Last week, when Governor Christie devoted almost his entire budget message to pension reform, he was not exaggerating the importance of the issue. The public employee pension system can and will affect New Jersey’s economic health and the quality of life. The pension system impacts everything from the state’s ability to finance needed public works projects to its annual budget, including state aid to education, and consequently, the operation of public school districts.
What the governor placed on the table, “A Roadmap to Resolution,” the report of the New Jersey Pension and Health Benefit Study Commission, is certainly complex. It proposes monumental changes in how public employee pensions, particularly the Teachers’ Pension and Annuity Fund and the School Employees Health Benefits Program, are financed and administered.
The report, and the entire subject of pension and health benefits reform, does not lend itself to easy answers. Therefore, I have appointed a staff committee to review the Study Commission’s recommendations, NJSBA’s policies on employee pensions and health benefits, and the impact of the Roadmap’s various proposals on local school districts. Through the committee’s work, our Association is building a series of recommendations that, I believe, will balance the health of the state pension and employee benefits systems with local school boards’ responsibility to provide sound educational programming.
Our preliminary findings specifically address the Roadmap report and reflect upon NJSBA’s long-standing beliefs on public employee pensions and health benefits. Let me share some of our findings with you:
PENSION SYSTEMS
NJSBA believes that the Teachers’ Pension and Annuity Fund and any new retirement program for certificated school district staff must be funded and administered by the state government. Transferring payment of the employer’s contributions to the teacher retirement plan from the state to local school districts will have a detrimental impact on educational programming.
To restore solvency to, and avert future default of, the state’s retirement programs, NJSBA supported the pension and health benefits reform act of 2011 (P.L. 2011, c.78). The legislation includes a schedule of annual state payments designed to close the deficit of two plans that serve school district employees, the TPAF for certificated staff and the Public Employees Retirement System (PERS) for non-certificated staff.
The Legislature should amend P.L. 2011, c.78 to extend the schedule of state payments to close the pension deficit from seven years to a period of ten years. Such a change would lower the annual payments and ameliorate their impact on essential programs that are funded through the General Fund of the State Budget, including state aid to education.
POST-RETIREMENT MEDICAL BENEFITS
Post-retirement medical benefits are provided to TPAF retirees through state legislation, not local school board action. Therefore, the cost of such payments should remain part of the state budget. Transferring the payments to local school districts would have a negative financial impact.
Post-retirement medical benefits are a major cost-driver in the state budget and, for retired school employees (both TPAF members and non-members), will total over $1 billion in 2015-2016. Therefore, NJSBA believes that the Plan Design Committee of the School Employees’ Health Benefits Program should redesign the post-retirement medical plan for teachers to reduce this annual cost.
HEALTH BENEFITS PROGRAMS
NJSBA supports the current statutorily required public employee contributions toward health benefits. The required payments, which reflect practice in the private sector and in public employment in other states, have provided significant financial relief for local school districts, enabling them to direct resources toward educational programming, including teacher employment.
To preserve these savings, NJSBA believes that the legislature should amend P.L. 2011, c.78, to make the current employee contributions toward health benefits a permanent requirement. Without such amendment, the contributions will become subject to labor negotiations, starting in many districts as early as this year.
To enable local school districts to further control the cost of health benefits, the legislature should give local boards of education unilateral authority to join the School Employees Health Benefits Program.
Changes in the pension and health benefit systems will require legislation and, according to the “Roadmap” proposal, a constitutional amendment—processes that require due deliberation. Thus, at this time, it appears that any reform will take a considerable amount of time to become a reality. Nonetheless, the urgency of the matter cannot be overstated. That’s why I want to share with you the direction NJSBA is taking on this critical issue. Needless to say, we will continue to communicate with you regarding our thoughts, concerns and recommendations.
These are my Reflections. I look forward to hearing yours. Contact me at [email protected].