‘Huge increase in taxes’ looming in NJ because of health benefits
TRENTON – Property owners across the state face huge tax hikes, officials warned Wednesday.
Local officials say the state must intervene to reduce the impact of roughly 22% increases in state health plan premiums for local government workers.
The State Health Benefits Plan increases were approved by a state panel a month ago but continue to reverberate among local officials who said they had no inkling such a hike was looming until mid- to late-summer.
East Windsor Mayor Janice Mironov says the financial impacts would be enormous and a double-whammy for many taxpayers whose towns and counties are in the state health plan. She said it’s not conceivable that Gov. Phil Murphy and lawmakers won’t resolve the issue, hopefully within four weeks.
“This is both a human issue. It’s a huge taxpayer issue. It’s a public employee issue. And it will be a political issue,” said Mironov, president of the New Jersey Conference of Mayors.
Offsetting tax hike
John Donnadio, executive director of the New Jersey Association of Counties says the health plan itself needs long-term reforms such as adding local government representatives to its board. But urgently, he said state surplus or federal COVID funds must also be tapped to offset the hike.
“The immediate relief has to come from the administration in terms of subsidizing local government employers and local employees in the same way that they did the state employees,” Donnadio said.
How much will this cost local governments?
Premium increases for state workers were capped at 3%, in exchange for the unions agreeing to increase some medical copays. It’s not clear what that will cost the state, though Treasury Department spokeswoman Danielle Currie says it won't have any impact on the current state budget.
"During the budget process, we proposed an appropriation for health benefits in FY23 based on projected utilization as well as inflation," Currie said. "The amount appropriated by the Legislature, and discussed during legislative budget hearings in May, is sufficient to cover our Fiscal Year 2023 health benefits costs."
"However, this is a self-insured plan so if actual claims costs end up being higher than projected, the state covers that increase through the Health Benefits Fund," she said. "If the actual costs in any given year end up being lower than contributions into the Health Benefits Fund, those monies will remain in the Health Benefits Fund to pay for future health benefits costs for members."
Similar changes applicable to local workers could be adopted, Currie said..
"The Legislature has the authority to make plan design changes that would lower the rates," Currie said.
It’s not clear how much the roughly 22% increase in premiums will cost local governments, though Donnadio estimated it could cost the state $350 million to $400 million to cap the increase to local governments at 3%.
If that cost is kept in local government budgets, it’s possible all that could be passed along to taxpayers, as health care costs are among the exceptions from the 2% cap on property tax levy increases.
For context, the entire statewide property tax levy increased by $583 million last year. A $400 million increase would amount to nearly $120 on the average tax bill – though the impact would vary, as some local governments are in the state health plan but others aren’t.
More might leave the plan now, though the timing makes it difficult for governments to line up alternative health plans for 2023.
'Huge increase in taxes'
Newark Mayor Ras Baraka called the increase in health care costs “inhumane” and said his city and others are working together to look for a different insurer.
“I think it’s draconian in any time to raise it 20%, period,” said Baraka, president of the New Jersey Urban Mayors Association. “To do it now, right in the middle of us trying to recover from COVID, is at best insensitive.”
Baraka said the cost of the increase to Newark is $24 million. Essex County Executive Joe DiVincenzo says it’s $21 million for Essex County.
“The situation now is we’ve got to make decisions – what we’re going to do, how we’re going to put this budget together by Jan. 15,” DiVincenzo said. “And it doesn’t look good for the people in this county as far as our taxpayers. It will be a huge increase in taxes.”
Democrats criticize Murphy administration
Senate Majority Leader Teresa Ruiz, D-Essex, said there has been a lack of transparency from the Murphy administration around the rate hikes, compounded by the state not extending the window for open enrollment to give towns and counties time to shop for alternatives.
“There’s a clear message that’s being sent to all of us, which is there’s no urgency or need to protect the taxpayer,” Ruiz said.
Assemblywoman Eliana Pintor Marin, D-Essex, who heads the Assembly Budget Committee, said budget negotiations would have gone differently in the spring if the administration shared what was being seen with health benefits. She also said some of its answers to lawmakers’ questions weren’t truthful.
Currie said the Treasury Department worked closely with the Office of Legislative Services and legislative leaders to answer as many questions as possible during the State Budget process, as well as through the summer leading up to the rate approvals last month.
"In fact, some legislators did raise questions about the proposed FY23 health benefits appropriations during the April and May budget hearings, and those questions were fully answered by Treasury officials and the increase in utilization trends was noted publicly," Currie said.
"Treasury has, and had, no reason to withhold information about utilization or costs increases and followed the same process this year as we have in past years, consistent with state statute," she said. "We understand the challenges of increased costs, but any suggestion that Treasury withheld information or did not do everything in its power to ensure a fully transparent process, either during the budget season or during rate-setting, is simply false."