Dear Mayor:

In a letter to the Co-chairs of the Joint Legislative Committee on Public Employee Pensions and Benefits, which held its maiden meeting in Trenton today, League of Municipalities’ Executive Director Bill Dressel outlined the impact of past Legislative actions on current and future property tax rates. He also offered some suggestions and the League’s assistance, as the Committee grapples with major costs driving local budgets. Click here for a copy of the letter.

On July 31, the Divisions of Pensions released pension billings to local governments for the Police and Fire Retirement System (PFRS) and the Public Employees Retirement System (PERS). Those payments are due as of April 1, 2007. The aggregate amount local employers must budget for is $650,263,998. In the aggregate this number is shocking!

The cost that will be born by local property taxpayers in 2007 will be $9,561.90, per each and every member of PFRS and $1,089.10 for each PERS member. The pension benefits local employers must fund for PFRS participants is nine times greater than the cost of PERS. Such a significant cost differential has resulted from basically three causes. First, State mandates through legislative enhancements granted over the objections of the League of Municipalities. Second, non-salary items such as holidays, clothing allowance sick time and vacation pay plus other non-salary benefits are rolled into the pension base as permitted by the Division of Pensions and the Board of Trustees in spite of the “credible salaries” definition found in N.J.A.C. 17:4-4.1(a)2vi. The third major cause is salary arbitration awards, which were well documented in the Bergen Record’s recent “Runaway Pay” series.

The League has asked the Committee to address these matters, as well as: the eligibility criteria for membership in PERS, which currently has a threshold of $1,500; salary padding during the final years of employment; an increase in the retirement age for new hires; movement towards a defined contribution system for elected officials and non-career appointees; and a recognition of both the State and local moral obligation to fund the employer’s portion of pension costs.

The League urges the Committee to advance cost saving reforms to address the health care cost crisis, which affects both the State of New Jersey and its political subdivisions.

For more information on this, contact Jon Moran at 609-695-3481, ext. 21.