PFRS Amended Pension Bill Unanimously Passes the Senate

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On Monday, March 13th, the Senate amended S-3040 on the floor, by an emergency, and then passed the amended bill unanimously.

One of the amendments will require the Board, at the end of 6 years, to conduct a review of the performance and funding levels of the retirement system, as compared to available market data, including, but not limited to, the performance of the State Investment Council and Division of Investment and the Bloomberg Barclay Indices.  Based on the review, by a majority vote, the Board may petition the Legislature to consider legislation that revert control of the pension system back to the Department of Treasury.

The other amendments, which address some issues raised by the League, include:

  1. Reduces the number of meetings a Board member can miss from 1/2 of the scheduled meetings to 3 meetings.
  1. Requires the Board to establish standards to define “unexcused absences”.
  1. Permits Board members to participate in meetings by teleconference.
  1. Establish minimum standards for Executive Director and Chief Investment Officer:
  1. Bachelor’s degree from an accredited college.
  2. 5 years of management experience in accounting, finance, public administration, government pension and retirement planning, investment banking, financial consulting, money management, or similar field.
  1. Permits the Board to establish additional qualifications for Executive Director and Chief Investment Officers.
  1. Prohibits any member, retiree, or other beneficiary of the system from holding the position of the Executive Director or Chief Investment Officer.
  1. Requires a minimum 8 votes of the board for:
  1. any enhancement or reduction of member benefits.
  2. approve any increase or decrease in employer contribution that is more than what is recommended by actuary for the system for the purpose of the annual funding requirement for the system.

This provision does not apply to activation of application for retirees pursuant to N.J.S.A. 43:3B-1 et seq.

Changes the quarterly payment dates to March 1, June 1, September 1, and December 1.

While the amendments address many of the concerns we had with S-3040, the amendments did not address our main concern with the Board of Trustees composition of 7 labor representatives and 5 management representatives.

The PFRS is a defined benefit system, where the amount of the retirement pay is calculated on a formula considering factors including length of employment and salary history; not on the return of the funds’ investments.  As a result if there is a shortfall in a return from investments the employers (in this case municipalities and counties) must make up the difference from their general funds.  At present time, local government employers are contributing 25.51% while the employee is contributing 10% to the PFRS. Therefore, the board should be comprised of an equal number of labor and management representatives with one independent member for an uneven number of members.  Otherwise, S-3040 creates a system where the employees retain all the control while the employers, which ultimately are our property taxpayers, assume the greater contribution risk.

In addition, S-3040 still continues to include a provision of withholding State Aid for non-payment of the employer contributions.  Local government employers have consistently made their pension payments and other safeguards exist that would prevent a local government employer from skipping a payment, such as Division of Local Government Services approval of local government budgets.  This provision is simply unnecessary and should be removed.

It is anticipated that an Assembly companion will be introduced as soon as Thursday  (March 16) but it is not known when the Assembly will act.

Ultimately, the League, as well as our partners with the  New Jersey Association of Counties,  share the same objective as the public safety unions, that is to secure the local PFRS system.   Thus, we look forward to continuing our dialogue with the public safety unions and we believe that we are close to developing a consensus on some specific aspects of the proposal we believe could be improved.

Contacts:

Lori Buckelew, Sr. Legislative Analyst, 609-695-3481 x112, lbuckelew@njslom.org.

Michael Cerra, Asst. Executive Director, 609-695-3481 x120, mcerra@njslom.org.

 

Legislation to Transfer Management of PFRS to Board of Trustees of PFRS

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Earlier this week, Senate President Sweeney introduced S-3040, which would transfer the management of the Police and Fire Retirement System (PFRS) to a Board of Trustees comprised of Labor and Management representatives.  The Board, acting exclusively on behalf of contributing employers, active and retired members, would have the general responsibility for the proper operation of the retirement system.

The Board may, in its discretion and at such time and a manner, as it determines:

  • Enhance any benefit set forth in N.J.S.A. 43:16A-1 et seq.; or
  • Modify any such benefit as an alternative to an increase in the member contribution rate; or
  • Reinstate, when appropriate, such reduced benefit to the statutory level without an additional contribution by the member.

