A plan supported by Gov. Chris Christie to reform the state’s troubled public pension system was introduced on Monday in the New Jersey House by Republican Assemblymen Declan O’Scanlon and Gary Chiusano, with Sen. Joseph Pennacchio planning to introduce the same measures in the Senate.
“The system in its present form is unworkable which is a major concern for every resident in the state,” O’Scanlon said. “This legislation will provide comprehensive and substantive improvements to save the system and protect taxpayers. If continue on our present course, public employees will lose their pensions and beleaguered taxpayers will face crushing tax increases.”
“There are several major public policies which need to be reformed in order to make New Jersey more affordable, and the public pension program is one of them,” Chiusano said. “The plan is grossly underfunded and will collapse without far-reaching systemic improvements. By enacting these measures, we will stabilize the state’s pension contribution at a manageable level and ensure its long-term viability. These reforms will ease the burden on taxpayers and strengthen the pension system for our public employees.”
If no changes are made to the current system, O’Scanlon and Chiusana said that the current unfunded liability of $54 billion will balloon to over $180 billion by 2041.
Under the sweeping proposal, future employees would be mostly affected by the 139-page bill. The highlights include:
- The retirement age would be raised to 65 for most employees, reflecting an increase in life expectancy. To retire early, workers would be required to have worked 30 years, instead of the current 25.
- Workers would be required to contribute 8.5 percent of their salaries towards retirement.
- Pensions would be calculated on employees’ earnings from their five highest-paid years, up from the current three.
- Firefighters and police would have the maximum pension benefit reduced from 70 percent of their current salaries to 65 percent.
- Cost of living increases would be eliminated.
- The 9 percent pension increase given to workers in 2001 would be eliminated for current and future employees.
Two weeks ago, Democrat Senate President Stephen Sweeney proposed a bill that stopped short of the Republican’s bill.
Sweeney’s bill would replace the present oversight boards of the public employees, teachers, police and firefighter pension systems with joint boards of management and labor organizations. The boards would oversee the management of the pension funds and have the power to adjust annual contributions and benefits based on the investment performance of the funds.
The plan would require workers to make additional pension contributions if the wanted to take advantage of the 9 percent pension increase given in 2001.
Workers with fewer than five years of employment would not receive cost-of-living adjustments, unless the board found some way to pay for it.
Sweeney said “This legislation will remove politics from the process and establish a private-sector model for the pension system. This will be comprehensive reform that will ensure that those who benefit from the pension fund are paying their fair share without adding any additional burden to already overtaxed taxpayers in New Jersey.”