Murphy points to roughly $100M in health benefits savings

July 12, 2018

TRENTON, N.J. (AP) — New Jersey’s underfunded state worker retirement system can save up to $100 million from an audit and other cost-cutting measures, Gov. Phil Murphy’s administration said on Thursday.

The announcement, in a statement from Treasurer Elizabeth Muoio, comes after the Democratic administration and Democrat-led Legislature enacted a $37.4 billion budget earlier this month and as Senate President Steve Sweeney calls cost-saving measures, including revamping the state’s pension and health benefits system, which carry an estimated $90 billion unfunded liability.

Muoio said the savings outlined Thursday came a day after a meeting with the state’s health consultant that suggested premiums could rise by 6 percent next year. She said the idea is just an “initial” cost-cutting proposal.

“Ultimately, our goal is to find the most cost-effective means to deliver quality health benefits to our nearly 1 million state and local government and school employees,” Muoio said.

The state oversees benefits for roughly 800,000 people. The savings Murphy’s administration proposed are nearly 3 percent of $3.4 billion in health benefits included in the state budget this year.

The savings Muoio outlined could lead to an estimated $77 million through an audit of ineligible enrollees. Muoio also says up to $25 million could be saved by streamlining costs from third-party vendors. She said committees tasked with designing the retirement plans would work toward lowering premiums, but she didn’t offer many details.

The new savings also are smaller than roughly $1.4 billion in cuts proposed by a bipartisan commission under Republican Gov. Chris Christie, who was in office before Murphy. That commission recommended, among other changes, switching from top-quality health plans to coverage in line with the private sector.

Democratic lawmakers welcomed cost-cutting ideas, which Sweeney said this month that he would pursue with the administration.

Budget Committee Chairman Paul Sarlo called the ideas “responsible” and said they could eliminate “wasteful spending.”

Republicans said the plan doesn’t go far enough.

“This is a very minimal attempt at savings for the taxpayers of New Jersey,” Assembly Minority Leader Jon Bramnick said.

Senate Minority Leader Tom Kean Jr. said the state’s pension and health benefits system was in “crisis” and said “comprehensive” reforms were needed.

The cost of public pensions and health benefits is a perennial issue in New Jersey, where Democratic and Republican administrations skimped on payments over many years, ballooning the unfunded liability. Christie agreed to fund the pension in exchange for worker givebacks but cut the payment when state revenue got tight. That angered labor and cemented Christie’s and unions’ difficult relationship.

Murphy won election last year on a promise to fully fund public pensions and with labor’s wholehearted support, and, unlike Sweeney, he has not called for significant cost savings, including from pensioners.

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