Category Archives: State Policy

Incentives Matter

Last year, California’s legislature adopted its state budget a record 100 days after its due date.

In the intervening months, California voters passed Proposition 25 which did two things: 1) it did away with the two-thirds supermajority requirement to pass the budget (retaining the two-thirds requirement to raise taxes) and 2) it stipulated that, in the event the budget is late, legislators would not be paid for any time worked between the budget’s due-date and its eventual passage.

Today is the due date for the budget.  They agreed to adopt one.


Collective bargaining and health care benefits in New Jersey

Is collective bargaining for public employees an “historic right”? That is the position of Bob Master, political director of  the Communication Workers of America (CWA), one of New Jersey’s public sector unions. He objects to a plan put forward by Governor Christie and Senate President Stephen Sweeney that would allow the legislature to set health care benefits, removing the item from the negotiating table. As for the historic nature of collective bargaining. Such powers arrived relatively recently in the public sector. With most states extending these provisions in the 1960s and 1970s, and up through the late 1980s. For a review, see my recent paper. (Economist Leo Troy, and political scientist Joseph Slater each provide a history of public sector unionism and reach the opposite conclusion on the implications of collective bargaining in the public sector.)

In New Jersey pension policy has always been a matter for legislation, a fact that Mr. Master does not challenge. Even if health benefits are removed from the table this does not eliminate the political leverage  public unions have over influencing legislators and thus legislation. Nor will it fix the core problem. Health benefits in New Jersey are completely unfunded and face a $66.7 billion liability.

Part of the reason that the bill has suddenly materialized is that until 2007 governments were not required to recognize the cost of Other Post Employment Benefits (OPEB) on their books. A bomb was dropped when this rule went into effect revealing $1.5 trillion in hidden liabilities in U.S. state and local governments.

Unlike pensions health benefits don’t come with the same guarantees. Of far greater relevance for public sector workers is how are state and local governments going to provide health benefits in the face of  such daunting costs? The Christie-Sweeney proposal asks workers to contribute on a sliding scale from 3 percent to 35 percent of their health insurance premiums depending on their salary.

Assembly Leader Sheila Oliver backs the unions’ position and proposes that health benefits remain off the table for three years. In 2014, collective bargaining for health benefits would be re-established and unions could seek lower contribution rates during the negotiation process. It would also make collective bargaining a gubernatorial campaign issue. It is a strategy that points to the uniquely political nature of public sector unionism. And it underscores the institutional incentives for politicians to promise short-term benefit enhancements at the expense of long-term solvency.


New Jersey Network (NJN) to be operated by NYC public broadcaster

New Jersey Network, known to New Jerseyans as NJN is now NJTV and is to operated by WNET the New York public broadcasting station. Governor Christie made the announcement today saying, “no one elected me to be programmer in chief.”

The sale saves the state about $11 million a year. The state of New Jersey will retain the TV license and will sell nine public radio licenses to Philadelphia (WHYY) and New York City (WNYC and WQXR).

New Jerseyans essentially have two out-of-state markets for their news: New York City and Philadelphia, a void NJN was to fill when it began in 1968.  According to reports the new non-profit will be required to dedicate 20 hours per week to New Jersey programming and will be made up of a board of New Jersey residents.

The legislature has 15 days to veto, otherwise the deal goes into effect on July 1.


A rush to retire in the public sector in New Jersey

Today’s Star Ledger reports that New Jersey public workers are retiring in record numbers, “rather than risk having their benefits cut by legislators.” Approximately 15,000 workers are estimated to have taken retirement between January and June. Couple this with last year’s record retirement of 20,000 and the state can expect to have to pay out more money from its underfunded pension system.

Unions blame Governor Christie’s public remarks. But the truth is the state’s pension system is in serious shape due to decades of bad decisions: careless benefit enhancements, erroneous accounting practices and skipped contributions. Health benefits are entirely unfunded as they are in most states. Denial of these structural flaws won’t improve the outcome for workers. Further, it points to how poorly funded states have created inter-generational inequity among public workers. Younger workers have fewer options. They can quit now, receive very little in benefits, and enter into a weak job market. Older workers can head for the exit with their full benefits locked into place and retirement assured. Another problem to consider is will the crisis in pension plans prompt an out-of-state exit and tax base erosion? While only an anecdote, one New Jersey worker says she will wait out the next 18 months until she reaches 25 years of retirement service to see what policy changes are implemented thus delaying her plans to retire in Virginia.




New Jersey gets closer to a deal on health care with unions

I have a new post at Public Sector Inc on the negotiations underway between the Governor, the legislature and the Communications Workers of America over how health care benefits should be structured. But there’s another level to this conversation: where should this policy be decided? In collective bargaining negotiations with the union and two branches of the New Jersey government? Or should this be in the realm of state legislation, as is pensions policy?


New Jersey Supreme Court asserts authority over Appropriations

The New Jersey Supreme Court has ruled that the state must spend an additional $500 million in Abbott school districts next year.The state’s 31 Abbott districts are low-income districts designated by the New Jersey Supreme Court in 1976 to receive extra state-provided funding.

In their decision they find that, “The Appropriations Clause creates no bar to judicial enforcement under circumstances presented here.” That is, the Governor must fund the schools according to the court-approved formula.

Governor Christie’s cuts to education provoked the Education Law Center – the plaintiff in the 30-year long Abbott court cases – to sue. And the court has ruled in their favor re-instating the funding cuts.  This decision should provoke a state-wide discussion over the role of the court in shaping education policy in the state over the past four decades. It essentially implies that the legislature and Governor have little control over more than one-third of the budget and the approach the state takes to education policy. Can Governor Christie “ignore the court?” That is hotly debated. With one Rutgers law professor saying such a move would lead to “a constitutional crisis.”

This debate over school funding in New Jersey certainly points to something troubling – the subjective interpretation of the 19th century constitutional phrase, a “thorough and efficient” education by the court. New Jersey’s education policy turns on this phrase and the funding formula sanctioned by the court to fulfill it. Has the policy worked? Much money has been spent in Abbott districts and improvements are scarce.