The Board’s primary obligation would be to direct policies and investments to achieve and maintain the full funding and continuation of the retirement system for the exclusive benefit of its members.

This legislation was developed with input from the public safety unions.  Their concept was presented during a session of the 2016 League conference.  The League is currently reviewing the legislation, focusing on its impact on property taxpayers in both the near and the long term.  We plan to share our conclusions and concerns with the sponsor and look forward to cooperating with all concerned on a plan that protects the interest of our members; more analysis forthcoming.

Contact: Lori Buckelew, Senior Legislative Analyst, lbuckelew@njslom.org, 609-695-3481 ext. 112.

Governor Takes Action on Legislation

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The Governor recently took action on various pieces of legislation, including the following:

  • The Governor conditionally vetoed A-4189/S-2670, regarding Urban Enterprise Zones (UEZs).  This bill would have extended, for two years, UEZ authorization in municipalities where the program was scheduled to sunset at the end of 2016. (Those municipalities are Bridgeton, Camden, Newark, Plainfield and Trenton.)  The remaining zones do not expire for a number of years.   While this bill is a conditional veto, it is effectively a veto since the Governor struck the language that would have extended these 5 zones on a short term basis.    We do not expect the Legislature to act on the Governor’s recommendations.

The Governor also signed the following bills into law:

  • PL. 2017, c. 16 requires that the annual notice of assessment on property to contain bolded notice of filing deadline for appeal.  This legislation took effect on February 10, 2017.
  • PL. 2017, c.19 requires the Department of Community Affairs to establish rules and regulations to provide affordable housing preference to homeless veterans, disabled veterans and family members who are the primary caregiver to disabled veterans residing with them, in a municipal or county housing authority project.   All applicants for the housing preference will also be required to meet the income requirements for admission to the housing project.  Priority for the preference will be given to applicants as follows: (1) homeless veterans shall receive first priority; (2) disabled veterans shall receive second priority; and (3) family members who are the primary residential caregivers to disabled veterans residing with them shall receive third priority.  This legislation will take effect May 1, 2017.
  • PL. 2017, c. 21 permits local units to enter into a shared service agreement with a federal military base for services that the local unit involved in the agreement is empowered to provide those services within its own jurisdiction.  Also the services must be permitted by 10 U.S.C. s.2679.  The law shall not be construed to impact existing Federal or State civil service laws and if there is a conflict regarding the content and duration of such agreements, federal law will control.  The League supported this legislation that took effect on February 10, 2017.
  • PL. 2017, c. 26 which preempts municipal regulation of some taxi services such as Uber and Lyft.   This new law unnecessarily exempts ride for hire services from local regulation. We had asked the Governor to conditionally veto the bill, so as to delete Section 26.
  • PL. 2017, c. 28 which requires health insurance carriers, and the State Health Benefits Program and the School Employees’ Health Benefits Program, to adhere to certain coverage requirements for treatment of substance use disorders.  The bill also places certain restrictions on the prescription of opioids, and requires certain notifications when prescribing Schedule II controlled dangerous substances used to treat chronic or acute pain.  The bill also requires certain health care professionals to receive training on topics related to prescription opioid drugs.

Contacts:

Michael Cerra, Assistant Executive Director, mcerra@njslom.org, 609-695-3481 x120;

Jon Moran, Senior Legislative Analyst, jmoran@njslom.org, 609-695-3481 x121;

Lori Buckelew, Senior Legislative Analyst, lbuckelew@njslom.org, 609- 695-3481, x112.

Action needed to address ‘bono fide severance of employment’ problem

During Wednesday’s Mayors’ Day session, Alpine Mayor Paul Tomasko asked State Legislative leaders about a matter that is important to municipalities all around our State. It involves the ability of retired public employees to continue to serve their fellow citizens, in volunteer capacities.

In 2014, the State’s Division of Pension and Benefits issued guidance on post retirement employment restrictions for public employees.  The guidance noted that there must be a “bona fide severance of employment”, a complete termination of the employee’s employment relationship with the employer for a period of at least 180 days, in order not to jeopardize the employee’s retirement benefits.  The Division considers re-employment by a different unit of the same public entity, whether the position is covered by the same retirement system or a different retirement system, to be employment by the same employer. If an employee holds more than one position with the employer they must separate from all employment in order to retire, even if the positions are covered by different retirement systems, or the second position is not subject to pension contributions.

