Testimony of 
Nichole F. LoPresti 
Director, Government Relations
Regarding 
Public Employee Benefit Reforms and A-2 (Pou, Giblin)
Before the Joint Committee on Public Employee Benefit Reform
December 7, 2006

    
Good afternoon, Chairman Scutari, Chairwoman Pou and members of the Committee. I am Nichole LoPresti, Director of Government Relations for the Chamber of Commerce Southern New Jersey. The Chamber appreciates the opportunity to testify before the Joint Committee today on the recommendations that were recently released pertaining to public employee benefits as well as A-2 (Pou, Giblin) which seeks to enact some of those recommendations.

    As you know, our Chamber has been in the forefront in calling on State government to control costs in order to offset the need to increase taxes. Our Board Council on Responsible Government Spending has issued 77 recommendations that conservatively would save State government, and, therefore taxpayers, hundreds of millions of dollars. Phase I and Phase II of our reports both addressed the issue of employee benefits and highlighted the lopsided nature of what employees in the public sector receive as opposed to what is received by their counterparts in the private sector.

    There seems to be widespread agreement – especially among taxpayers and our members– that State and local governments can no longer afford to pay benefits at their current level. Therefore, our organization was encouraged when this committee released 41 recommendations that we believe addressed head-on the issue of public employee benefits, and did so in a way that preserved the benefits of current public employees. In fact, a vast majority of your recommendations apply only to those hired after the effective date of the enabling legislation. And, while we believed that some recommendations could have gone farther, we thought that the recommendations represented an important first step toward controlling spending and making real reforms that would ultimately lead to lower property taxes. We enthusiastically and publicly supported these recommendations in communication to our members and to the general public through “letters to the editor.”

    However, while many of the Joint Committee’s recommendations are included in A-2 (Pou, Giblin), many key recommendations that represent significant savings, or if not enacted, significant costs to taxpayers well into the future, are NOT included in the bill. Specifically, the legislation does not include the following recommendations of the Joint Committee:

• Increasing the retirement age to 62;
• Reducing the benefit formula for new members of the retirement systems from n/55 to n/60;
• Capping pensionable salaries to the Social Security wage contribution limit;
• Repealing the non-forfeitable right to pension benefits after five years of pension service;
• Limiting participation in the SHBP to those who work at least 35 hours per week; and
• Reducing the number of State holidays for public employees.

    The Chamber of Commerce Southern New Jersey strongly believes that it is appropriate for these reforms to be accomplished through action taken by the Legislature. These recommendations must be included as part of the overall reforms recommended by this committee as the window of opportunity to achieve reform is now!

    Our State’s fiscal situation underscores the notion that benefit reform for state employees cannot wait a moment longer. We have watched the State’s interdepartmental account – comprised largely of employee benefits and salary increases – grow 70 percent over the last five years. Furthermore, salaries and wages now account for 73 percent of the State’s overall operating budget. This year alone, the increased costs associated with providing pension, salary and health benefits comprised 86 percent, which is approximately $592 million of the increased costs of state operations ($691 million). And finally, the State provided $2.3 billion in payments to local school districts to fund retirement benefits, which is an increase of $823 million over the previous year. These expenses are spiraling out of control, crippling the operations and functions of state government. It is evident that the State has reached a point where the level of benefits provided is simply no longer affordable.

    Therefore, we urge the Committee to follow through on all of its recommendations, which were based on weeks of testimony from experts who have described in detail the price tag associated with the reforms which have been omitted from the legislation presented before you today. Please do the right thing for all taxpayers in the State and implement these reforms in addition to the other Committee recommendations. The residents of our state are counting on you to make the tough decisions and adopt a meaningful reform package.