The Can’t Lose New Jersey State Worker Contract

Last Saturday, we explained what a great deal Governor Jon Corzine has negotiated for New Jersey’s state workers. The average worker will receive a 35 percent increase in salary over the four-year contract - 13.6 percent in wage scale increases, the balance in incremental salary increases.

Yesterday, we explained how the “major concession” on health insurance benefits was actually another Corzine giveaway to the unions. Some employees, those enrolled in the NJ Plus medical insurance plan, will have to start contributing towards their health insurance. Workers currently enrolled in the state’s indemnity (Traditional) and HMOs plans already make contributions. Now all workers accepting health insurance from the state will pay 1.5 percent of their salary for medical benefits. Where’s the concession?

As we’ve explained before, state workers are “contributing” towards their benefits with the extra money the state’s giving them in four straight years of wage scale increases. As the union explained to state workers, “We made them raise the overall wage package in order to pay for the 1.5 percent cost.” The wage scale increases of 3 percent in each of the first two years and 3.5 percent in both of the final two years of the contract more than covers the new employee contribution requirements.

Still, there are state workers who feel this is a bad deal for them, especially in the long run because of the precedent setting health insurance contribution. They fear future increases to employee contributions for medical benefits in subsequent contracts. They fail to realize the 13.6 percent wage scale increases are locked in forever and there’s no way they lose in the long run with this new contract.

Let’s look at several scenarios to prove our point – it’s better for state employees to take the offered wage scale increases (across-the-board raises) now and contribute toward health insurance. In the short and long run, the state worker comes out ahead even if he never receives another salary increase and the state ratchets up the percent of salary for medical coverage in future contracts.

The following scenarios use the average salary for a New Jersey state worker of $54,742 for 2006. To make things less complicated, we’ll also assume the employee is at the maximum salary for his position and not eligible for any incremental salary increases - ever.

Scenario #1
He receives no across-the-board salary increases, but he never contributes towards his health insurance. He retires in 2050.

He will have earned a total of $2,408,648.00 and contributed a total of $0 for health insurance from 2007 through 2050. His net total salary is $2,408,648.00.

Scenario #2
He receives the across-the-board salary increases per the 2007-2010 contract of 3%.3%, 3.5% and 3.5% and pays 1.5 percent of his salary for health benefits. He never receives a salary increase of any type for the rest of his working years. He retires in 2050.

He will have earned a total of $2,725,552.23 and contributed a total of $40,883.28 for health insurance from 2007 through 2050. His net total salary is $2,684,668.94.

The employee is ahead by $276,020.94 under Scenario #2.

Scenario #2a
In the 2011-2014 contract he’s forced to start paying 3 percent of his salary for health insurance and there are no across-the-board salary increases. No incremental raises either.

He will have earned a total of $2,725,552.23 and contributed a total of $78,210.63 for health insurance from 2007 through 2050. His net total salary is. $2,647,341.60.

The employee is ahead by $238,693.60 under Scenario #2a.

Scenario #2b
Under the 2015-2018 contract he has to start paying 6 percent of his salary for health insurance. Still no raise.

He will have earned a total of $2,725,552.23 and contributed a total of $145,399.85 for health insurance from 2007 through 2050. His net total salary is $2,580,152.38.

The employee is ahead by $171,504.38 under Scenario #2b.

Scenario #2c
It’s now the 2019-2022 contract and it’s still bad news for our employee – no salary increase and he’s forced to start paying 9 percent of his salary for health insurance.

He will have earned a total of $2,725,552.23 and contributed a total of $205,123.60 for health insurance from 2007 through 2050. His net total salary is $2,520,428.63.

The employee is ahead by $111,780.63 under Scenario #2c.

Scenario #2d
We’re now in the 2023-2026 contract and still no salary increase. He now has to start paying 12 percent of his salary for health insurance.

He will have earned a total of $2,725,552.23 and contributed a total of $257,381.88 for health insurance from 2007 through 2050. His net total salary is $2,468,170.35.

The employee is ahead by $59,522.35 under Scenario #2d.

Scenario #2e
It’s now been 20 years and the 2027-2030 contract is not good to our employee. Still no salary increase and he has to start paying 15 percent of his salary for health insurance.

He will have earned a total of $2,725,552.23 and contributed a total of $302,174.69 for health insurance from 2007 through 2050. His net total salary is $2,423,377.54.

The employee is ahead by $14,729.54 under Scenario #2e.

Even under these worst case scenarios, no salary increase for 40 years and health insurance contributions rising to 15 percent of salary, the employee is still be ahead of the game. We all know this won’t happen. Between now and 2050 most state workers will receive incremental salary raises and additional wage scale increases in future contracts. There is no way for a state worker to lose under this new contract. Taxpayers are another story.