On Friday, March 27, Jonathan Pushman and Christopher Jones, NJSBA governmental relations advocates, joined podcast host Ray Pinney to discuss current and future legislative issues. Some of the key issues raised, edited for brevity and clarity, appear below:
Question: Can you tell us the status of pending legislation regarding health benefits reform?
Answer: In early March, Senate President Steve Sweeney and the New Jersey Education Association announced an agreement on legislation that is expected to generate hundreds of millions of dollars in savings on school employees’ health benefits costs. On March 19, the full Senate approved the legislation by a vote of 34-0. The legislation is now pending in the General Assembly.
The legislation, S-2273, would require the creation of a new “New Jersey Educators Health Plan” (NJEHP) in the School Employees Health Benefits Program (SEHBP). This plan, the design of which is laid out in the bill, is expected to carry lower premiums than the most popular options in the SEHBP, N.J. Direct 10 and N.J. Direct 15. Employees who opt into this new NJEHP would shift into a new salary-based premium sharing schedule, which is also specified in the bill. Employees in higher salary ranges would pay progressively more than those at lower income levels. Currently, most employees pay a percentage of premium toward their health benefits coverage, which was required under “Chapter 78.” Other than N.J. Direct 10 and N.J. Direct 15, all other SEHBP plan options would be eliminated. Employees who decide to remain in these other two plans would continue paying their Chapter 78 contributions or whatever they are required to contribute pursuant to their collective bargaining agreement.
All new employees would be required to select the new NJEHP and will not have the option of choosing any other plans.
In addition to NJEHP, a Garden State Health Plan would also be established. The level of benefits will be equivalent to those of the NJEHP, except that the Garden State network will consist solely of New Jersey-based providers. Cost-sharing for employees who select the GSHP would be half that of what is required for the NJEHP. According to the Senate Majority Office, the cost of care delivered outside of New Jersey is 50% to 100% greater than the same services provided in-state.
The bill would require the NJEHP to be available by July 1, 2020, and a special open enrollment period would be held before that date. The GSHP would have to be established by July 1, 2021. These timelines are subject to change as the bill must still receive consideration by the General Assembly.
Additional information on the proposal can be found here.
Question: What about districts that participate in the SEHBP, but have collective bargaining agreements that no longer permit their employees to select N.J. Direct 10 or N.J. Direct 15, the only existing plans that would remain under S-2273?
Answer: The bill does not explicitly address such situations and the NJSBA has sought clarification on this issue. This may be a matter that would have to be handled through negotiations between the board of education and the local bargaining unit.
Question: Does this proposal also apply to districts that do not participate in the SEHBP, such as those that self-insure or belong to a joint insurance fund?
Answer: Yes. Districts that do not participate in the SEHBP would also have to offer plans that mirror the N.J. Educators Health Plan. Those districts must also continue offering any other plans required under their collective bargaining agreements. Any employees that select the NJEHP would move into the salary-based contribution schedule. Employees who choose to stay in those existing plan options will continue to pay their Chapter 78 contributions or any amount that has been agreed to through negotiations. Non-SEHBP districts would also have to offer the Garden State Health Plan by July 1, 2021.
Question: How much savings will this plan generate? Is there any chance a district could lose money under this proposal?
Answer: According to reports, school districts would save more than $600 million annually under the bill. Employees would save approximately $400 million in premium costs. Districts spending above adequacy, according to the school funding formula, would be required to apply any realized savings to property tax relief. The bill does not presently place any restrictions on how districts spending below adequacy may use the savings. No data has been released to date that indicates how much individual districts can expect to save. The NJSBA has advocated for amendments to the bill that would ensure no districts suffer any adverse financial consequences due to the bill’s provisions.
Question: Legislation was passed in the Assembly by a 79-0 vote that would permit municipalities to delay the quarterly transmission of property tax revenues to school districts during gubernatorial-declared emergencies. Where does this bill stand now? What should board members do to address these concerns?
Answer: A-3902 was passed by the General Assembly on March 25, two days after it was introduced and with little deliberation. The sponsors said “grace periods will certainly help as local governments continue to manage the pandemic and their municipal duties” as justification for the bill. However, it should be noted, school boards are also local governments; and they are dependent on municipalities collecting and dispersing property taxes in a timely manner. In fact, statewide, school budgets make up 60% of all local government expenditures.
Those interested in stopping the bill should contact their senators and/or the governor’s office to explain the dire consequences this bill will have on school districts. Where feasible and appropriate, it may be prudent to coordinate efforts with local education associations as this bill would delay payment of teacher’s salaries. A position statement was sent to all state senators expressing NJSBA’s opposition to the bill.
Question: Could this bill be amended to allow districts to tap into reserve accounts, comingle funds or allow districts to borrow against future aid with the state paying the interest?
Answer: Although better than the predicament presented by the bill in its current form, there are concerns with these solutions. Tapping into reserves is reminiscent of 2010, and districts never got that money back. And according to the Association of School Business Officials (ASBO) which represents the business administrators, obtaining short term loans is not easy for school districts as it is an uncommon practice and they do not have the ongoing relationships with lenders that would facilitate such a loan.
It would therefore be best to oppose the bill outright or request a specific carve out for school districts to ensure they continue to receive funds in a timely manner.
Question: Is there a possibility that the final FY 2021 aid amounts will be less than the numbers given by NJDOE?
Answer: Yes, this is always a possibility. Many may recall significant state aid changes in the spring of 2017 and 2018. The governor’s proposed budget, of which a district’s state aid amount is a part, is only a proposal. The budget is not final until passed by the Legislature and signed by the governor.
Obviously, there is a lot of uncertainty concerning the future, including the state budget. Board members should have open dialogues with their business administrators and superintendents about contingency plans in the event state aid numbers change before July 1.
It is NJSBA policy that we object to any diminishment of state aid figures once they are announced.
Question: Will S-2 continue to be implemented?
Answer: Again, at this time, there is great deal of uncertainty and there is no definitive answer to this question. That being said, it should be noted S-2 was sponsored and heavily advocated for by the Senate President. It would seem reasonable to speculate that any changes to state aid will be done within the framework of S-2.
Question: Could the proposal allowing districts to exceed the 2% cap in order to recapture aid lost due to the phase-in of S-2 be revisited with any state aid changes?
Answer: Theoretically, yes. NJSBA was very supportive of this proposal and was proud that its origins were from our Fall 2019 Delegate Assembly. We were exceedingly disappointed by its veto and expressed this displeasure accordingly.
That being said, we must be ready for what eventually will become our new normal, whenever that starts. Just this past week, our country saw an enormous one-week jump in unemployment applications that shattered the previous record. New Jersey’s economy is acutely tied to New York City’s, which is currently the epicenter of the health crisis.
Although NJSBA continues to be supportive of this proposal, we must be aware of the political atmosphere that will exist post-crisis. We will have to assess how receptive our elected officials, and the public at large, will be to a proposal that ultimately calls for higher property taxes, no matter how justified those taxes may be.