Pension costs continue growing

Municipal and school officials say they have planned for the added expenses in next year’s budget.

By: Paul Koepp
   Over the last three years, towns and school boards across the state, including South Brunswick, have been facing steep increases in state-mandated payments into the pension plans of their employees, and next year will be no different.
   However, most local officials say they have planned in advance for the resulting budget crunch.
   The state Treasury Department released projections July 20 estimating the amount that municipalities and school boards across the state will have to contribute in 2008 to public employee pension plans.
   Statewide, local governments will have to pay $1.056 billion for the retirement benefits of public employees, including $416 million for government workers and $640 million for firefighters and police officers. That’s a $406 million increase over this year’s total of $650 million. In 2004 the tab was just $53 million.
   Benefit costs have gone up 27 percent in the last year. In addition, the state had put off its own and municipal and school board contributions to the funds for about a decade, creating about a $25 billion shortfall in the two funds. To make up for the shortfall, increased contributions have been phased in by 20 percent each year, leading to next year’s huge jump.
   "We recognize that these contribution amounts are large and represent substantial increases from last year," state Treasurer Bradley Abelow said in a July 20 press release. "They are symptomatic of the need for New Jersey to put its fiscal house in order, which Gov. Corzine is committed to doing and is making significant progress toward."
   In previous years, the state released local governments from their obligation to pay into the pension funds, leaving the plans with a $25 billion shortfall. Starting in 2005, increases in the required payments by local government have been gradually phased in and will level off by next year.
   In South Brunswick next year, the township will be expected to pay $843,241 to the Public Employees’ Retirement System, covering government workers, compared to $480,989 in 2007. The South Brunswick Board of Education is set to contribute $986,058 to the PERS for employees not covered by the Teachers’ Pension and Annuity Fund, compared to $528,426 this year. In addition, the amount the township is expected to pay into the Police and Firemen’s Retirement System would jump from $1,035,775 in 2007 to $1,513,955 in 2008, according to the projections.
   Township Finance Officer Joe Monzo wrote in an e-mail Tuesday that the hikes were roughly the amount that had been anticipated and that they would cause an "added tax burden of 2.25 cents (per $100 of assessed valuation) even before we begin the 2008 budget process."
   However, he said they would have no effect on the 4 percent tax levy cap because the expenditures for pension contributions are outside the cap.
   An 2.25-cent increase in the municipal tax rate would raise the municipal tax bill for the owner of a home assessed at the township average of $194,400 by about $44, from $1,215 to $1,259.
   Mr. Monzo said the increases for 2009 would be much less because the phase-in of the local governments’ required contributions would be complete.
   Other local towns will be hit with similar increases.
   The Monroe Township contributions to the PERS would include $595,198 from the township, $153,975 from its municipal utility authority, and $20,657 from its three fire districts, for a total of $769,830, compared to $418,579 in 2007. The school district, which paid $221,512 into the PERS last year, is set to pay $427,289 in 2008. The township’s early retirement incentive contribution would remain steady at $68,059. Meanwhile, its PFRS contribution would increase from $563,881 in 2007 to $985,552 in 2008.
   "Anytime there’s an increase that large, it does affect the school budget," said Wayne Holliday, the school district’s business administrator. However, the school district factored the increases into the budget process because it had been told in advance to expect them, he said.
   In Cranbury, the township will be expected to increase its PERS from $49,662 this year to $91,625, while the school district’s payment would rise from $22,266 to $38,726. The township’s PFRS contribution would be $202,212, compared to $109,018 in 2007.
   Cranbury School Business Administrator Carolyn Eversole said that, with the increases in pension payments in the last few years, "something else has to give."
   "We’ve made the adjustments we’ve had to make, and we will continue to do that," Ms. Eversole said Tuesday. "Unfortunately, the ultimate adjustment is in the classroom, and the cost has to be borne instructionally by the students."
   Jamesburg’s PERS contribution would go from $28,829 to $54,434, with the school district paying $32,290, compared to $18,568 this year. The borough’s PFRS would increase from $150,542 to $245,095.
   Borough Business Administrator Denise Jawidzik said that while the pension tab would be expensive, "we should have been paying all along."
   "You can’t complain about not having to pay a bill for a couple years," she said.
   Tom Reynolds, business administrator for the school district, said he will have a better idea of the impact of the increase in January, when official figures are released, and later next year when state aid is announced.
   Addressing a potential budget crunch, he said, "We’re OK this year. Next year might be a different story."