TRENTON, NJ — Police and firefighter unions were given Assembly approval to manage their own pension and health benefit system today, and they don’t have to ensure that it will be properly funded before making changes.
Assemblyman Edward H. Thomson urged the majority to protect taxpayers and pensioners with an amendment requiring that the pension system be on its way to full funding despite whatever changes the union wants to make. It was blocked by a party-line vote 50 to 21. Thomson called for a substitution of the bill for his own bill with the safeguards in the Assembly appropriations committee last week but got the same result.
“I agree that the police and fire retirement unions should be given the opportunity to manage their own system,” said Thomson (R-Monmouth/Ocean), who represents the 30th Legislative District, which includes Belmar and Lake Como. “But as an actuary I have grave concerns that this bill is lacking the true funding benchmarks and safety nets to protect pensioners and taxpayers.”
Actuaries recommend a minimum target funded ratio of 80 percent before changes should be made to a pension system. New Jersey’s funded ratio for the police and firefighter’s retirement system is only 64 percent, while unfunded pension liabilities increased by over $26 billion last year according to the state’s debt affordability report issued last week.
“Even further, the courts have reduced benefits retroactively for pensioners in Rhode Island. Retroactively cutting benefits for all pensioners is a very real possibility in the near future for our state,” said Thomson.
In January the First U.S. Circuit Court of Appeals ruled that Rhode Island doesn’t have to fund its pension and health benefit system, giving the state the ability to retroactively cut benefits. As a result, current employees and even retirees have had their pension and health benefits cut to reduce the Rhode Island’s unfunded liability instead of raising taxes.
According to the Mercatus Center, Rhode Island was ranked 38th in fiscal condition last year and New Jersey was ranked dead last.
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