If an individual returns to public employment with the former employer, even as a volunteer,  prior to satisfying the requirements of a bona fide severance from employment, the employee will be required to repay all retirement benefits received from the date of retirement and may be required to re-enroll in the same or different retirement system.  As a result, volunteer firefighters and first aid members, and volunteer parade, event or celebration committee members or volunteers serving the PTA, to name a few; who were also public employees, have been required to resign from their volunteer position in order to receive their retirement benefits.

Volunteers are the backbone of communities providing services to the residents at no cost to taxpayers while freely giving of their time and expertise.  Employees affected by the Division of Pensions ruling generally are at least 55 years of age. In their volunteer positions, they often serve as mentors to the new and younger members, typically providing guidance and direction.

While well intended the Division of Pensions has created an unintended consequence which, if not changed, will impact every public employee who volunteers in the state and will not only drive up property taxes, but would also reduce the quality and level of essential public services.

In November, 2014, the League of Municipalities adopted a Resolution, urging action to direct the Division of Pension and Benefits to permit retirees and local elected officials to continue as volunteers, without impact to their retirement, and to not require the complete 180 day separation from volunteer service.

In response, two pairs of companion bills have been introduced.

Last year, the State Senate unanimously passed S-2107 (companion to A-536), which would permit a person with a pre-existing volunteer relationship as a firefighter or first aid with their employer to retire from service covered by PERS or PFRS and continue to serve that employer as a volunteer.  We support this bill, which would address part of the problem.

Other legislation, however, goes all the way in resolving the problems created by the Division of Pensions’ ruling on ‘bono fide severance.’

A-3223/S-2446 would allow public employees in state-administered retirement systems who continue any preexisting volunteer relationships with employers from whom they retire, to continue to volunteer for their prior employers without jeopardizing their pensions.  Legally speaking, this bill would clarify that such a relationship does not vitiate a bona fide retirement.

S-2107, A-536 and A-3223 all await action in the Assembly State and Local Government Committee. S-2446 has been referred to the Senate State Government, Wagering, Tourism and Historic Preservation Committee.

We commend the sponsors of these bills and would urge action to remedy the problem, once and for all.

Contact:  Mike Cerra, Asst. Executive Director, mcerra@njslom.org or 609-695-3481 x120.

Executive Order on Sanctuary Cities/Immigration Enforcement

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On January 25 President Donald Trump issued an Executive Order on “Enhancing Public Safety in the Interior of the United States.”  The Executive Order takes steps to “ensure the public safety of the American people in communities across the United States as well as to ensure that our Nation’s immigration laws are faithfully executed.”

That same day, the National League of Cities (NLC), the national affiliate of the League, hosted a conference call with most State League executive directors and NLC staff to identify concerns and questions with the Executive Order.  It is unclear if there is a new affirmative obligation to provide local law enforcement personnel to conduct immigration investigations, which potentially creates an unfunded mandate.  It is also unclear what is considered to be a sanctuary jurisdiction.  It appears they are reinstating the Secure Cities program but it is further unclear whether participation will continue to be voluntary or mandatory.  There is uncertainty regarding what federal funds and how much federal funds are at stake.  It is also unclear regarding the impact on previous legally declared sanctuary jurisdiction.

NLC will engage with the administration to get answers and clarification on the executive order on various outstanding questions and concerns with the Executive Order.   As we learn more detail we will continue to advise you.

The Executive Order:

