A measure to allow New Jersey municipalities this year to postpone 50% of their pension contributions now heads to Gov. Jon Corzine's desk after lawmakers yesterday approved the plan.
The bill passed the General Assembly in a 42 to 36 vote and was approved in the Senate by a vote of 21 to 17.
The governor first announced the pension-deferral initiative in November, and said the plan is an "unusual but necessary step" to help maintain essential services at the local level and keep property tax increases within the 4% levy cap.
The initiative would allow local governments a one-time, 50% cut to their pension contributions this year, in comparison to earlier bills that offered pension deferments over three years.
In addition, municipalities that opt to postpone would repay - beginning in fiscal 2012 - the deferred amount over 15 years, as opposed to an earlier, 30-year plan of repayment.
Local governments could also opt to continue making full payments to the Public Employees' Retirement System and the Police and Firemen's Retirement System, if they so choose.
Opponents of the measures say pushing out pension contributions will increase retirement payments in fiscal 2012 and beyond and strain future operating budgets at the local level.
The administration and legislative leaders say the one-time initiative is needed to help cities and counties provide essential services in a recession without raising property taxes beyond the state's 4% property-tax increase cap .
Local governments that opt to postpone would be required to detail the need for the deferral, including an inability to stay under the levy cap without risking public safety or other essential services.
Approval of the Local Finance Board, a division within the Department of Community Affairs, is required before a city or town can defer contributions.
According to the DCA, potential pension deferments this year for cities and towns throughout the state total $335 million, although that amount does not include county governments or school districts. Newark tops the list of cities, with a possible $21 million postponement.
Esmeralda Cameron, spokeswoman for Mayor Cory Booker, said Newark will defer a portion of its retirement contribution, if that becomes an option.
Following Newark is Jersey City. Brian O'Reilly, business administrator for the city, said his department will seek to postpone $14.8 million in retirement contributions this year, not to stay below the 4% cap but to help the city with cash-flow needs as development has temporarily dropped off.
O'Reilly said without the postponement option, Jersey City would need to consider layoffs in its police and fire departments.
"It's more of a source of revenue where some of the building permits have slowed down," he said. "Some of the prepayments on some of the major tax abatement projects have slowed down."
