Yesterday, President Don Webster and I represented the Association at the Governor’s Annual Budget Address to a joint session of the state legislature.
For this coming school year, Governor Christie recommended a $94.3 million increase in direct state aid to public school districts. However, a large portion of the governor’s address focused not on next fiscal year’s appropriations, but rather on the need to find a long-term solution to the most severe challenge facing the state’s financial infrastructure: the underfunded public employees’ pension system. It’s a critical subject that I would like to address in this column.
In the governor’s speech, he referenced the recommendations of the New Jersey Pension and Health Benefit Study Commission. Last week, a year after issuing its initial report (A Roadmap to Resolution, February 24, 2015), the commission released a follow-up study.
The new document, Supplemental Report on Health Benefits, is the commission’s effort to flesh out a major element of the “Roadmap” plan—reducing the cost of public employee health benefits. In the process, the new report sheds light on another key component, and one that is of serious concern: shifting responsibility for the employer’s share of future teacher pension costs and retired education employees’ health benefits from the state to local school districts.
On page 32, the commission illustrates how its proposal would work in a “hypothetical” community, with a total tax levy of $39 million, which is lower than the state average. Bottom line: the proposal would not be cost-neutral for local school districts.
While the commission asserts that the hypothetical community’s overall property taxes (for all purposes combined) would decrease, its plan would result in a $200,000 bump-up in the school tax levy for this one district. That translates to roughly half of the allowable increase under the state’s current cap. And that’s a best-case scenario. It assumes two factors: (1) the state would enact legislation to require the lower-cost health benefits, or the local school board would successfully negotiate the proposed benefit levels with its teachers’ union; and (2) the state would grant a one-time cap adjustment to allow for absorption of the new costs.
Last year, in correspondence with the commission, we addressed several issues related to the initial “Roadmap” plan, including the following:
A shift of pension and retiree health benefit costs to local school districts would have a deleterious impact on educational programming and is simply unacceptable.
Post-retirement medical benefits—one of the costs that would shift to local school districts—were granted to retired teachers in the late 1980s by the state, not by local school districts.
In addition to the negative financial impact on school districts, there is a compelling public policy rationale for state payment of teachers’ retirement costs—the state, not local school districts, determines the level of benefits and any changes or alterations to these programs.
For the foreseeable future, New Jersey’s pension shortfall—calculated at $40 billion to $82 billion, depending on the methodology used—will eclipse just about every other public policy debate. And it should, since resolving the pension issue will be necessary to avert financial calamity.
NJSBA recognizes the magnitude of the issue, and our staff is analyzing the commission’s latest report. However, any solution that negatively impacts our state’s public schools—one of its greatest strengths—is no solution at all.
These are my Reflections. I look forward to hearing yours. Contact me at firstname.lastname@example.org.
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