  • Gives the Secretary of Homeland Security (Secretary) up to 1 year to issue rules and guidance to ensure the assessment and collection of all fines and penalties from individuals unlawfully in the country and from those who facilitate their presence;
  • Directs the Secretary to engage with Governors as well as local officials to enter into section 287(g) agreements, which allows the US Immigration and Customs Enforcement (ICE) to enter into agreements with state and local law enforcement agencies and train officers to carry out immigration law enforcement functions;
  • Instructs the Secretary, with the consent of local officials, as appropriate, to take appropriate action to authorize State and local law enforcement officials to perform the functions of immigration officers in relation to the investigation, apprehension, or detentions of individuals illegally in the United States;
  • States that any agreement structured by the Secretary shall ensure that any jurisdiction that fails to comply with applicable federal law does not receive Federal funds, except as mandated by law;
  • Requires the Secretary to prioritize removal of individuals illegally in the United States based on federal statute;
  • Obliges the Attorney General and the Secretary to ensure that jurisdictions that willfully refuse to comply with 8 U.S.C. 1373, which states that a Federal, State or local government entity or official may not prohibit, or in any way restrict, any government entity or official from sending to, or receiving from, the Immigration and Naturalization Service information regarding the citizenship or immigration status, lawful or unlawful, of any individual;
  • Directs the Secretary to hire 10,000 additional immigration officers;
  • Requires the Secretary to weekly make public a comprehensive list of criminal actions committed by individuals illegally in the United States and any jurisdiction that ignored or otherwise failed to honor any detainers;
  • Directs the Office of Management and Budget to obtain and provide relevant and responsive information on all Federal grant money that is currently received by any sanctuary jurisdiction;
  • Directs the Attorney General and the Secretary to develop and implement a program to ensure that adequate resources are devoted to the prosecution of criminal immigration offense in the United States;
  • Directs the Secretary to establish within ICE an office to provide proactive, timely, adequate, and professional services to victims of crime committed by removable individuals illegally in the United States and requires quarterly reporting studying the effects of victimization by criminals illegally in the United States;
  • Requires the Attorney General and the Secretary to submit a 90 day report and 180 report on the progress of the directives under the Executive Order.

Depending on how the Executive Order is implemented, the Order could raise Constitutional concerns.

In 1984, the United States Congress passed the National Minimum Drinking Age Act, which withheld 5% of federal highway funding from states that did not maintain a minimum legal drinking age of 21. South Dakota, which allowed 19-year-olds to purchase beer containing up to 3.2% alcohol, challenged the law, naming Secretary of Transportation Elizabeth Dole as the defendant.

In its 1987 decision, the Supreme Court held that the statute represented a valid use of Congressional authority under the Spending Clause and that the statute did not infringe upon the rights of the states. The Court established a five-point rule for considering the constitutionality of expenditure cuts of this type:

  1. The spending must promote “the general welfare.”
  2. The condition must be unambiguous.
  3. The condition should relate “to the federal interest in particular national projects or programs.”
  4. The condition imposed on the states must not, in itself, be unconstitutional.
  5. The condition must not be coercive.

Writing for the majority, Chief Justice William Rehnquist wrote that the Congress did not violate the Tenth Amendment because it merely exercised its right to control its spending. Rehnquist wrote that the Congress did not coerce the states because it cut only a small percentage of federal funding. It thus applied pressure but not irresistible pressure.

And more recently, in NFIB v. Sibelius (2012), Chief Justice Roberts famously described the federal government’s plan to withhold all Medicaid funding, if states refused to agree to the Obamacare Medicaid expansion as a coercive “gun to the head.” In that case, states stood to lose over 10 percent of their overall budget by not agreeing to the Medicaid expansion. Many sanctuary jurisdictions would stand to lose that percent of their budget—and more—if they lost all federal dollars.

NLC will engage with the administration to get answers and clarification on various outstanding questions and concerns with the Executive Order.   As we learn more details we will continue to advise you.

Contact:

Michael Cerra, Assistant Executive Director, mcerra@njslom.org, 609-695-3481 x120.

League statement on Supreme Court “gap” Ruling

Today the New Jersey Supreme Court in a unanimous but nuanced ruling affirmed but modified the Appellate Division’s July 11 decision, which reversed a lower court’s misinterpretation of the Fair Housing Act by assigning a new and unrealistic affordable housing obligation on municipalities.

This is a complicated decision, which will be discussed and debated for months to come.  But there are some readily made observations:

  • The Supreme Court affirmed but modified the Appellate Division ruling.  In doing so, the Court further expanded the Mount Laurel doctrine to include a new obligation on municipalities, which will be folded into present need. The Court wrote:

“…the trial courts must employ an expanded definition of present need.   The present-need analysis must include, in addition to a calculation of overcrowded and deficient housing units, an analytic component that addresses the affordable housing need of presently existing New Jersey low-and-moderate income households, which formed during the gap period and are entitled to their delayed opportunity to seek affordable housing.”  (Page 31 of decision.)

