Lawmakers trying to put state on 'Path to Progress'
PHOTO BY VERA OLINSKIN.J. Senator Steven Oroho stands in his office.
By Vera Olinski
The New Jersey State Legislature Democrats and Republicans foresee trouble regarding ballooning public employee pension liabilities and growing healthcare costs. As a result, they created the 25 member Economic and Fiscal Policy Work-group with N.J. Senator Steven Oroho (R) as co-chair, along with N.J. Senator Paul Sarlo (D) and state Assemblyman Louis Greenwald (D). Ultimately, their analysis and recommendations are summarized in the “Path to Progress” report which outlines ways to reduce the total cost of government — state, county, and municipality — to taxpayers. Oroho explained, the “Path to Progress” report primarily outlines recommendations for the legislature and governor to make changes in public pensions and healthcare going forward, while allowing the state to pay what has been promised to public employees over the years. How state got hereMistakes were made over the years, Oroho said, by governors and legislatures of both parties, promising, but not paying for, those promises. One major mistake, he continued, occurred in 2001, when the state government retroactively increased everyone’s pension benefits by 9 percent — except police, fire, and a few separate funds. That same year, Oroho said, the Whitman administration started taking “Pension Holidays,” by not putting money in the pension fund. Then “the dot–com” bubble burst, and the stock market went down. Consequently, the combination of the 9 percent increase, not putting money in the pension fund, and the market crashing, he summarized, caused the main crux of the issue — an enormous hole. That is why, Oroho explained, when he first came to the New Jersey Senate, he sponsored the law requiring quarterly payments instead of yearly, thereby saving tax payers money. One pension system recommendation from the report is to move new and less than five year service state and local government employees from the Public Employees’ Retirement System and Teachers’ Pension and Annuity Fund to a sustainable hybrid system. Employees with over five years of service and vested contractual pension rights would remain in their current system. In addition, Oroho said, the Affordable Care Act’s Cadillac Tax will cost over $600 million, based on taxing 40 percent of the 17 percent difference between N.J.’s actuarial insurance value of Platinum, 97 percent, and Gold value, 80 percent. N.J. has the highest actuarial value of health benefits in the nation, Oroho said. One recommendation is to shift all state and local government employees’ and retirees’ health care coverage from Platinum to Gold after fiscal year 2019, when state collective bargaining contracts expire. This change would also save employees money, he said, on their premium cost-sharing payments. Another report recommendation, Oroho said, is to create regional K-12 school districts in order to better coordinate academics, curricula planning, purchasing, and administration. If because of demographics a school board recommends eliminating buildings in the future, he added, that would be a local decision, and the report does not recommend closing schools. Regarding concerns of smaller local municipalities possibly combining with larger, Oroho said, the report does not recommend combining municipalities, because the data shows small communities cost tax payers less per capita. Another recommendation in the “Path to Progress,” Oroho said, is to provide more shared services throughout the state. He mentioned, Sussex County has already used shared services a lot among municipalities and schools — while other parts of the state, not as much. Oroho said they have also sponsored a bill to require the state to cap their budget by 2 percent. He commented, if towns, municipalities, and school boards have to cap their budgets each year, the state should have to do the same and use shared services. Oroho added, “We keep pushing for it [the bill] to go in each year.” If changes are not made to the pension and benefit structure, he continued, the cost of pensions and benefits will rise an additional $4 billion over the next four years. Even with a normal three 3 growth rate in revenue, he said, that will not cover the increase, and pensions and benefits could grow to more than 26 percent of the total N.J. State budget. New Jersey was an economic powerhouse, Oroho concluded, not too long ago. “We can get back there, but it is going to take time and discipline,” he said, “and that’s if we start doing some of these things. If we don’t do them, our costs will just go up.” Chief of Staff Jeffrey Spatola said about 50 municipal officials met to learn of the recommendations. Now, he added, resolutions are being adopted, so far, by towns in Sussex and Warren County in support of the “Path to Progress” recommendations. For all the N.J. “Path to Progress” recommendations see: pathtoprogressnj.org .