Gov. Chris Christie has been touting the need for new reforms to the pension and health care programs for public employees during his town hall meetings this summer. A ranking Republican legislator predicts that skyrocketing health benefit costs for public employees in New Jersey will cripple the state’s budget in less than six years.
State Assemblyman Declan O’Scanlon (R-Monmouth), who serves as the GOP budget officer in the Assembly, said last week that he is hoping to unveil a package of reforms before the end of the year in an effort to stave off the growing cost of health benefits.
“The state of New Jersey’s fiscal health is precarious. You can’t argue with the math,” he said. “The commitments that some well-meaning — but irresponsible, nonetheless — previous New Jersey officials made will crush the taxpayers of New Jersey.
“If we don’t have [reform], this all explodes. And somewhere between three and six years from now, this is going to come to a head.”
O’Scanlon’s comments came a week after Gov. Chris Christie said during a town hall meeting in Long Branch that the state will pay more in benefits for retired employees than for active employees over the next year.
Though he did not present a specific plan, O’Scanlon said the reforms must result in employees contributing more for health care. “[Public benefits] are extremely generous. The overwhelming majority of the people in the private sector don’t get health benefits from their employers anywhere near what public sector employees get,” he said. “That has got to change.”
However, the state should focus more on driving down premium costs rather than increasing contributions, according to Kevin Lyons, a spokesman for the New Jersey State Patrolmen’s Benevolent Association.
“Almost every plan the state has come up with to save costs is nothing more than cost shifting,” he said. “That has nothing to do with the exorbitant prices we are paying.” Lyons said Christie’s 2011 pension reforms led to a rush of retirements that are now in the system.
“So, essentially what the government has done is attempted to break the system even worse and incentivize people to retire,” he said. “Now you are paying more people who are retired, rather than people who would make contributions to the pension system.”
Lyons said PBA sources have indicated that while Christie’s assessment was current, retirees generally cost the state less because they have fewer dependents and are more likely to use Medicaid as a primary provider.
While Lyons was critical of previous reforms, O’Scanlon said the much-discussed pension reform has resulted in a nearly 50 percent decrease in state pension costs.
If the health benefit problem isn’t dealt with properly, the taxpayers will bear the brunt of it, he said.
“If New Jersey becomes insolvent, nobody is well-served — public workers included,” he said. “There are ways and changes to that system that will rein in those costs.
“If the bills are going to be egregious and we rely on tax increases, you are talking about dramatic tax increases that will crush New Jersey’s economy.”
During his Aug. 19 town hall meeting, Christie said the pension and health benefit programs collectively are more than $40 billion in debt, and the state would have to raise $4 billion in additional tax revenues to make the required pension payments for the next four years.
However, Lyons said there are several mechanisms — including county-operated patient care centers for public employees, prescription drug reform, wellness programs, and increasing emergency-room copays to give employees an incentive to seek other options for nonemergency care — that would drive costs down.
“The emergency room is the most expensive thing in the world because of charity care,” Lyons said. “They have to charge enormous numbers in order to make their bottom line black.”
Patrick Colligan, state PBA pension coordinator, said the union would hold a meeting in September to discuss various proposals to lower costs.
“It’s the unions that are trying to help to keep costs down and work on the premiums,” he said. “We are the ones that have to address the cost savings, and the state hasn’t made any effort to help us along the way.”
Colligan said he hopes state officials include PBA representatives in the planning process, and that the reforms are not “shoved down our throats like Chapter 78 was.”
Steve Baker, spokesman for the New Jersey Education Association, said the escalating costs should have already been addressed.
“These are not things that should be coming as a surprise to anybody,” he said. “You can pretend like this is something that you just discovered this year, but these are things that the state has been aware of [and] we have been aware of.
“We have not seen, with the exception of 2011, a surge in retirements, so it is going to be something where the state is going to have to continue to meet its obligations.”
Baker said the state would be best served by building the health care costs into the annual budget.
“You need to build that into the budget. You have to understand and acknowledge that you made these promises and you need to live up to these contractual obligations that you have,” he said. “You need to have a long-term plan.”