  • At the same time, the Court rejected the arguments of certain housing advocates and developers to further expand the “gap” obligation and double count certain households.    The Court wrote,

The trial court must take care to ensure that the present need is not calculated in a way that includes persons who are deceased, who are income-ineligible or otherwise are no longer eligible for affordable housing, or whose households may be already captured through the historic practice of surveying for deficient housing units within the municipality.” (Page 31 of decision.)

  •  The Court ruling, however, has added to a very complicated, process, which will require the expenditure of further resources at the local level. The Court in this decision once again invited the Legislature to revisit the issue and provide necessary reforms.

The so-called “gap” period does not result from any failures of local government.  This “gap issue” arises out of Council on Affordable Housing’s inability to promulgate third round regulations from 1999 to the present or make any final determination as to state and regional housing need, as well as constant litigation by certain groups    The Fair Housing Act defines a municipal obligation to include present and prospective need, and when it has developed a plan to address both those needs, a town should be deemed compliant and allowed to proceed.

League Executive Director Michael J. Darcy, CAE offered the following comment:

“While the Supreme Court attempts to forge a middle ground, this decision is vague as to how to determine this additional present need obligation.   Thus, the ruling provides little guidance and will likely result in additional property tax resources being expended.    We again call upon the Administration and Legislature to craft long-overdue reforms and promulgate a reasonable, rational state housing policy.”

 

Contact: Michael Cerra, Assistant Executive Director at 609-695-3481 ext. 120 or mcerra@njslom.org

 

Follow the League on Twitter at: http://twitter.com/NJ_League

Federal Infrastructure Policy Will Impact New Jersey Municipalities

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Local officials appreciate the need to keep an eye on policy developments in our State’s and our Nation’s Capitals. In our Federal system, many decisions made on other levels of government inevitably have consequences for municipalities. As the 115th Congress and the 45th President begin to shape America’s future, New Jersey Mayors and municipal governing body members will need to react to any proposals that could help, or hinder, their ability to meet the needs and promote the interests of their citizens.

One area of interest is investment in our decaying infrastructure.

President-Elect Donald Trump has vowed to deliver a major rebuilding package to Congress within his first 100 days in office. He has called for transportation investments, ranging, on different occasions, from $500 billion to $1 trillion.

His nominee to lead the U.S. Department of Transportation, Elaine Chao, echoed the call to repair the nation’s crumbling infrastructure, during her confirmation hearings, last week. At that time, she indicated that one of her top priorities will be to establish an infrastructure “task force.”

But, aside from the promise of fast action and a proposed level of investment, the Administration has yet to provide specifics on the plan. Based on reactions from Congressional leaders and on hints provided during the transition, this is what we know so far.

It appears that no consensus on an infrastructure package will take shape during the new President’s first 100 days in office.

Pennsylvania Congressman Bill Shuster, who Chairs the House Transportation Committee, has stated the Congress would consider ways to pay for the program during the first 100 days, then consider specific investment alternatives and enact the infrastructure package over the next 100 days. Speaker Paul Ryan has also indicated that the issue is likely to get addressed later in the year. It seems reasonable to anticipate action on infrastructure investments before Congress’ traditional August recess.

Further, though candidate Trump had called for massive transportation investments, with proposals ranging from $500 billion to $1 trillion, the final package could end up being smaller than those initial figures. Congressional Republican leadership, along with rank-and-file Members, has been suspicious of increased spending and the impact it would have on the deficit.

However, those concerns could be abated by the incoming Administration’s strong preference for luring private sector investments in our Nation’s crumbling infrastructure. The new President believes the private investors can complete projects more efficiently and economically than can the public sector.

During the transition, one possibility that was mentioned would provide $137 billion in federal tax credits to companies that finance transportation projects. It was estimated that this could generate up to $1 trillion in investment over 10 years. Additionally, through Public Private Partnerships, investors could bid on projects, agreeing to build and maintain them for a set amount of time, and recover their costs through tolls or set state payments.

