In a desperate attempt to have the findings of his commission stay on the radar Thomas J. Healey had an op-ed in the Star-Ledger last week that included this bar graph:
with this explanation:
The commission does not propose reducing current funding levels, but spending the money more wisely than it has been spent to date providing the costliest public employee health benefits in the nation. Employees and retirees will get a bigger “bang for the buck” by using funds currently wasted by excesses in the health benefits system to instead bolster retirement funding…..The proposed reforms would save the retirement system by controlling health benefit costs – moving from unaffordable “platinum” plans to high-quality “gold” level plans that are more fairly in line with the private sector – without affecting quality of care. It is a win-win for everyone.
In a rebuttal letter to the editor this week Brian Wahler, mayor of Piscataway and president of the New Jersey State League of Municipalities. and Donald Webster Jr, president of the New Jersey School Boards Association, made the point:
We are concerned that the proposed savings resulting from the commission’s health-care proposals are unlikely to offset the shift of the unfunded liabilities to the local level. ….We have not seen the data behind the commission’s assertion that reforms to the health benefits would “more than offset” this transfer of liability.
Nobody will ever see that data because it does not exist.
Let’s look at two numbers from the graph: $3.84 billion that New Jersey is paying for health benefits for state employees and all teachers and $1.38 billion that the state would be paying for only state employees after teacher health benefit costs revert to the localities. Participant data from the latest pension actuarial reports shows this breakdown of public employees and retirees as of July 1, 2013:
Total state employees only: 153,514
Assuming proportional benefits per capita that would mean that of the $3.84 billion approximately $2.35 billion is for teacher health benefits leaving $1.49 billion for other state participants (instead of the $1.38 billion forecast).
There are 363,060 participants on the local level and again assuming proportional benefits that would mean $3.51 billion that property-tax payers are already paying for health benefits. Adding on another $2.35 billion for teachers would bring the total property tax tab to $5.86 billion for health benefits alone (without even considering the extra costs of pension payments and the employer potion of Social Security).
According to the Census Bureau, in 2010 property taxes in New Jersey totaled over $25 billion and represented 48% of all State and local tax revenue. Add on $2.35 billion for health benefits, $750 million for Social Security, and $1 billion for pensions raises those property taxes another $4.1 billion. Of that $29.1 billion new total $5.86 billion ($3.51 billion that localities are already paying plus $2.35 billion in teacher benefits that they would be paying for health insurance alone) would be the cost for health insurance.
Page 11 of the Roadmap outlines the the Pension & Benefit Study Commission’s thinking:
…because local health benefits costs are so high, even moderate reforms would result in huge local savings. If aggregated, these savings could permit a higher overall level of post-reform benefits and more equitable State/local allocation of benefit obligations at no additional cost to local taxpayers.
For there to be “no additional cost to local taxpayers” health benefit premiums for 606,458 participants that are $5.86 billion have to decrease by at least $4.1 billion – 70%. Put another way, an average annual premium of $9,663 has to go down to $2,902. Who would believe that can ever happen, outside of the world of mindless bar graphs?