New Jersey Gov. Jon Corzine yesterday announced an initiative that would allow local governments to temporarily postpone 50% of their required pension contributions over three years as opposed to making full payments in April.
The governor said the plan, which requires legislative approval, would generate $540 million of savings for municipalities, school districts, and counties across the state. Corzine announced the proposal at the New Jersey League of Municipalities annual conference in Atlantic City.
"By taking this unusual but necessary step, my intent is to help our municipalities get through this recessionary period at the same time we dramatically reduce the pressure on property taxes," Corzine said.
Yet the governor stressed that this is a temporary initiative to help local governments maintain essential services in a weakening economy and that larger payments in the future will need to make up for the smaller contributions.
"Let me be clear: this is only a deferral," Corzine said. "We will again require 100% funding by 2012 - and those payments will be larger so as to compensate for the lowered level of contributions over this three-year period."
In response to the governor's proposal, Sen. Kevin O'Toole, R-Bergen, Essex, pointed to those anticipated higher pension payments and said that residents would need to take on higher taxes in the future to help meet those contributions.
"Gov. Corzine's latest scheme is an election-year gimmick that will cause property tax bills to skyrocket after the next election," O'Toole said in a prepared statement. "This plan does not save taxpayers any money. Property taxpayers will shoulder an even greater tax burden in the three years following the gubernatorial election as municipalities raise taxes to pay for this year's pension obligation. Instead of showing leadership and choosing to govern responsibly, [Corzine] has again shown his willingness to push current expenses onto future taxpayers."
The governor said he prefers suspending pension payments on a temporary basis as opposed to raising the state's current 4% limit on property tax increases, a move that could help local governments generate enough revenue to meet 100% of their pension payments. Municipalities, in total, paid $696.4 million in police and fire pension contributions in fiscal 2009 compared to $639.7 million the year before, according to NJLM executive director Bill Dressel.
"In the absence of the deferral, some communities would have to raise taxes unbearably at precisely the wrong time or potentially break a basic covenant with the public by compromising the quality of public safety, education, or in providing a safety net for the most vulnerable," Corzine said.
Any hope for additional state aid seems unlikely. The state is facing a $1.2 billion deficit in the current fiscal 2009 budget, which began July 1. Administration officials said they will identify more than $600 million of cuts in the executive branch to help offset the shortfall, along with other spending reductions.