State employee benefits continue to tighten New Jersey state budget

TRENTON-New Jersey's finances are expected to keep getting tighter, and generous pensions and health benefits for public employees are a major reason. Today, eight percent of state taxes support the pensions and health benefits for public employees. The benefits are growing so fast that the state estimates that in five years, it will take more than one-fifth of the taxes it collects to cover those costs. ``If we don't address the issue of employees and retirees having the best health plans and pension plans around, then basic state functions become at risk,'' state Treasurer John E. McCormac told Gannett New Jersey, which is made up of The Asbury Park Press and five other newspapers, for Sunday's editions. ``We have a better (benefit) plan than any corporation in the state. ... I don't know that we should.'' Gannett found that the benefits programs are so large not only because lawmakers have been so generous at a time when private pension and health care programs are being scaled back, but also because of financial gimmicks and abuse. Pensions for state workers at all levels of government are based on the average of the workers' three highest salaries. In some cases, Gannett reported, workers have modestly paid jobs for most of their careers, then are appointed to high-paying jobs for three years. Meanwhile, payouts are generous in the system. In February, state retirees received cost-of-living increases for 4.8 percent. Private sector retirees rarely get cost-of-living increases. At the same time, risky decisions in managing the pension funds have meant the coffers are running dry. In 1997, the state borrowed $2.8 billion through bonds to make up revenue from the general budget that should have gone to fund the pension. The administration hoped to pay off the debt through investing in stocks. But the market declined four years later. The state is still trying to figure out how to make up the lost money from that decision. Financial experts also said the state used an overly optimistic view of financial markets in 2001 to justify higher pension payouts. Changing the system will not come without a fight. ``The state budget debate is going to take a look, I assume, at everything on the table, and I know our members feel very seriously about (the state) fulfilling the commitment made to them,'' said Steve Wollmer, spokesman for the New Jersey Education Association, the union for public school teachers.