New Jersey Gov. Chris Christie Monday is set to sign into law legislation that requires government employees to pay more for pension and health care benefits.
The Christie administration says the reforms will generate billions of dollars in savings for the state and local governments and help strengthen the state's pension fund.
The pension reform bill boosts the retirement age for new teachers and public employees to 65. The measure also eliminates automatic cost-of-living adjustments for retirees. The pension board may reinstate a cost-of-living increase for retirees if the fund reaches target funding goals.
Teachers and public employees will pay an additional 1% immediately toward their retirement, with an additional 1% increase phased in over seven years. Pension contributions for police and fire employees will increase by 1.5% while judicial employees will pay 9% more over the next seven years.
The administration calculates the pension reform initiatives will produce $120 billion of savings for the state and local governments over 30 years. New Jersey and its local governments have a $54 million unfunded pension obligation, as of June 30, 2010.
The pension reform bill aims to boost New Jersey's pension funding ratio to 88% by 2041. The initiative requires that the state make its annual payment to the pension fund or face potential litigation from state employees. Lawmakers from both political parties have missed annual pension contributions to help balance state operating budgets.
"Together, we're showing New Jersey is serious about providing long-term fiscal stability for our children and grandchildren," Christie said in a statement. "We are putting the people first and daring to touch the third rail of politics in order to bring reform to an unsustainable system."
Workers will also pay more for health insurance, with contributions based on a percentage of health care premiums rather than salary. Those increases will phase in over four years.
Christie, a Republican, anticipates the health care benefit changes will save the state $3.1 billion over the next 10 years. The state's unfunded other post-employment benefit liability is $71.4 billion.
Democrats control the General Assembly and the Senate. While Assembly Speaker Sheila Oliver and Senate President Stephen Sweeney pushed for the two reform bills, many of their fellow Democrats balked at the changes.