News
Corzine's Pension Deferral Proposal
By Ryan Fennell
TRENTON - Governor Jon S. Corzine has proposed a pension deferral initiative that would provide reductions in the contributions municipalities must make to the Public Employee's Retirement System and the Police and Fireman's Retirement System.
The initiative narrowly passed the Senate Budget and Appropriations Committee on December 11, 2008 with an 8-6 vote. However, the bill was pulled from the Senate floor on Monday and was not voted on in the last session of the state Legislature for 2008.
The proposal would have allowed municipalities to defer fifty percent of their required contribution in 2009 followed by a forty percent deferral in 2010 and a twenty percent deferral in 2011. Municipalities would be required to return to a full contribution in 2012 and also begin paying back the deferred money, with 8.25 percent interest, over 30 years.
The proposal has been uniformly opposed by state Republicans who feel that the over $500 million dollars in savings associated with the proposal can be found by other means.
"We had been pitching for awhile that we need to do our best to leave more money in people's pockets," said Assemblyman Declan O'Scanlon (D-12). "We said when (Corzine) cut property tax relief and direct aid to municipalities, which amounted to about half a billion dollars, we proposed restoring that (with other cuts) which is exactly the same amount Corzine is proposing now, all of a sudden saying we do need to leave more money in people's pockets when he rejected it out of hand when we proposed it."
According to O'Scanlon, early on in the 2008 budget process state Republicans proposed restoration of municipal aid through other cuts that they specifically identified.
"Our proposal, when we made it in the budget process, was very reasonable," O'Scanlon said. "We suggested making responsible cuts and maintaining our level of property tax relief which would have left half a billion dollars in people's hands and Corzine rejected it out of hand."
"The initiative attempts to phase into 100 percent contribution over three years in these difficult economic times," Treasury Department spokesman Tom Vincz said. "It is so the expense is not to be shouldered by the taxpayer at precisely the wrong time."
According to Vincz, municipalities would have the option to either pay fifty percent the first year, sixty percent the second year, and eighty percent the third year before returning to 100 percent in 2012, or if a municipality wishes to pay the full amount in 2009 the state would put fifty percent toward the contribution and place the remainder in a separate account that could be used toward the contribution in the subsequent years.
"Municipalities would have the option to use the principle and earnings to help offset future payments," Vincz said.
O'Scanlon believes that this proposal would only press municipalities further into debt and make it that much harder to climb out.
"In this economic downturn nobody thinks it's going to be over in one year," O'Scanlon said. "It's going to be several years and it's just going to make it harder to dig out from underneath this mess we're in and prolong the economic downturn we all agree we are in."
"Whatever we do to get this money into people's hands, which we believe we ought to, it must be offset with budget cuts from other places. That is the right way to help New Jersey survive this crisis," O'Scanlon said.
"If they ultimately want to do a pension deferral contribution the way to do it is not to skip the payment," O'Scanlon continued. "The way to do it is to cut the budget in other places and have the state make the payment. That way you are giving a break but not slamming people in subsequent years. The State of New Jersey has no money. If you don't have offsetting cuts you're being irresponsible."
On Monday Corzine released a statement regarding the removal of the bill from the senate and addressed those opposed to the initiative.
"I assure you that those same people will be griping enormously when we have to balance the budgets with across-the-board cuts in municipal aid. Property taxes will rise and the state will be blamed for doing nothing," Corzine said. "I think those people who vote against this will have to explain to their taxpayers why property taxes are skyrocketing. I see no prospects for increased municipal aid, and I see substantial prospects for more cuts. The people who voted against us are just saying that this is what they prefer."
