Christie's Pension Proposals Spur New Jersey Government Worker Retirements

New Jersey Governor Chris Christie’s proposals to cut pension benefits and raise government workers’ health-insurance payments contributed to a 60 percent jump in retirements in 2010 as more than 20,000 people filed to leave.

The number of applications is the most in at least a decade, according to data from the state Treasury Department. Teacher retirements surged 95 percent, the largest increase of any public-sector group, as 7,132 educators submitted papers last year, up from 3,663 in 2009.

Christie, 48, a first-term Republican, urged legislators in September to roll back a 9 percent benefit increase enacted in 2001, raise the minimum retirement age to 65 from 62, increase worker contributions and freeze cost-of-living raises to help reduce a $53.9 billion deficit in the state’s pension system.

“Government doesn’t seem to want us anymore,” said Rae Roeder, president of Communications Workers of America Local 1033, which has about 7,000 members in the divisions of treasury, education and law and public safety. “People are saying it’s time to get out -- ‘I’m going to take what I can and see if I can survive this mess.’”

Union Battles

During his first year in office, Christie tangled with the New Jersey Education Association, the union representing 200,000 current and retired educators, over pay, benefits and tenure. Last April, voters overturned a record 59 percent of school budgets after Christie urged them to do so in districts where teachers didn’t accept wage freezes.

“People don’t even want to admit that they’re teachers anymore,” said Steve Wollmer, a spokesman for the teachers’ union. “People got spooked, and a lot of them jumped.”

Police and firefighters are scheduled to rally March 3 at the state Capitol to protest Christie’s cuts, according to an announcement by the New Jersey State Policemen’s Benevolent Association on its website. Jim Ryan, a spokesman for the police union, said the current year and next will be “some of the toughest in 20 years.”

“There’s been so much uncertainty that those who had enough credits retired,” he said in an interview. “The average officer doesn’t understand how this came about. They’re just doing their jobs.”

More than 3,000 union members rallied Feb. 25 in Trenton against the governor’s plans and those of Wisconsin Governor Scott Walker, who has asked lawmakers to pass a bill limiting collective-bargaining rights.

Retirement Moves

William Quinn, a spokesman for Treasurer Andrew Sidamon- Eristoff, said the retirement rush may also have been caused by people delaying such plans over the past few years because of the longest U.S. recession since the 1930s. The increase won’t widen the pension system’s so-called unfunded liability, he said.

Moody’s Investors Service said today that the current 62 percent funding level of New Jersey’s pension system would drop for several years as the state phases in contributions, and it won’t return to its current level for a decade. A new state law requires the state to make one-seventh of its pension contribution in the next fiscal year, and then increase the payment gradually each year until it is making the full amount.

Christie’s budget for the fiscal year that begins July 1 includes a $506 million pension contribution, the minimum required. The proposal, which requires passage from the Democratic-led Senate and Assembly, would be a “credit positive” for the state in the long term, Baye Larsen, a Moody’s analyst, wrote in a report.

Credit Rating

Moody’s in September lowered its outlook to negative on $31.6 billion in bonds sold by New Jersey, citing underfunded pensions, budget gaps and a slow economic recovery.

The pension gap “was a key piece of that negative outlook,” Larsen said in an interview. “Their ability in the near-term and long-term to manage that unfunded liability will be a critical component as we continue to look at their ratings going forward.”

New Jersey’s bonds are rated Aa2 by Moody’s, the third- highest investment grade. Standard & Poor’s cut its rating on the state’s debt to AA-, its fourth-highest rank, on Feb. 9, citing the state’s growing pension and health-care obligations.

U.S. governors are looking to cut the expense of their workforces as 44 states face as much as $125 billion in budget deficits next fiscal year, according to the Washington-based Center on Budget & Policy Priorities.

Lawsuits Filed

Government workers in Colorado, South Dakota and Minnesota have already filed legal challenges to attempts by politicians to pare back pensions as 18 states look to reduce benefits. Christie, a former federal prosecutor, has said he doesn’t mind breaking promises to pensioners.

More than 10,700 state and local government workers filed retirement papers last year, up from 7,370 in 2009, the Treasury data show. Police and firefighter retirements surged 45 percent as 2,317 applied for pensions in 2010.

“It tells you how rich the benefits had become,” Michael Drewniak, a Christie spokesman, said in an e-mail, referring to the rush of retirements. “Someone had to do something to stop the escalation, and it had to start sometime.”

Christie’s administration will conduct negotiations with unions representing about 51,000 government workers whose contracts expire this year, including the Communications Workers of America, the American Federation of State, County and Municipal Employees and the International Federation of Professional & Technical Engineers, Drewniak said.

The governor is seeking to make all public employees pay 30 percent of their health-insurance premiums, up from the current 1.5 percent of their salaries, to help close a $66.8 billion gap in the cost of providing medical care to retirees.

To contact the reporter on this story: Terrence Dopp in Trenton, New Jersey, at tdopp@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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