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Legislation – Pension & Health Benefits Reform Article from Wall Street Journal

Please find copied below the Wall Street Journal article that provides the best overview of the pension and health benefits reform compromise struck between Governor Chris Christie and Senate President Steve Sweeney.  We’ll make sure to provide you with more specific details as they become available.  

New Jersey Gov. Chris Christie and Senate legislative leaders have reached a deal to cut pensions and benefits for current public employees, according to a person familiar with the matter.

The deal would require workers to pay more of their salaries into the pension system, give up annual cost-of-living increases and pay a percentage of their health care premiums in a tiered system based on their salary, this person said. New employees would have to work longer to get full benefits. Current retirees would not be affected by the deal, nor will people who have at least 25 years in the system.

Top Democratic lawmakers appear to support the proposal. Senate President Stephen Sweeney, who is also a private-sector labor leader, believes he has the votes in his caucus to make it work, according to a person familiar with the matter. It’s unclear whether Assembly Speaker Sheila Oliver is on board with the deal — one legislative source said she was — and if she would be able to muster enough votes in the Assembly, which has been more of an obstacle to Christie’s agenda.

Oliver “has no comment at this time,” her spokesman Tom Hester said.

The deal, which has yet to be officially announced, comes more than nine months after Christie announced his proposals for cuts to help balance a pension system that was $53.9 billion underfunded at last count. Health-care liabilities for New Jersey’s public employees are even greater. Officials from the governor’s office could not be reached for comment.

One significant change included in the proposal would contractually require the state to make its payments into the pension fund. For more than a decade, New Jersey has skipped payments into the pension system, made only partial payments or re-adjusted accounting to make the system look healthier than it is. 

A labor-management board system similar to what was proposed by Sweeney will also be put in place under the terms of the deal. Once the pension system hits a target of 75% funded, the board of four union representatives and four employer representatives will have the power to make changes to contribution rates, retirement ages and cost-of-living adjustments.

The governor would also give up a right to impose a contract, moving instead to a super-conciliation process in which a mediator draws up an agreement if there is an impasse. The deal would apply to Christie’s current negotiations with state workers to renew their contract, which expires at the end of June.

Under the deal, teachers and state workers will immediately increase their contributions to the pension system from 5.5% of their salary to 6.5%, with an additional 1% contribution phased in over seven years. State police, municipal police and firefighters will increase their contributions immediately from 8.5% of salary to 10%. Judges will need to increase contributions from 3% to 12%.

Automatic cost-of-living adjustments will be eliminated. New employees would have to work longer to get full pension benefits.

As for health care, employees would have to pay up to 30% of the cost of the premiums, depending on their salaries. The contribution would be phased in over four years.

The goal is to make the pension system 80% funded in 30 years – a target that is seen as healthy. Pension systems, which take in money as it’s paid out, are not seen as needing to be 100% funded.