By Brent Johnson
TRENTON, NJ — As the United States continues to grapple with runaway inflation, a decade-old debate over restoring automatic cost-of-living adjustments to pensions for retired New Jersey public servants is boiling again.
On the one hand, hundreds of thousands of former employees are worried about hundreds of thousands of former employees who have already gone more than 10 years without seeing their pension checks increase to compensate for inflation – a freeze that made part of a famous law of the time. Chris Christie signed in 2011 to bolster the state’s debt-ridden pension system.
State Sen. Shirley Turner, D-Mercer, longtime sponsor of a bill that would revive the adjustments, known as COLAs, said it was retirees who were counting on those hikes and now have even more struggling to survive when “everyone knows pain at gas pumps and grocery stores.
“It wasn’t the employees’ fault that the pension is the way it is,” Turner said. “These people are hurt.”
Meanwhile, New Jersey’s state treasurer said last week that it could be another 10 to 20 years before the pension system reaches the level of funding at which COLA restoration is allowed. under this law of 2011.
On the other hand, state estimates show that bringing the adjustments back now could add billions to the unfunded liabilities of a retirement system that has made big gains in recent years — Garden State Taxpayers bearing the cost.
In an interview last week with NJ Advance Media, Christie called restoring COLAs now a “bad idea at the wrong time,” saying it would jeopardize the state’s progress on pensions and pointing out that the law he signed allows adjustments to come back once the system is in place. better financial shape.
“Using the current inflation problems as an excuse is bullshit,” he said. “The only people who are going to be hurt in the long run are the state taxpayers.”
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Former state Senate speaker Stephen Sweeney, a Democrat who worked closely with Christie on bipartisan pension reforms, agreed. He said the move would be “crazy”.
“We talk about affordability, and you’re going to do it now? I would love to get a COLA for the workers, but we have to pay for it,” Sweeney told NJ Advance Media.
At the heart of the matter is Turner’s bill (S260) that would end the freeze, one of the most contested parts of the 2011 overhaul. The senator has introduced it in every legislative session since Christie signed the law.
The measure went nowhere, never even receiving an audience. But he suddenly gained two dozen sponsors — Democrats and Republicans — in recent weeks.
Officials say retirees are pushing lawmakers to reconsider as the annual inflation rate has soared to around 8%.
It also comes as lawmakers from both parties pledge to make New Jersey more affordable after a contentious November election that saw Democrats retain control of the state legislature but Republicans gain seven seats.
Additionally, it comes just weeks after Democratic Gov. Phil Murphy tabled a state budget proposal with billions of dollars in revenue, federal aid and record spending, including a full payout to the pension system. for a second consecutive year.
Without cost-of-living adjustments, the value of pensions gradually erodes as inflation rises.
But the COLA freeze was part of a larger effort launched by Christie and lawmakers in 2010 and 2011 to begin to save New Jersey’s retirement system, which previous governors and legislatures had underfunded by billions for years. Christie’s administration projected that suspending COLAs alone would save $70 billion and help prevent the pension system from becoming insolvent.
Under the law, retirees would again receive increases once the individual state plans that make up the pension fund are 80% funded.
In 2016, the state Supreme Court upheld the freeze in the face of a lawsuit filed by retired officials.
Currently, none of the state’s individual pension funds come close to 80%. Appearing at a state Senate budget hearing last week, state treasurer Elizabeth Maher Muoio told lawmakers there could be about a decade for local government workers and two decades for state government employees before annual cost-of-living adjustments accrue to their pension checks under current law.
It didn’t go over well with Senator Samuel Thompson, R-Middlesex, a co-sponsor of the bill to restore the COLAs.
“Thirty years after their retirement, they still won’t have a COLA?” Thompson asked. “By God, 30 years of inflation. Now we have to work something better for it. I mean, it just doesn’t work.
State Sen. Richard Codey, D-Essex, another sponsor, said reviving COLAs is “the right thing” to help retirees who aren’t “living high on the hog.”
Workers and union leaders said the suspension was particularly troublesome for older retirees, who weren’t earning as much in wages and were relying on the adjustments.
