Rushed budget axed $200M Murphy promised to N.J. towns hit by soaring public worker health costs

The state Legislature axed $200 million from the new state budget that was intended to cushion the blow of double-digit health premiums hikes many municipalities and counties in New Jersey face in the coming year, according to the state’s League of Municipalities, the lobbying and advocacy organization representing the 564 local governments in the state.

Gov. Phil Murphy included the $200 million in the state budget he proposed in February to help local leaders avoid raising local taxes or cutting jobs and service elected officials claimed would be needed to cover the 22.8% rate hikes the State Health Benefits Commission approved in September.

In the customary rush to reach an agreement and pass a budget by June 30 — the end of the fiscal year — the state Senate and Assembly sent Murphy a revised $54.3 billion budget that included an additional $1 billion in spending. But the $200 million for premium relief was gone, said Michael Cerra, executive director for the League of Municipalities.

“We are taken aback, to be honest,” Cerra told NJ Advance Media on Friday. “We expected it to be there. There had been no indication there was any opposition to it.”

The source of the money was federal relief funds, and not state taxpayer dollars, Cerra said. Unless a deal can be reached soon, municipal and counties leaders, most of whom operate on a calendar year budget, will be forced to raise taxes or cut services or jobs, he said. The league is hoping to avoid these options, he added.

“We are still at the table. We are willing to work out anything with anyone in order to find relief,” Cerra said. Murphy said when he proposed the $200 million relief package, he wanted to see savings to offset the increase, and local and county officials are committed to finding it, he said.

“We are here and we are not going away,” Cerra added.

Murphy spokeswoman Christi Peace said budget negotiations produced a different solution to aid municipalities.

“Changes were made to the final budget following months of discussions between the Administration, Legislature, and stakeholders throughout the state,” Peace said.

“To support local municipalities, the final budget instead included an allocation of $150 million in Energy Tax Receipts-related payments for the Municipal Relief Fund to reduce towns’ budgetary pressures, including the cost of health care. The $50 million for the Urban Investment Fund will further help a number of cities respond to local needs.”

The $150 million from energy tax receipts was a late add-on in the final hours of budget negotiations and an acknowledgement that local officials have complained for years about how state government has long-raided this fund for its own purposes. League of Municipalities officials praised the move as soon as the budget was signed on June 30, not knowing that the spending plan also removed the $200 million for health benefits.

Representatives for Senate President Nick Scutari, D-Union and Assembly Speaker Craig Coughlin, D-Middlesex, did not respond to requests for comment.

Murphy struck a deal with state labor unions last fall to reduce their burden from the health care rate hikes to 3%. But talks between the administration and lawmakers with local leaders did not produce a similar agreement. The $200 million budget item was supposed to address that.

The health plans cover more than 800,000 state, county and local government workers, although enrollment has been declining. After the rate hikes were announced, Newark, the state’s most populous municipality, dropped out of the state plan in February and found its own coverage. A total of 30 local and county governments have left, including Trenton and Camden, Cerra said.

Local officials are already getting a sense of what the premium hikes will be like for the coming year, Cerra said. They won’t be as astronomical, but they will rise. It’s a double hit that local officials will have to figure out, he said.

“I am concerned about the smaller employers who can’t make those moves (to leave the state plan),” Cerra said. “I am increasingly concerned about the viability of the system.”

NJ Advance Media staff writer Matt Arco contributed to this report.

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Susan K. Livio may be reached at Follow her on Twitter @SusanKLivio.

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