Local officials review new laws
By:G. Natasha Zoe
A combination of four new laws, billed as a budget balancing effort for municipalities and school boards, might not be used by Hillsborough officials because the money-saving benefits of the plan may not be as helpful as some had hoped.
On July 15, an early retirement incentive package was signed into law, allowing employees to retire early without a penalty to their benefits. The series of four bills covers employees whose retirement funds are in the Public Employees Retirement System, the Teachers Pension and Annuity Fund and the Alternate Benefit Program.
But the only way school boards and municipalities would save under the plan is if retiring employees are not replaced. According to the New Jersey Division of Pensions and Benefits, a smaller savings could be seen if retirees are replaced by employees at lower salaries. And all savings are temporary they will end whenever an employee would have retired had there not been an incentive.
Worse for the local officials, the early retirement incentive also has a price tag additional pension costs, post-retirement medical costs and payments for unused sick and vacation days. The costs, like the savings, would vary employee to employee, but are based on salary and years of service.
For those reasons, Assistant Superintendent of Schools Thomas Venanzi said he does not plan on recommending the school board use the newest municipality cost-saving measure authorized by the state Legislature.
And Hillsborough Township Administrator Judith Haas said the township is currently studying the early retirement incentives and has not made a decision yet.
"The bill does not have a timetable," said Ms. Haas. "We are studying the impact. We need to get more details on the legislation."
Among the township employees, including the Police Department, there are fewer than 15 people eligible for the incentive, according to Ms. Haas.
The Hillsborough school board researched similar early retirement incentive packages when they were offered previously, said Mr. Venanzi.
"First you have to see what people within your organization are eligible and determine what it would cost if you took advantage of the program and compare that with if you did nothing," he said. "The cost has been exorbitant. The only districts that would benefit from the early retirement programs are districts with declining enrollment. It would allow districts that no longer have a need for as many employees to get them off the rolls quicker."
"We strongly advise boards to thoroughly examine any early retirement incentive program to understand the effects of the long-term costs, staff participation in the program, and possible difficulties associated with replacing staff who retire," said Mike Yaple, spokesman, New Jersey School Boards Association.
"We recently did a survey of the 93 school districts that took part in the programs offered by the state in 1991 and 1993," said Mr. Yaple. "Half reported no significant savings, 39 percent reported savings and the remainder were unsure.
"The average repayment of financial obligations was a little over 18 years," said Mr. Yaple. "Half of the districts that repaid cost on installments said the installments were still causing a financial hardship, a decade later.
"Savings were not as clear cut as one might think," said Mr. Yaple. "One of the other things our survey found, 11 percent of districts would participate in the program again, 29 percent said they would not and 61 percent were unsure.T
"Another thing to consider, a board can not decide how many people or which people will participate," said Mr. Yaple. A school board or township can only offer early retirements to all the eligible employees. Each employee decides whether or not to retire early.
Sen. Walter Kavanaugh (R-Somerville) voted for A2639 and A3530, and against A2638 and A2640. Assemblymen Christopher Bateman (R-Branchburg) voted against all four bills. Sen. Kavanaugh and Mr. Bateman were available for comment.
Assemblyman Pete Biondi (R-Hillsborough) was ill when the bills came up for a vote and did not vote.