Further, we should expect any new infrastructure program to include a roll-back of any regulatory impediments that add costs and delay swift completion of transportation projects. This is a priority for both the incoming Administration and Congressional Republicans. During her confirmation hearings, Transportation Secretary-nominee Chao expressed support for streamlining regulations in any infrastructure proposal. And House Committee Chairman Shuster also views regulatory reform as an important component of any infrastructure plan, saying there are “hundreds” of regulations that should be repealed.

Finally, the new Chief Executive has vowed to follow “two simple rules” when he is in office: buy American and hire American. That, however, could force a show-down between the Administration and the House leadership. Speaker Ryan dropped a so-called Buy America provision from a waterways bill last year. That provision would have required American steel and iron to be used in certain drinking water projects. Critics of the steel provision were concerned that directing federal funding to American providers would create an artificial system of winners and losers, and that it would increase costs.

Lawmakers from both parties have shown willingness to work with the new Administration on rejuvenating the nation’s aging infrastructure. So, on infrastructure matters, it’s fair to say that our 45th President will be in the driver’s seat.

With that in mind, we note one important component of an infrastructure investment program that, to our knowledge, has been discussed by neither Congressional nor Administration officials. We believe it extremely important that a significant portion of any Federal Aid flow directly to local projects. Local officials are responsible for the vast majority of our State’s vital infrastructure. Yet all too often, revenues funneled through State Treasuries never reach the projects most important to local citizens and businesses.

Let’s hope the specifics that emerge – on transportation and on other infrastructure needs – will allow New Jersey municipalities to better serve the people, and protect the future, of our Garden State. We’ll be watching. You should, too.

Contact:  Jon Moran, Senior Legislative Analyst, jmoran@njslom.org, 609-695-3481 x121.

New Jersey Selected to Take Part in USDA Pilot

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Thanks, in large part, to the efforts of New Jersey Mayors and municipal governing bodies; our State has been selected, as one of three, to participate in a United States Department of Agriculture (USDA) pilot program.

Each day, thousands of New Jersey residents struggle to put healthy food on the table for their families. As of July 2016, there were 858,572 persons in New Jersey receiving SNAP benefits, which is approximately 10 percent of our state’s population.  A significant number of our constituents are dependent on these benefits to provide nutritious and affordable food for their children and families. According to the USDA, 524,000 individuals, or 6 percent of New Jersey’s population, live in food deserts with little access to healthy food options.

We thank those of you who visited the Mayors’ Information Booth at the League Conference in November, where you had the opportunity to sign on to our letter to USDA Secretary Tom Vilsack. In that letter, we urged Secretary Vilsack to include the Garden State in the upcoming two-year pilot that will enable (SNAP) participants to purchase their groceries online. We also thank those of you who responded to our follow-up request on this matter. (Please see our fact sheet on the SNAP pilot program, for further details.)

We thank Senator Cory Booker for involving the League in this effort to include New Jersey in the pilot. We believe that this will bolster the initiative being spearheaded by League President and Bridgeton Mayor Albert Kelly, to ensure better nutrition for children and families living in need of assistance all around our Garden State.

Contact:  Jon Moran, Sr. Legislative Analyst, jmoran@jslom.org, 609-695-3481 x121.

Governor Signs E-Waste bill

Thanks to your efforts and countless county and municipal officials,  we are very pleased to advise you that earlier today Governor Christie signed S-981 into law.

The League supported S-981A-2375, regarding so-called “e-waste.”   Specifically, this legislation would require each manufacturer of “covered electronic devices” to provide for the collection, transportation, and recycling of its market share in weight of all covered electronic devices collected in a program year.

This new law will ensure that manufacturers provide for a “free and convenient” recycling program for all of the covered electronic devices that are collected and further eliminate the need for local governments, and by extension our property taxpayers, to either absorb these costs or eliminate their programs.

Thank you to all who reached out to your Legislators and the Governor on this timely initiative.    Our thanks also to our partners at the New Jersey Association of Counties for their efforts in advancing this legislation.

Keep an eye out for an advisory from the League on this new law.   In the meanwhile,  click here for a copy of S-981.

You can also click here for our earlier blog postings on this new law.

Contact:   Michael F. Cerra, Assistant Executive Director, 609-695-3481 x120, mcerra@njslom.org.