TRENTON — Furious after watching pension investment fees triple over the last three years even as their funds lost value, police and firefighter union leaders are seeking to wrest control of their underfunded pensions from the state.
As Gov. Chris Christie is set to deliver his final budget address, state Senate President Sweeney (D-Gloucester) on Monday introduced a bill (S3040) that would transfer management of the Police and Firefighters Retirement System to a newly expanded board of trustees.
“They’ve been screwing up pensions for decades now,” Ed Donnelly, president of the New Jersey State Firefighters’ Mutual Benevolent Association told NJ Advance Media, referring to the $11 billion that the state has yet to pay into his retirement system.
Since Christie’s reelection, state worker pension fees have soared, but as a newly released actuary report shows, in the last fiscal year the market value of PFRS assets dropped 6 percent. In the last fiscal year, police and fire retirement system’s value went from 70.5 percent fully funded to 64.4 percent.
By comparison, the S&P 500 index has returned 17.5 percent in the last year.
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The proposed legislation would give uniformed first responders greater voice and tilt control over those assets away from the state treasurer’s office and towards union members.
Sweeney’s bill would transfer the management of the police and firefighters unions from the state treasury’s pensions and benefits division and award it to an expanded 12 member board of trustees whose balance of power favors union members by a ratio of 7 to 5.
The union side of the board would include:
- one police officer appointed by the president of the New Jersey State Policemen’s Benevolent Association
- one police officer appointed by the president of the New Jersey State Fraternal Order of Police
- one firefighter from the appointed by the president of the New Jersey State Firemans’ Mutual Benevolent Association
- one firefighter appointed by the president of the Professional Firefighters Association of New Jersey
- one retiree from the system elected by retirees of the PFRS system
Meanwhile, the governor would appoint five trustees in total; four from local governments and one from state government.
“It’s really about taking the politicians out of the equation,” said Fred Beaver, who was director of pensions at the state treasury from 2002 to 2010.
Now a consultant to the NJ State Firefighters Benevolent Association, Beaver said that while the new board’s structure would seem to favor unions, Christie was likely to support it since his own pensions task force had recommended as much in 2015.
Two years ago, the state pension and health benefit study commission recommended that New Jersey “transfer the assets, liabilities and risks of the existing pension and new retirement plans to employee entities willing and able to assume this obligation.”
It also urged the state to “allow those who receive the benefits to have the power and assume the risk of managing the plans to ensure that the available funds are sufficient to pay for the provided benefits.”
A spokesman for Christie did not respond to an inquiry by NJ Advance Media about whether the governor might back the legislation.
Sweeney, in a statement emailed to NJ Advance Media, said giving the union’s agency over their own destiny would produce better results.
“This practice has been effective with private-sector unions so we know that it works,” wrote Sweeney in an email to NJ Advance Media. “Their returns actually improved when they took control. When the investment strategies are their own, the unions will make sure they make the best decisions for their members.”
Under the proposed legislation, the police and fire unions would also obtain broad discretion over both the size of members retirement benefits and the contributions needed to support them.
An early draft of the legislation reviewed by NJ Advance Media allowed that the board may “enhance…or modify any benefit as an alternative to an increase in the member contribution rate.”
It also allows for the board to “reinstate, when appropriate, such reduced benefit to the statutory level without an additional contribution by the member.”
Beaver said this would be a welcome change for unions who’ve seen state contributions held hostage to the whims of the budget.
“In the past, the support of the board went as far as the treasurer wanted it to go,” said Beaver.
Christie has said he’ll make a record $2.5 billion pension payment in his final year, but that’s only half the most recent actuarial recommendation.
Claude Brodesser-Akner may be reached at cbrodesser@njadvancemedia.com. Follow him on Twitter @ClaudeBrodesser. Find NJ.com Politics on Facebook.
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