Soaring
pension costs put crunch to counties
Tab more than doubles for firemen, policemen
and municipal workers
Sunday, August 14, 2005 • BY STEFANIE COHEN AND MIKE
FRASSINELLI • Star-Ledger Staff
Pension costs for municipal workers, firefighters and
police officers have more than doubled this year, leaving
townships across Sussex and Warren counties and the rest of
New Jersey struggling to come up with the extra cash in next
year's budget cycle.
The payments are part of the $383 million towns across
New Jersey are being required to budget to help close a $35
billion gap in the funds.
For six years, municipal and county governments and
school boards were paying nothing or a greatly reduced
amount. But under a five-year timetable, next year's tab
will be $208 million higher than the first bills taxpayers
paid in 2005.
The Treasury Department maintains spreading out the
payments eases the pain.
But with most towns seeing their contributions double,
town officials are seeing red.
"If all other factors are the same," said Sparta
Township Manager Henry Underhill, "the bottom line is
raising taxes."
Township officials say they were warned that the pension
costs would rise.
But that doesn't mean coming up with the extra dollars
will be easy.
Townships throughout the county must pony up 60 percent
of the pension liabilities for police and firefighters, and
40 percent for all other municipal employees to offset
depletion in the state's pension funds.
In Sparta, the township will have to come up with
$316,108 for fire and police pensions and $98,078 for
municipal employees, including all non-certified staff
members in the school district -- more than double what the
township had been paying into those funds. Taxpayers will
also have to kick in $80,381 for the Sparta Board of
Education municipal workers pensions.
In total, Sparta taxpayers will face an increase of
about $240,000 over the current year's pension
payments.
For that amount, the township could run the tax
assessor's office, or the planning board, or pay for snow
removal all winter, said Underhill.
Officials point to three reasons for the financial
problem. The state's assurances that towns could skip
payments for six years dealt the first blow, by depleting
the state's two pension funds, the Public Employees'
Retirement System and the Police and Firemen's Retirement
System.
The crisis deepened when the stock market took a
downturn.
And finally, the premier benefit package approved by
state lawmakers drove the bills up exponentially.
Local governments were given a holiday from making
pension payments after the Whitman administration in 1997
sold $2.8 million in bonds to cover unfunded liabilities in
the system. The Whitman administration called the savings to
local governments property tax relief.
Judith Cambria, a financial analyst for the League of
Women Voters and a critic of the pension bond plan, said the
skipped payments from local governments exacerbated the
situation.
"It was totally irresponsible," Cambria said. "Every
time you put it off, it adds to the amount you have to pay.
You're only compounding your debt."
Bill Dressel, executive director of the New Jersey
League of Municipalities, said he's been inundated with
calls from frantic mayors since the bills were announced by
the state last month. Even though Dressel was briefed by the
state treasurer two years ago on the emerging crisis, he
never expected such skyrocketing bills.
"It was the magnitude of the increase that surprised me.
It just took my breath away," Dressel said. The league
successfully lobbied the state to phase in payments over
five years. Dressel said the league's actuaries are
analyzing the figures.
"We're trying to come up with some sort of a relief
strategy but it's not easy," he said.
As part of the phase-in, municipalities this year were
responsible for 40 percent of the fire and police pension
contribution and 20 percent of the municipal workers'
contribution. Next year, those figures will jump another 20
percent.
"In any business, when you start to rob Peter to pay
Paul, consequently you have got to pay it back," Warren
County Freeholder Director Richard D. Gardner said. "It
causes more heartache and consternation, and the end result
is more demanding. For this year, we're fine. But as the
percentage increases, it is going to cause more strife to a
county."
The freeholders have a total bill of $855,762, up more
than $400,000.
To give an idea of what having an extra $400,000 can
accomplish, Gardner noted that the county was able to buy a
new, state-of-the-art 911 field communications unit for less
than that.
"In Warren County, that's a large piece of change,"
Gardner said. "In Warren County, we try to pay as we go
along -- we don't like to let anything slip behind us. And I
think that's where our state government is running into
trouble."
Hackettstown Mayor Roger Hines doesn't expect cutbacks
in services, but the town has to contribute a total of
$172,800.
"In retrospect, they should have never refused those
payments," said Hines, a retired teacher. "It probably
should have been kept at the same level. I think it's sort
of a gimmick. The state budget, it amazes me the way they do
things."
Vernon officials must come up with $235,427 for police
and fire pensions, and $83,539 for municipal workers in the
2006 budget. Taxpayers will also be responsible for $88,288
for Board of Education pension funds.
In total, taxpayers will contribute about $240,000 more
than last year's payout.
"There is no answer," said township financial officer
Monica Goscicki. "We'll raise taxes, cut a little here, a
little there. Maybe make up revenues in some other line
item."
Taxpayers in Sussex County will also have to kick in
$573,337 extra in pension funds.
The increase is equivalent to what it takes to maintain
300 country bridges in Sussex County, said county
Administrator John Eskilson.
"But," he pointed out, "one could argue that for several
years we've had the benefit of not having to fully fund our
pension obligations."
Still, Underhill said, paying a steadily increasing
pension rate might have been preferable to getting hit with
a huge increase over a shorter time.
"They dickered around with this stuff," he said. "For
years, the fund wasn't used as an investment or as state
revenue, and it was working fine. Nobody was upset."
Staff writers Al Frank and Diane C. Walsh contributed to
this report.
© 2005 The Star-Ledger. Used by NJ.com with
permission.
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