Property taxes and city pensions
How will Hoboken be affected?
From NJ.com (Star Ledger):
Pension funds will siphon $1B from towns
Property taxes face ‘ticking time bomb’
Tuesday, March 13, 2007
BY DUNSTAN McNICHOL
Residents who pay property taxes will face another big jump in the cost of funding public employee pension plans, with a $1 billion bill coming due next spring, figures released yesterday show.
That’s how much municipal officials statewide will have to set aside for pension payments when they map out their local budgets for the coming year — an increase of $383 million over this year’s bills.
The cost has been rising dramatically since 2004, when the state required towns to resume payments into the pension funds after a six-year break.
“It’s a ticking time bomb, and now the time bomb is waiting to go off,” said William Dressel, executive director of the New Jersey State League of Municipalities. “They’re going to continue to go up at an intense rate, and the property tax payers are the ones that are going to have to dig into their pockets to pay the bill.”
The size of next year’s bill became clear yesterday with the release of an annual report by the actuary for the Police and Firemen’s Pension Fund. The report said New Jersey’s municipal governments are scheduled to pay $640 million into that fund on April 1, 2008.
That comes on top of $393 million towns are scheduled to pay into the retirement fund for other local government employees on that date.
Together, the retirement payments will reach $1.033 billion.
While local officials face the $383 million increase, they would see a boost of just $32.6 million in state aid that Gov. Jon Corzine highlighted in his proposed state budget for the upcoming year.
“It’s atrocious that we’re in this position,” said Mark Kandrac, a Hamilton firefighter who is chairman of the state Police and Firemen’s Retirement System. “It seems to me we’re on a course for real disaster.”
Janet Cranna, an actuary with Buck Consultants who presented the annual police and fire pension analysis to Kandrac’s board yesterday, said the mounting costs are a lingering impact of stock market losses in 2001 and 2002 and a decision by state and local governments to skip billions of dollars in payments.
Even as payments have been phased back in over the past five years, they have lagged behind the total needed to fully fund the retirement systems by $1.2 billion.
“We’ve pretty much exceeded our credit limit, and we can’t even make our minimum payments,” said Kandrac.
Even with recent robust investment returns, Cranna said, the taxpayer payment into the police and fire fund will rise an additional $56million by April 2009, meaning there is no relief in sight from the soaring local tax bills.
Annual benefits paid from the fund totaled $1.1 billion, according to the report, meaning the fund is in no immediate danger of missing pension payments.
But over the long term, Cranna’s report noted, the $20.4billion in the Police and Firemen’s Pension Fund is $5.4billion short of the amount needed to cover the retirement benefits promised to the system’s 75,000 working and retirement members.
That shortfall is one piece of a $24.8billion funding shortfall across the state’s seven retirement systems.
Corzine and state Treasurer Brad Abelow say the mounting pension costs are one reason the state needs to assess the prospects for raising money through the sale or lease of such state assets as the New Jersey Turnpike or the state Lottery.
The projected growth in pension expenses next year amounts to about 7 percent of the total amount of property taxes raised by local governments last year. By itself, the added pension expense will far exceed the 4 percent cap lawmakers have attempted to impose on local tax levies through legislation that would give homeowners and renters $2.2 billion in local tax credits.
That legislation (A-1) is awaiting Corzine’s signature.
Dunstan McNichol may be reached at (609) 989-0341 or email@example.com.