Still, the state’s nonpartisan Legislative Services Office estimates the bill would add $110.8 billion to the unfunded liability of the retirement system, which still stood at $91 billion in mid-2020. , according to the latest report from the State Treasury Department.
State and local government employers would pay about $3.7 billion a year to pay the unfunded liability over a 30-year period, according to the OLS.
Muoio warned lawmakers of the cost during the hearing this week.
Christie said the move would put the state pension fund in a “perilous position.”
“If future administrations continue to do what we did in terms of funding retirement and what the Murphy administration did in terms of funding retirement, they will get the COLA back,” the former governor told about retirees. “But they will get it back at a time when the fund can afford to pay it.”
State Sen. Declan O’Scanlon, R-Monmouth, agreed.
“Would I like to be able to return the COLA? Absolutely,” O’Scanlon said. “But the people who will pay for this are New Jersey taxpayers. You have to do the math.
State Senate Minority Leader Steven Oroho, R-Sussex, said he believed the sponsors had ‘good intentions’ but may not have known the financial impact of the proposed law.
Even civil servant unions, many of whom once opposed the COLA freeze, are reluctant to reinstate them now.
Rob Nixon, director of government relations for the State Police Benevolent Association, said these workers “should never have had their COLAs taken away.”
“But this bill is not the vehicle to do that,” Nixon added.
Steve Baker, spokesman for the New Jersey Education Association, the state’s largest teachers’ union, called a decade without COLA “one of the devastating consequences of the state’s failure, for decades. many years of respecting its end of the pension market by paying its fair share. share.”
But, Baker added, “we have to be extremely careful about any sudden changes that could threaten” the state’s progress with the pension system.
In the current state budget, the state contributes fully to the pension system for the first time since 1997, about $6.9 billion. There’s a similar amount in Murphy’s proposed budget for the fiscal year that begins July 1.
Two Wall Street rating agencies cited pension payments as one of the reasons for the state’s recent credit rating upgrade.
The bill to restore COLAs is expected to pass both houses of the state legislature and sign Murphy into law. Whether he is even posted for a vote is unclear.
State Senate Speaker Nicholas Scutari, D-Union, “will review and consider the proposal thoroughly,” spokesman Richard McGrath said.
Assembly Speaker Craig Coughlin, D-Middlesex, is “reviewing the legislation,” spokeswoman Cecilia Williams said.
“Any changes will need to ensure that civil servants’ pension funds can stay on a path to better health, both for current and future retirees who depend on them and for those who may bear the financial responsibility for reinstated COLAs,” he said. added Williams.
Murphy’s office declined to comment on the bill.
Turner, the lead sponsor, said the cost of restoring COLAs is “a legitimate concern” and she doesn’t expect the proposal to ultimately pass.
Instead, she said, one step the state could take is to increase pension payments even more in the new budget.
“Since the governor is giving away so much money, he could show good faith by giving at least some consideration to retirees,” Turner said. “The sooner we get it back to 80%, the better off everyone will be.”
Sen. Jon Bramnick, R-Union, a longtime Christie ally who is now a co-sponsor of that bill, said the 2011 reforms were needed, but police, firefighters and other employees of the government “took it on the chin for a long time”. period of time.”
“Reasonable increases only make a certain amount of sense,” Bramnick said. “With billions of dollars in disposable income, it’s time to give them a little more.”
State Assemblyman Gregory McGuckin, R-Ocean, another sponsor, said if the state could provide money for undocumented immigrants and other programs, “we should take care employees”.
Assemblyman Ralph Caputo, D-Essex, another sponsor, said the measure “at least starts a conversation” about the dilemma.
“There is a certain loss of confidence in being a public employee,” Caputo said. “That shouldn’t be the case.”
Sweeney said the state might be able to reinstate COLAs if it establishes a “hybrid” pension plan — something he was pushing before he lost re-election in November. Oroho, the Republican Senate leader, said he was ready to discuss it.
“Nobody wants those COLAs back more than me,” Oroho said. “Let’s make sure people who are currently receiving checks are not at risk of losing their checks.”
NJ Advance Media staff writer Derek Hall contributed to this report.
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