The following op-ed will appear in the Sunday Star-Ledger and NJ.com on July 28, 2019.
How often do you pay 50% more for anything? In NJ, we are every day
While we’ve been hearing a lot about the US debt ceiling lately, reporters and politicians know how difficult it is to convert a looming threat into what it means to an audience as individuals; and, after all, what can we do about it anyway?
Similarly, in New Jersey, there are continuing laments about our state’s overwhelming debt burden driven by our massive unfunded pension liability and unreasonably high cost of health benefits of our public workers and how that is driving our uncompetitive tax levels. And likewise, in NJ we ask ourselves, “what can we do about it anyway?”
Well, for once, the federal government has helped us out on the first point: translating a big threat into everyday language.
An analysis completed by Dr. Charles Steindel, former NJ Chief Economist, based on last quarter’s BLS reports, helps us understand our problem at a more finite level:
The “Cost per Hour” of pension and health benefits
A review of data for the cost per hour of pension and health benefits shows those costs for the US public workforce is double the cost in the private sector. And New Jersey sticks out since our cost of benefits for public sector employers is 50% higher than the public sector in other states.
In real numbers, the US average public sector benefits cost is $19.14 an hour or $8.81 more than private sector which makes it nearly twice as high. In New Jersey, government employers pay 50% more for benefits ($17.50 an hour) than the national average for public sector employers ($11.47 an hour).
These costs are just as jarring when viewed on an annual basis. The national average cost for public employee medical insurance (based on BLS data) is equal to about $12,000 a year. The cost to the employers of a typical New Jersey public worker plan is much higher: it’s reasonable to estimate that New Jersey government employers spend conservatively an average of $20,000 a year per worker, which adds up to an additional $10 per hour in costs.
And on the pension side, New Jersey’s $3.2 billion FY19 contribution to employee pension is only 60% of what was actuarially required. This translates to $11,000 annually so is already equal to the average national cost of public employee pensions ($11,000). To reach 100% of the actuarially required level, which some elected officials say is their goal, the NJ government contributions will escalate another $3 billion and be well above the national average—likely more than $15,000 a year per worker or 36% higher than today.
Anticipating another counterpoint, Dr. Steindel illuminates how we are allowing antiquated beliefs about pay levels to drive our willingness to support higher than necessary cost of benefits for our public work force. He demonstrates that the average wage in the private sector is lower than the public sector and points to the education levels required by our government for its work as an underlying driver of a higher cost per hour than in the private sector.
So now that we have this problem under the microscope…what can we do about it?
In New Jersey, Pension and Health Benefits for our public workforce is a top cost for every town, county and the state overall…. almost $26 billion this year alone when you add it all up as we showed in our report, Adding It All Up: An Impartial Look at NJ’s $117 Billion Government.
This November across New Jersey thousands of candidates will be seeking state, county and local office. There are only 2 questions you need to ask of anyone seeking your vote: Do you think it’s right for me to pay 50% more than other states for your and other public employee benefits? And when will you insist on a vote to reduce the cost of these pension and benefits and pass those savings on to taxpayers?
You would never knowingly pay 50% more for everyday essentials such as gas, or milk, or electricity for your home. You shouldn’t be, but you are, every time you pay sales tax, pay your property tax bill, and every toll you pay on the Garden State Parkway or NJ Turnpike.
When will you say enough and I won’t be taken advantage of anymore?
Regina Egea is president of the Garden State Initiative, an independent research and educational organization dedicated to promoting new investment, innovation and economic growth in New Jersey.