By DEREK HARPER Statehouse Bureau, 609-292-4935
TRENTON - Gov. Jon S. Corzine's proposal to allow towns to defer some pension payments over the next three years narrowly cleared the Senate Budget and Appropriations committee Thursday, as unions loudly complained about the proposal and Republicans promised unified opposition. The bill, S7, cleared the committee by an 8-6 margin Thursday afternoon, with all Republicans and Senate Majority Leader Stephen M. Sweeney, D-Salem, Gloucester, Cumberland, voting against the measure. Sen. Shirley K. Turner, D-Mercer, was the apparent swing vote, voting for the measure but reserving the right to change her mind on the Senate floor.
The bill is expected to get a full Senate vote Monday, the last session before lawmakers leave for the year.
The bill would allow schools, local governments and authorities to defer half of their state pension payments due next April, followed by 40 percent in 2010 and 20 percent in 2011.
The deferred sum, plus 8.25 percent interest, would be repaid over 30 years starting in 2012.
Towns also have the option of setting up a separate account for deferrals, setting the contribution aside until 2012. The governor has said this would be a way to stave off steep property tax increases next year in the midst of a recession that has seen tax revenue plummet. Treasury spokesman Tom Vincz said the last three years of annual $1.1 billion contributions were more than what the state paid into pensions over the decade.
The bill would save the state's 566 municipalities a collective $584.3 million next year, $508.9 million the year after that and $257.5 million the third year, according to estimates by the nonpartisan state Office of Legislative Services.
But OLS estimates also said the plan would tack on between $63.5 million and $60.2 million over the three subsequent years.
It also comes as OLS expects state pension obligations - even without a deferral - to more than double from $1.06 billion now to $2.18 billion in fiscal year 2014-15.
Frederick J. Beaver, director of the state Division of Pensions and Benefits testified that he estimated the state currently has about $60 billion worth of assets to cover about $120 billion in pension liabilities.
Thursday morning's hearing started late, after legislators met behind closed doors for about 90 minutes.
Sweeney said during that time that lawmakers amended the proposal to allow local governments facing four percent caps on budget growth to not have to include deferral repayment under the cap.
Sen. Leonard Lance, appearing in the committee for the last time before he is sworn in to the U.S. House of Representatives in January, angrily attacked the proposal.
"This bill is a trifecta of fiscal horrors," said Lance, R-Warren, Hunterdon, because it reduces contributions, directly increases the state's pension unfunded liability through missed contributions and indirectly increases the unfunded liability through missed appreciation.
"The governor ran for office pledging we would not do a lot of what this bill does," said Lance, the Republican budget officer. He promised all 17 Senate Republicans would oppose it when it gets a floor vote. Legislation needs 21 votes for Senate approval.
Bob Master, legislative and political director for Communications Workers of America District 1, was the first union leader to attack the bill, calling it "hasty and ill-conceived" because of the unfunded liability increase.
Other union officials, including those from the state firefighter and police unions, spoke out against it. The New Jersey Educational Association Vice President Barbara Keshishian also questioned provisions of the bill.
But at the same time William G. Dressel, Jr., New Jersey State League of Municipalities executive director, supported the bill because the alternative was layoffs and dramatic tax increases.
"If this was normal times like last year, I wouldn't be here," Dressel said before the meeting. "I wouldn't be on this bill."