Scaling down retirement and health benefits for newer public workers and merging elementary- and middle-school districts were among the recommendations outlined Thursday by the Economic and Fiscal Policy Working Group commissioned by Senate President Stephen Sweeney to develop ideas to get the state out of a financial morass.
“We’re in a crisis right now, it’s here, it’s now, it’s not four years for now, it’s now,” said Sweeney, D-3rd District, at an afternoon news conference in Trenton. “We’re going to be billions in deficit.”
The 25-member blue-ribbon panel, which was commissioned in February, also recommended additional fixes including using tolls collected on the New Jersey Turnpike to help replenish the state’s underfunded pension system and having smaller towns share services such as policing.
The recommendations potentially could overhaul many of the state’s key fiscal and government policies, all aimed at confronting the myriad financial and operational problems it faces.
Notably absent from the group were members of the executive branch. Sweeney maintained he proposed a “partnership” with the governor’s office to have representatives be part of the panel. No one from the Murphy administration was immediately available to comment on Sweeney’s assertion.
Murphy did issue a statement saying he looked forward to reviewing the group’s recommendations, adding his administration “stands ready to listen to any and all ideas on how to build a stronger and fairer New Jersey without unfairly burdening the middle class.”
“This administration inherited a fiscal mess, taking office after eight years when the conventional wisdom in Trenton was to keep millionaires and billionaires from paying their fair share while slashing benefits for middle-class workers. Our problem isn't simply how much state government spends — it's how,” Murphy said. “Protecting tax breaks for the wealthiest and special interests while asking the middle class to shoulder more and more of the burden isn’t fair and is the wrong approach to getting our fiscal house in order.”
The recommendations still have to be taken up for a vote in the Legislature, and Sweeney conceded not all would reach fruition. Some of the suggestions are almost certain to draw the ire of public sector unions and school officials.
Among the lawmakers on the committee were Senate Budget Chair Paul Sarlo, D-36th District; Sen. Steve Oroho, R-24th District; and Assembly Majority Leader Lou Greenwald, D-6th District.
One recommendation calls for school employees and state and local government workers to move to less expensive health care plans, while future retirees would have to contribute a higher cut of their paycheck to health benefits.
Another calls for altering the retirement benefits of new public employees and those with less than five years on the job.
“New Jersey is at a crossroads. We’re beyond the crossroads — we’re in trouble. If we don’t make some changes, we will not be able to make our obligations,” Sweeney said.
Incomes of up to $40,000 would be pensionable, but anything above that would be subject to a 401 (k)-style retirement plan. And unused sick leave payouts would be capped at $7,500 for people below the $40,000 threshold, while freezing it for anyone above that mark.
Sweeney said the federal Trump tax cuts, which capped state and local tax deductions, have been a significant game-changer for the state’s economy. To alleviate the impact of the $10,000 cap on SALT deductions, the panel recommended allowing businesses to form S-corporations to reduce the amount of taxes they would have to pay.
The proposals also call for merging hundreds of K-6 and K-8 school districts into much larger, regional K-12 districts. Towns also would share services such as snow removal and policing, which would trigger redundancy layoffs.
The New Jersey Education Association, the state’s largest teachers union, said Sweeney, “chose millionaires over the middle class.”
“Despite spending several months meeting, Sweeney’s Economic and Fiscal Policy Working Group issued a report that consists largely of rehashed and rejected proposals that target middle-class public employees for deep cuts while glossing over the state’s responsibility to live up to its long-neglected obligations,” said the NJEA in a statement.
Another panel recommendation calls for establishing a gross income tax deduction for contributions to New Jersey-based charitable organizations.
“New Jersey is a very tax-sensitive state, and we have to find a way to make it more affordable,” Sweeney said.
Another recommendation calls for ramping up how much money goes toward school districts under the payment in lieu of taxes (PILOT) program that features long-term tax exemptions towns are granted to attract businesses and investment.
Municipalities would also be subject to more stringent regulations for how they are able to dispense those tax credits.
Reaction to the committee’s recommendations from lawmakers on both sides of the aisle was swift.
"Affordability is a real issue for New Jerseyans. I commend the panel for their commitment and contributing their time and expertise towards this noble effort to address property taxes and other critical issues facing our state,” said Assembly Speaker Craig Coughlin, D-19th District, in a statement. “Now that the panel's list of recommendations to the Legislature has been made public, we will begin to take a thoughtful look at their proposals and seek input from our legislative members as to how to best move forward."
Senate Republican Leader Tom Kean, R-21st District, said he was confident the Legislature could work together in a bipartisan way to get many of the recommendations enacted into law.
“The members of our caucus have long championed legislative initiatives that are similar to many of the group’s recommendations, including my proposals to create a new tax deduction for charitable contributions to the nonprofits that serve our communities and to look at the efficiencies of county and local governments,” Kean said in a statement.
Meanwhile, the New Jersey Chamber of Commerce called the report "an important step in creating a better economic future for the state."
"While we need time to digest and fully analyze many of the specific recommendations, the most important accomplishment of the workgroup is that it points us in the direction that the New Jersey Chamber of Commerce has long advocated – toward a more economically competitive and affordable New Jersey," said NJCC president and CEO Tom Bracken in a statement.
But Bracken indicated several of the recommendations would still require "sacrifices and compromises on all sides."
"We need to fully vet the recommendations with all involved parties so everyone understands the direct impact and the unintended consequences that could result from them," he said.
Michele Siekerka, president and CEO of the New Jersey Business & Industry Association, called the report "encouraging."
“While these ideas will require further review and appropriate stakeholder input, there is no question New Jersey needs to plan and adopt long-term, sustainable solutions to our fiscal challenges," Siekerka said in a statement. "We need to see New Jersey’s future through the lens of regional competitiveness and affordability and many of these initial recommendations make a good first step in that direction."