Newly hired employees would pay highest rates immediately, not have phase-in benefit
Clik here to view.
Senate President Stephen Sweeney today unveiled a plan that aims to slash the state's huge medical costs by requiring public employees to kick in significantly more to health benefits.TRENTON — In the face of what he expects to be significant blowback from party supporters, Senate President Stephen Sweeney (D-Gloucester) unveiled a proposal today that calls on all of the state's 510,000 public employees to kick in significantly more money for their medical benefits.
“My plan is real simple: public employees will pay more,” Sweeney said at an afternoon news conference at the Statehouse.
Sweeney said he expects his proposal will upset public employees, as it did when he pushed for similar reform in 2006.
“Then, the system was in a free fall and collapsing. Five years later, we are much worse off,” said Sweeney.
Not tackling health benefits is not an option, even it means alienating a large base of Democratic supporters, Sweeney said.
"If we say we're not going to stand up to special interests, then none of us will be standing," Sweeney said.
Sweeney made the announcement alone and was not joined by other Democratic leaders, such as Assembly Speaker Shelia Oliver. Sweeney downplayed their absence, saying this is his reform bill and that he believes party leadership is serious about reform.
Under Sweeney’s proposal, all public employees would pay a percentage of their premium instead of the current system that requires them to pay at least 1.5 percent of their salary, according to officials.
The increases would be phased in for current employees over seven years and would be applied on a sliding scale depending on their salary. Newly-hired employees would pay the highest rates immediately and not have the benefit of the phase in, Sweeney said.
For example, in the first year, public employees who make less than $30,000 would pay 2 percent of their premium, while those who earn more than $100,000 would pay 12 percent, according to a chart.
When fully implemented after the seventh year, the lowest income workers would pay 12 percent of their premiums, while top earners would pay 30 percent, according to the chart. The annual payments would range from $2,280 to $5,700 a year.
Gov. Chris Christie has called for all public employees to pay 30 percent of their premiums on gradual basis, regardless of income. It’s unclear whether Christie supports Sweeney’s version.
Current retirees, most of whom pay nothing for their medical benefits, would not be subject to the increase under both the proposals advanced by Christie and Sweeney. All increases would go into effect at the start of the next union contract.
Like Christie, Sweeney will also call for the creation of multi-tiered benefit plan where employees can pay less for less coverage and more for increased coverage, officials said.
Taxpayers last year paid more than $4 billion for public employee health benefits.
Unlike the laws governing public pension plans that typically require payments each year to fund the current and future costs, retiree medical benefits rules allow states to "pay as you go," which means they pay on the current cost each year and ignore the long-term price tag.
For New Jersey, that long-term price tag is nearly $67 billion — about $13 billion more than the state’s pension deficit. And while the pension funds have $48 billion on hand, the state hasn’t saved a dime for medical benefits.
New Jersey has the highest unfunded liability and annual medical benefit costs in the nation, according to an analysis by the Center for State and Local Government Excellence,