NJCPA Endorses NJ Economic and Fiscal Policy Workgroup’s Pension and Benefit Reform Recommendations in Path to Progress Report
Statement by Ralph Albert Thomas, CPA (DC), CGMA,
CEO and Executive Director, NJCPA
The New Jersey Society of Certified Public Accountants (NJCPA) strongly endorses the pension and benefit reform recommendations spelled out by New Jersey’s Economic and Fiscal Policy Workgroup in its “Path to Progress” report. Given the state of New Jersey’s pension and retiree health benefit crisis — with liabilities of more than $151 billion and counting — these recommendations are crucial to getting the state’s economy back on track.
The Economic and Fiscal Policy Workgroup, which was created by Senate President Sweeney and is co-chaired by Sen. Paul Sarlo, Sen. Steven Oroho and Assemblyman Louis Greenwald, issued its Path to Progress report in August to identify ways to improve the state’s economic growth and competitiveness. Along with other non-legislative members, I am proud to say I sit on the 25-member workgroup.
Calling New Jersey’s fiscal future “bleak,” the Path to Progress report cited the need to shift from the current defined benefit pension system to a sustainable hybrid system that combines the best elements of both a defined benefit and a defined contribution system.
Without changes to the pension and benefit structure, the cost of pensions and benefits will rise from a current $6.6 billion to about $11 billion in 2023, according to New Jersey Treasury projections submitted to the Senate Budget and Appropriations Committee and other health benefit reports. That would be 27 percent of the state budget. We believe that the only way to pay for that would be a steep hike in taxes and draconian cuts to programs important to New Jerseyans.
The Path to Progress report made the following recommendation to improve the pension system:
- Shift new state and local government employees and those with less than five years of service in the Public Employees’ Retirement System and the Teachers’ Pension and Annuity Fund from the current defined benefit pension system to a sustainable hybrid system and preserve the current system for employees with over five years of service who have vested contractual pension rights.
The Path to Progress report cited the following health benefits recommendations:
- Shift all state and local government employees and retiree’s health care coverage from Platinum to Gold.
- Require all new state and local government retirees to pay the same percent of premium costs they paid when working.
- Merge the School Employees Health Benefits Program into the larger State Health Benefits Plan and make the plans identical in coverage.
- Cap accrued terminal leave payouts for state and local retirees at $7,500 or the amount currently earned, and make those payments based on average career salary.
- Require state and local governments to pay the first $15,000 of remaining earned sick leave immediately or allocate it on a pre-tax basis to retiree healthcare premiums for qualifying employees and pay the remaining amount over five years.
- Require an ongoing third-party audit of health care claims.
- Require families with multiple state or local government employers to select only one health care plan from one employer.
The report had four other areas of reform, which included education reform at the administrative level; county and municipal government reform and shared services; state and local government tax structure; and leveraging assets to stabilize the pension system.
The full report is available at pathtoprogressnj.org.