NJ Education Report

Gov. Christie gave his budget address yesterday afternoon and the big news was what he described as a “historic agreement” with NJEA  intended to  alleviate New Jersey’s enormous pension system debt, which John Reitmeyer of NJ Spotlight estimates as “between $37 billion and $83 billion depending on which accounting method is used.”

With all the featured players – Christie and  NJEA leaders as well as gubernatorial hopefuls Steve Sweeney (Senate President) and Steve Fulop (Jersey City  mayor) — currently jockeying for power positions, it’s hard to know exactly what transpired behind closed doors. But it’s pretty clear that NJEA did engage in discussions with a study commission tasked with coming up with solutions for N.J.’s pension crisis and that other labor unions were not notified of these negotiations. (Here’s the study commission’s report entitled “A Roadmap to Resolution.”)

The “agreement” touted by Christie, which NJEA disputed yesterday after the speech, is based on a series of reforms that includes freezing all state pensions and  creating a new cash-balanced hybrid defined contribution plan. From PolitickerNJ: “Among the plan’s specifics are to freeze existing pension plans, aligning future public employee retirement benefits with private-sector levels, and transfer the assets, liabilities and risks of the existing pension and new retirement plans to employee entities willing and able to assume this obligation.”

The plan would also affect public employees’ generous health plan benefits. From the Star-Ledger:

Public employers pay, on average, 95 percent of an employee’s health care expenses, while the average employee pays 18 percent of premium costs. Benefits would be reduced, with the employer paying 80 percent of expenses and the average employee contribution to their premium increasing to 25 percent. Retirees would receive the lower level of coverage without having to kick in more… 

The alternatives to its recommendations, the commission cautioned, are extreme tax increases: it would take raising the sales tax from 7 percent to 10 percent or increasing the income tax by 29 percent to generate $3.6 billion a year. 

Even with a “millionaire’s tax” charging the state’s 16,000 richest an extra $50,000, on average, the state would still need to raise income taxes 23 percent. Funding the $3.6 billion entirely on the backs of millionaires would cost each an additional $228,000 a year, according to the report.

The study commission also recommended that local school districts take responsibility for employee retirement benefits, which would presumably be rendered net-neutral (or close) by district savings on health care costs.

John Mooney at Spotlight sums up the other education proposals mentioned in Christie’s speech:

For schools, there was, indeed, not much else new to report in the governor’s proposed budget, which called for no overall change in direct state aid to school districts, making it the third year of nominal or no changes in so-called “formula aid” to schools. The actual aid numbers for each district are to be released later this week. 

Elsewhere in the budget, there were some small increases or decreases, including $3 million in additional aid to preschool program and a $3 million allocation for inter-district school choice. There was a $2 million cut in aid for charter school start-ups, and $4 reduction million to nonpublic schools. 

In his only real initiative, Christie did revive his proposal for a relatively modest, $2 million school-voucher program that would use tax credits to raise money for “scholarships” to enable low-income students to attend private schools or public schools outside their communities. 

It’s one of the most contentious and longest-running education issues in the state. And, with its long-shot odds for winning approval in the Democrat-controlled Legislature, it warranted just a line in the governor’s budget address.

But the real news, of course, was Christie’s celebration of the pact with NJEA. Charles Stile of The Record notes, “Despite the post-speech quibbling over semantics, the fact that these bitter foes are even talking — albeit through intermediaries — represents a seismic shift in Trenton. It reflects a new political reality. Christie needs the union. And the union needs Christie.”

Other union leaders were appalled.  Spotlight reports  that “the leader of a firefighters union said the NJEA should be ‘ashamed for allowing Gov. Christie to slash the terms of retirement their members have earned’” and Hetty Rosenstein of the Communications Workers of America “said the state pension payments affirmed by the court on Monday need to be honored.”

NJEA  President Steinhauer battled back with this statement:

“We have not agreed to any changes to pensions or health benefits. We have only agreed to continue looking at all solutions that may provide our members with more stable pensions and affordable, high-quality health benefits. The solutions proposed by the commission are complex, and they will require a much greater commitment from the state than has been shown in recent years. For this process to succeed, all parties will have to conduct themselves with the utmost honesty and clarity in order to build trust and allow real solutions to emerge.” 

For further analyses, besides the ones linked above, see Samantha Marcus and Tom Moran of the Star-Ledger. A.P. at Newsworks, Michael Symons at Asbury Park Press, and Jill Colvin and Geoff Mulvihill at the Courier-Post.