ANALYSIS: A budget shortfall is imminent, and savings may not be as advertised

ANALYSIS: A budget shortfall is imminent, and savings may not be as advertised

TRENTON, N.J. – Gov. Phil Murphy has touted his agreed to health-benefit savings with public unions, but it does not seem to be enough.  After Moody’s reported that a shortfall is expected this fiscal year, affecting fiscal year 2020 plans, those savings become all the more important. But they may not be as advertised.

The $800 million in savings are based on a contract that was recently ratified, and it includes other changes. In addition to the savings, public employees will receive annual raises of 2 percent and lower premium contributions than are currently required under 2011 bipartisan pension and health benefit reforms.

The annual raises are sure to cut into the savings, but the real blow will be significantly increased costs of health care payments by taxpayers.  The public is not privy to the specifics of the contract, and it is uncertain if the purported health benefit savings include changes in employee contributions.

The new employee contributions will be contractually set – putting the state in a precarious position if a recession hits.  Contracts cannot be avoided once agreed upon, and taxpayers will be on the hook to pay for health benefits and pay raises they can’t get themselves.

State finances today are a great concern, but the state’s fiscal future is a grave concern.