Trenton, NJ – Nearly two years after historic, bipartisan pension reforms were signed into law by Governor Christie, local governments continue to witness the substantial savings on their pension costs compared to just two years ago when an unreformed system caused a precipitous increase in the cost of public employee pension and health benefit costs to New Jersey property taxpayers.
Pension bills for Fiscal Year 2014, which are being conveyed this week to local governments and school districts throughout the state, will produce projected savings of $540 million statewide compared to what these governments and school districts would have had to pay if pension and other reforms had not been enacted in 2011.
“The tough decisions we made in 2011 to get our pension and benefit costs under control are paying dividends every year for New Jersey’s overburdened Monmouth County property taxpayers,” said Governor Chris Christie. “The combination of pension and benefit reform and other bipartisan reforms such as the 2 percent cap on annual increases in local property taxes, the reform of interest arbitration and promoting shared services are all bringing well-deserved relief to middle-class taxpayers.”
The total savings from pension reforms and reform-enabled revisions to assumptions on future salary growth and investments now amount to nearly $1.3 billion statewide, including $34.61 million for Monmouth local government – municipalities, counties and other local government units – when compared to the costs local governments would have had to absorb without Governor Christie’s bipartisan reforms.
The total amount that local governments and school districts will have to contribute to PERS and PFRS in Fiscal Year 2014 will be $1.57 billion, compared to the $2.11 billion they would have had to pay without reform.
“This is a great example as to how bipartisan state-level reform can pay big dividends for Monmouth County taxpayers.” said State Treasurer Andrew Sidamon-Eristoff. “Thanks to pension and other reforms under Governor Christie’s leadership, local governments will save approximately $540 million overall, an amount that is equivalent to 37 percent of total budgeted municipal aid in Fiscal 2014.”
Once the pension reforms of 2011 took effect and the initial $257 million in first year savings were achieved, it was anticipated that on a year-to-year basis there would be increases in required contributions from this new, lower starting point to reflect changes in actuarial experience and investment performance.
In Fiscal Year 2014 there will be a 11.15 percent increase in actuarially recommended contributions to the Public Employees Retirement System (PERS) and a .28 percent reduction in recommended contributions to the Police and Firemen’s Retirement System (PFRS), or an aggregate increase of 5.68 percent.
These contribution rates are based on actuarial calculations that weigh a large number of factors. These include the longer than anticipated life expectancy that plan participants are enjoying in retirement and a small reduction in the anticipated rate of return on the pension plans assets from 7.95 percent to 7.90 percent to reflect current market realities and investment performance in Fiscal Year 2012 that fell short of the expected rate of return even though it exceeded that of many other large institutional funds.
These factors were offset somewhat by reductions in anticipated wage increases for plan participants, increased contributions from individual plan participants and lower benefit levels for new hires adopted as part of the reforms in 2011 for many of the State’s pension systems.
The breakdown of the $34.61 million in newly announced savings for Fiscal Year 2014 for Monmouth County local government – municipalities, counties and other local government units – is attached to this release. A full breakdown for every local government unit in New Jersey can be found at http://www.state.nj.us/treasury/pensions/pdf/financial/2014-pers-pfrs-ch78-compare.pdf.
Local governments throughout New Jersey make annual contributions to PERS and PFRS to fund pension benefits for their employees and these contributions are one of the largest components of their budgets.