The more we learn about the “fair contract” New Jersey Governor Jon Corzine has negotiated with the state’s public employee unions, the clearer it becomes how unbelievably unfair it is to state taxpayers.

“Corzine said he would endorse pending legislation to "ensure there will be no premium sharing for retirees now or in the future," the New Jersey Education Association said in a message to members last week.”

Since 2002, the cost for New Jersey’s public employees’ health insurance has been increasing by double digit percentages. In 2002, retired public worker health insurance cost taxpayers $50.8 million. According to the state’s Benefits Review Task Force that number will be $2.3 billion in 2010.

“Gov. Jon Corzine, who highlighted the staggering tab for the medical benefits promised to retired public employees in his budget speech last week, has pledged that retired teachers won't have to help pay their $53.6 billion share of the bill.”

“The post-retirement medical benefits promised to 325,000 working and retired teachers are scheduled to cost the state $53.6 billion, a recent accounting report showed. That's about two-thirds of the $78 billion bill that taxpayers face for the retirement health benefits for all public employees.”

“The promise was worked by Corzine in a side deal with the state teachers' union this month while he hammered out a separate four-year collective bargaining agreement with state workers.”

“Corzine said the proposed guarantee of free retirement coverage for teachers simply continues the existing system, and would apply only to teachers already on the payroll or retired. For future hires, he said, local school boards can negotiate post-retirement insurance payments in contract talks.”

This pending legislation on retiree health insurance would tie the hands of all future governors, just as legislation to hike public employee pensions by 9 percent did in 2001. Corzine’s deal would “simply” lock in an existing system that has produced a crushing tax burden that will only get worse in New Jersey as time goes by.

Stop this “pending legislation” NOW!

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.

Remember when Jon Corzine was running for Governor he claimed he had a universal health care plan that would cover 776,000 people in New Jersey at a cost to state taxpayers of $15 million? We wrote a number of posts, beginning in May of 2005, pointing out the absurdity of his campaign promise.

Let’s see, $15 million divided by 776,000 comes to $19.33 per person.

Twenty-one months later and now Governor Corzine says we have to hock the Turnpike to pay for his plan to cover New Jersey’s uninsured.

The one option that is new and that we are now studying is asset monetization.

The economic potential from restructuring the state’s interest in our asset portfolio is too significant to ignore whether that asset is the Turnpike, the lottery, naming rights, air rights, or whatever.

Potentially, asset monetization could reset the state’s finances by dramatically reducing our debt burden, and consequently reducing debt service.

Monetization could free up as much as a billion dollars or more in every year's budget – long into the future.

The debt service payments made every year could more than fund the universal health care initiative that I’m working on with Senator Vitale.

Call us skeptical about Corzine’s latest cost estimate. New Jersey covers 612,520 residents through Medicaid at a total cost of over $7 billion – the cost evenly split between state and federal taxpayers.

For those who are willing to buy Corzine’s plan, we hear he has a bridge in Brooklyn he’d like to sell you.

Here’s a link to New Jersey Governor Jon Corzine’s budget address and a link to the proposed 2008 state budget.

Corzine’s 2008 budget calls for a 7.2 increase in spending, from $31.061billion in 2007 to $33.292 billion for 2008.

Corzine estimates state revenue from taxes and fess will generate $31.952 billion in 2008 - $1.34 billion less than his proposed spending for the year. This budget gap is to be financed with $665 million from the non-recurring use of the dedicated FY 2007 half penny from the sales tax increase and a $670 million non-recurring surplus as a result of stronger than anticipated FY 2007 revenues.

Corzine estimates a $2.5 billion budget deficit for 2009 - with state spending of $35.4 billion and revenues of $32.9 billion.

“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?

Local Government Tax Shell-acking Game

The people of New Jersey spent $38.2 billion for local government in 2006. That’s the total amount spent for all public schools, municipal and county governments in the state. It breaks down to $4,378.44 for every man, woman and child in the Garden State.

Property taxpayers paid $20.9 billion of the total tab for local government, of which $15.4 billion was picked up by homeowners. State taxpayers contributed $13.3 billion and other local and state revenue sources funded the remaining $4 billion.

This means homeowners paid 40.3 percent of the cost of local government in 2006 before receiving direct property tax relief of $1.7 billion in the form of property tax rebate checks and credits. Of course state taxpayers paid for this property tax relief program too while the cost of local government remained unchanged at $38.2 billion.

The system for financing local government in New Jersey is one very complicated shell game. The object of the game is to spend as much as you dare while getting the other guy to pay for it. We’ll show you how the Local Government Tax Shell-acking game is played in future posts.