Based upon news reports, our email inbox and comments left on this blog, there seems to be some confusion about the "fair contract" Governor Jon Corzine negotiated with the state’s union employees. The following information is provided to clear up misconceptions.

Under the new four year union contract, workers are to receive a 3 percent salary increase in years 1 and 2 and a 3.5 percent increase in years 2 and 4. Each year state employees will contribute 1.5 percent of their salary for health and 0.5 percent of salary for pension benefits.

The new contract will result in an 11 percent net increase in wages over the four year period. Using the average salary for a New Jersey State worker in 2006 of $54,742 we have the following example:

Average State Worker Salary
Under New Union Contract

But, salary is just one component of a worker’s total compensation. Total compensation -- salary plus benefits -- is what really matters to state taxpayers. Whether a tax dollar is spent on an employee’s salary or benefits really doesn’t matter - it’s still a dollar out the taxpayer’s pocket.

Health benefits for active employees are estimated to increase 13 percent annually for the next four years, an increase of 63 percent. (Total health benefit costs for active and retired employees will increase 18 percent annually) Using the average health benefit cost for an active state worker in 2006 of $13,594 we have the following example:

Average State Worker Health Benefit
Under New Union Contract

Over the four year contract period, the average salary plus health benefit for New Jersey State workers will increase from $68,336 to $83,133, an increase of 21.7 percent.

We will address the pension issue in a separate post.

Corzine Declares Victory With New Jersey State Worker Contact – Taxpayers Concede Defeat

“State officials said costs for public worker benefits, including health insurance, have increased 150 percent over five years and are expected to double by 2010 “ – an average annual increase of 30 percent.

The average health benefit cost for each of New Jersey’s 80,185 state employees in 2006 was $13,594. The average cost for an active state employee’s health insurance has been increasing at 13 percent per year and is expected to continue growing at this rate for the next four years. By 2010 the average health benefit cost per state employee will be $22,165.

The Star-Ledger says the Governor has proposed a new contract to state unions that “If ratified, the deal described by officials last night would provide a clear political victory for Gov. Jon Corzine.”

The Corzine administration and state worker unions last night closed in on a contract agreement that would provide 13 percent in wage increases over four years but require workers to make major concessions on health insurance and pensions, saving the state hundreds of millions of dollars.

Union and administration officials involved in the final stages of negotiations, which continued late into the night, said the proposal would for the first time require workers to contribute from their paychecks to the cost of their health benefits. Under the plan, employees would chip in 1.5 percent of their annual salaries, in addition to the co-pays and deductibles they currently pay.

So, state workers are going to pay 1.5 percent of their salaries for health benefits, but taxpayers are going to give them the money to pay for it, plus an extra 1.75 percent for the next four years. Where do the millions in savings to taxpayers come in? The cost for worker health benefits will continue to increase by 13 percent annually and salaries will increase by a net 1.75 percent each year after employee health benefit contributions.

Of course state employees are eligible for other benefits in addition to health insurance - as we know total state worker benefit costs are increasing 30 percent annually. So what else has Corzine proposed?

State workers also would contribute 5.5 percent of their salaries toward their pensions, up from 5 percent in the current four-year contract that expires June 30.

So, state workers are going to increase their pension contributions by half of one percent, but state taxpayers are going to give them the money to cover the increase. Where’s the savings?

After all is said and done, total state worker benefits will continue to increase by 30 percent each year, plus state workers will receive a net annual salary increase of 1.25 percent.

A “clear political victory for Gov. Jon Corzine” and a terrible defeat for state taxpayers. Did you really expect it would be otherwise?