion in 2023, the first year the state is scheduled to make a full recommended annual contribution.

The governor and Sweeney have disagreed on how to finance this. Murphy has advocated raising taxes on income over $1 million from about 9% to 10¾%. Sweeney, who opposes that tax increase, told the North Jersey Record that if the state doesn’t enact his pension and health-care changes, he’ll have the Legislature put them on the ballot as an amendment to the state constitution in the 2020 election.

New Jersey’s pensions for state workers and teachers are among the least generous of the nation’s 70 largest plans, Wowkanech said. A typical state or local government worker with 30 years of service would get $31,600 a year.  

“New Jersey’s educators have already been pushed beyond the breaking point, with unsustainable health-care costs and a pension that costs much more and delivers much less than what was promised to many of us when we entered this profession,” the New Jersey Education Association said in a statement. “Proposals to further raise costs or slash benefits will irreparably harm our profession and our schools, and NJEA members will join as one to fight them.”

May 17, 2019

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