Christie, a first-term Republican, and Sweeney, a West Deptford Democrat, will announce the agreement at a press conference in Trenton later today, said the people, who declined to be identified because they weren’t authorized to speak publicly about the deal.
The governor has been urging the Democratic-led Legislature since September to pass measures designed to reduce a $53.9 billion deficit in New Jersey’s pension system. His agreement with Sweeney is projected to save state and local governments $122 billion over the next 30 years in pension costs alone, according to a memo provided by a person familiar with the accord. Health-care savings weren’t detailed.
“It’s definitely positive given how the rhetoric has been so adversarial,” said Dan Solender, who oversees $14 billion as head of municipal bonds at Lord Abbett & Co. in Jersey City. “The more years the funding is deferred, the bigger the issue becomes.”
Michael Drewniak, a spokesman for Christie, declined to comment in an e-mail. Derek Roseman, a spokesman for Sweeney, and Tom Hester, a spokesman for Assembly Speaker Sheila Oliver, declined to comment on the agreement, which needs approval from both legislative houses.
New Jersey’s pension system, providing benefits to almost 800,000 current and former workers, has a deficit that grew 18 percent in a year from $45.8 billion as of June 2009 as the state failed to make contributions. Nationwide, states are grappling with pension-funding gaps of as much as $479.5 billion, according to data compiled by Bloomberg.
Christie skipped a $3 billion pension payment last year, saying he wouldn’t put more money into a “broken” system. The governor will make a $759 million payment as soon as lawmakers approve his overhaul plan, Treasurer Andrew Sidamon-Eristoff said in May.
The pension underfunding and rising health-care costs were cited as concerns by Moody’s Investors Service in April when the credit-rating firm downgraded the state’s debt one step to Aa3, the fourth-highest level.
The agreement between Christie and Sweeney aims for 80 percent funding of the pension system within 30 years, up from the current 62 percent, the people said. State and local government employees and teachers would face an immediate increase in pension contributions to 6.5 percent from 5.5 percent, and another increase to 7.5 percent phased in over seven years, they said.
U.S. public pension funds have 76.1 percent of the assets needed to meet their retirement payments, according to a survey of 215 plans released today by their trade association. The funds surveyed, which have $900 billion of assets and cover 7.6 million workers, are making changes “to ensure their long-term sustainability,” said the report from the Washington-based National Conference on Public Employee Retirement Systems.
Under the agreement between Christie and Sweeney, judges would move to 12 percent pension contributions, from 3 percent, while police officers and firefighters would face an immediate pension contribution increase to 10 percent from 8.5 percent, the people said.
The agreement also would raise the minimum retirement age to 65 years old, from 62. It would abolish annual cost-of-living raises until the pension system reaches 75 percent funding, at which time a newly formed board would have the discretion to reinstate the adjustments, the people said.
The deal would phase in higher health-care premium contributions over four years, the two people said. The levels would be based upon earnings in order to shield low-income workers. The people declined to disclose a target for the increased payments. Christie has called for workers to contribute 30 percent of the cost.
Currently, government employees contribute 1.5 percent of their salaries toward health-care premiums, an average of about 8.5 percent of the cost. The accord between Sweeney and Christie would change that to have workers pay a set proportion of premiums. Employees with 25 years or more of service, or those 55 and over, wouldn’t see any changes in their health-care plans, according to the memo detailing the plan.
Another change in the accord would alter the way in which government worker contracts are settled in cases of an impasse. The deal would also end the governor’s right to impose a contract if the state can’t reach an agreement with labor, instead moving to mediation.
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