New Jersey lawmakers may vote as early as Thursday on an initiative that would allow municipalities to defer a portion of their pension contributions until fiscal 2012, a move that would generate an estimated $584 million for local governments in fiscal 2009.
The General Assembly’s Budget Committee last week passed the bill, A3688, in a seven-to-five vote. The chamber’s next voting session is Friday.
Gov. Jon Corzine, who announced the initiative in late November, said lower pension contribution payments will help local governments keep property taxes in line. He has pledged that the state’s Local Finance Board will strictly enforce rules that say municipalities must stay within New Jersey’s 4% property-tax levy. Rising pension costs could prompt cities and towns to boost property taxes to meet the state’s current 100% pension contribution requirement.
The bill would allow for a 50% contribution this year, and 60% and 80% payments in fiscal 2010 and 2011, respectively. Municipalities would again pay 100% contributions in fiscal 2012.
Many Republican lawmakers, labor unions, and heads of the various retirement funds say delaying pension contributions would only exacerbate pension costs in the future.
A fiscal analysis of the bill indicates that while municipalities would save money in the short term, pension contribution costs would increase by $63 million beginning in fiscal 2012, “yet this amount will change over time because the unfunded liability will be amortized over decades.”
The Senate version of the measure, S7, passed through the Senate Budget and Appropriations Committee on Dec. 11. That chamber has yet to put up the measure for a vote.
