Benefits, pensions under scrutiny in property tax push

8/9/2006, 2:33 p.m. ET By TOM HESTER Jr. The Associated Press

TRENTON, N.J. (AP) — New Jersey must balance paying the benefits and pensions promised to 740,000 current and retired government workers with cutting the state's highest-in-the-nation property taxes, lawmakers said Wednesday.

But how to do that remained uncertain as a special committee looking to cut the Garden State's heavy property tax burden by reforming public worker benefits met for the first time. Lawmakers vowed to consider all ideas as the panel devises its recommendations.

"We must be realistic about the problems that we are facing here," said Sen. Nicholas Scutari, D-Essex, the panel's co-chairman. "Waving a magic wand is not going to fix what ails us."

The special committee is among four formed to complete property tax reduction recommendations by Nov. 15 as part of a plan to reform the state's tax system by the end of the year. The state has the nation's highest property taxes, with property owners on average paying about $6,000 per year.

Publicly funded benefits for state, county and municipal government workers, as well as school workers, are among the areas lawmakers hope to target.

The state will spend nearly $3 billion this year on public employee benefits and pensions. Health care costs have climbed from $750 million in 2002 to about $2 billion. By 2010, health and pensions benefits are projected to cost the state about $6 billion.

Such costs devour money that could otherwise go toward property tax relief.

Local governments owe $650 million this fiscal year for public employee, police and firefighter pensions. Property taxes are the only way for local governments to fund such contributions.

State Sen. Bill Gormley, R-Atlantic, a member of the benefits committee, said the panel's effort must coincide with contract negotiations with the state worker unions. State labor contracts expire July 1, but Gormley said the committee can't make decisions about pensions and other benefits unless it knows what health benefits will be negotiated.

"We can't wait for the spring," Gormley said. "We really have to know what the benefits package is now."

He called for Gov. Jon S. Corzine's administration to immediately start negotiations. Corzine, who is on vacation in Italy, has said he wants to start talks in September, and state worker unions said Gormley and his fellow lawmakers cannot get involved in negotiations.

"They're not sitting at the bargaining table last time I looked," said Chris Shelton, a vice president with the Communications Workers of America.

The administration negotiates contracts. The Legislature gives them final approval.

Shelton and another CWA official, Bob Master, indicated the unions will fight any bid to reduce state worker benefits or create a different system for newly hired workers. Master predicted a "tough round of bargaining."

"We cannot solve the state's problems on the backs of the workers," Shelton said.

Scutari was unmoved by Gormley's demand for immediate contract talks.

"That may be difficult," Scutari said.

As the panel works in the coming months, Scutari said it will consider a report completed in 2005 by a task force appointed by then-Gov. Richard J. Codey.

That panel recommended numerous changes that could, if all were implemented, save state and local governments an estimated $1.7 billion per year.

Among other things, the task force recommended:

_Restricting end-of-career salary hikes that help boost pensions.

_Requiring employees to designate a single job to base a pension upon.

_Basing a pension on the average of five highest salaries as opposed to the three highest salaries.

_Barring pensions for professional service contractors and vendors.

_Requiring 401(k)-type retirement plans for elected officials and political appointees.

_Increasing the public employee retirement age from 55 to 60.

_Requring all current and retired employees to contribute to health care.