By ANGELA DELLI SANTI, Associated Press WriterTRENTON, N.J. (AP) — New Jersey awmakers want to reverse years of raids on state retirement funds by requiring the state to pay its annual share into the pension system.
The Senate held a required public hearing Monday on a resolution that ultimately would be decided by voters because it changes the state constitution. The Senate is expected to vote on the resolution next week. The Assembly has yet to consider it.
If voters are asked to approve a ballot question in November, they would decide whether to bind the state and other public employers to make at least one-seventh of their pension contribution the following fiscal year. The employers would be required to increase the contribution by one-seventh every year until the entire portion is being paid in FY2017.
The state’s public worker unions oppose the resolution, which they say sanctions the state to continue underfunding the pension system for seven more years.
“It will constitutionally sanction the very practices that put the pension system into the state they are right now,” said Brian Volz, a spokesman for the New Jersey Education Association, the state’s largest teachers union.
The pension system for public workers, teachers, police and firefighters is underfunded by $46 billion and risks becoming insolvent unless fixes are made.
The state for years has skipped or greatly reduced its annual contribution to the system, diverting money that should have been budgeted for such contributions to other spending, including general operations. Local government employers and employees have been making their scheduled contributions, although former Gov. Jon Corzine allowed municipalities to defer half their payment last year because of the recession.
The state’s full payment for the upcoming year is about $3 billion, and could grow to as much as $4.4 billion the following year, according to an estimate quoted by Steve Lonegan, a conservative former mayor of Bogota in Bergen County and unsuccessful candidate for governor.
In testimony Monday, Lonegan said he agreed with the unions who oppose the measure, groups with which he has seldom found common ground.
By 2017, he said the state’s full contribution to the system could be as high as $12.3 billion. At best, he said, it would be around $5.5 billion, nearly all the revenue generated from the state sales tax.
“Where is this money going to come from? Is there going to be a major, major reduction in state services? Or massive tax hikes that could be crippling to this economy,” Lonegan asked. “You’ll never be able to make that pension payment seven years from now. that could bring economic collapse to the state.”
However, the resolution’s prime sponsors, Senate President Steve Sweeney and Senate Republican Leader Tom Kean Jr. said the measure would help the state to keep its promise of a secure retirement for career public employees.
The Senate unanimously passed a three-bill package of pension and health benefits reforms last week that would cap the value of unused sick days retiring public employees can cash out at $15,000; require all government workers to contribute at least 1.5 per cent of their salaries toward their health insurance costs; and bar part-time workers from enrolling in the state pension system.
The Assembly Budget Committee is scheduled to hear from experts on the status of the pension system on Thursday. It has yet to take up the reform package.