Thousands of New Jersey’s retired police officers and firefighters would once again see annual cost-of-living adjustments to their pension benefits under bipartisan legislation introduced earlier this month.

The cost-of-living adjustments, commonly referred to as COLAs, were suspended more than a decade ago under a fiscal policy change that still impacts retired state and local government workers.

But that policy, initially adopted as a cost-saving measure for state government, has drawn increased attention in recent years as inflation rates have soared, putting significant pressure on retirees living on fixed incomes.

To assist a group of retirees that is “likely to be most in need,” the bipartisan proposal would restore COLAs for retirees who have been receiving pension benefits for a minimum of 10 years through the state’s Police and Firemen’s Retirement System.

For those with annual pensions worth up to $75,000, the rate of adjustment would be based on changes to the federal government’s consumer price index, according to the bill. For those with higher annual benefits, the rate of adjustment would total 1% in the first year, the bill says.

Surviving beneficiaries of eligible retirees would also be eligible to receive the adjustments, according to the bill.

Why only police and firefighters?

And while the bill would initially only benefit a small group of New Jersey’s retired first responders, Assemblyman Alex Sauickie (R-Ocean), portrayed the measure as a first step toward a full restoration of COLAs, across all groups of retired workers, including teachers and others.

“The goal was to get this restarted somewhere, sooner than later. If anyone says why police and fire, it happens to be something I’ve been passionate about,” Sauickie, a primary sponsor of the bill, said during a recent interview with NJ Spotlight News.

“I wanted to limit it to start and make sure that we got it right,” he went on to say.

In New Jersey, the health of the state pension system has been a major concern, in part due to a long-standing fiscal policy that led to the shorting of state government’s annual employer pension contributions for more than two decades. During some years, the pension payments were skipped altogether as governors and lawmakers from both Democratic and Republican parties prioritized tax breaks and other policy goals.

‘If anyone says why police and fire, it happens to be something I’ve been passionate about.’ — Assemblyman Alex Sauickie (R-Ocean), a primary sponsor of the bill

The state’s underfunding of its worker pension funds was only reversed by Gov. Phil Murphy and lawmakers, and in the latest annual budget, the state’s employer pension contribution totaled a record, more than $7 billion, counting dedicated revenue from the state Lottery.

However, the state’s actuaries have determined it will take decades of making such robust payments to both cover benefits earned by current workers, and to undo all the damage done due to the historic underfunding.

Why COLAs were suspended

Moreover, the state’s share of the pension system’s net liability remained nearly $80 billion in 2023, according to estimates included in the Department of the Treasury’s latest annual debt report, a sum that far outpaces the size of state government’s current annual budget, which totals a record-high, nearly $57 billion.

Despite the retirement system’s long-standing financial troubles, no retiree has been in danger of not receiving a pension check. But the conditions of the various funds that cover the retirements of individual groups of workers, such as police officers and firefighters, teachers, and other government employees, vary.

The measure has also been endorsed by several influential labor unions.

Moreover, the breadth of the state’s overall pension liabilities — and the annual cost to state government of funding them — did provide impetus for the adoption of a 2011 reform law often referred to as Chapter 78 inside the State House.

That bipartisan law, among other changes, resulted in an increase in employee contributions and adjustments to the retirement age, along with the ongoing suspension of COLAs.

In recent years, Murphy has indicated a willingness to work with advocates for retired workers on ways to ease the burden of the long-standing suspension of COLAs, but his administration has also previously estimated it could cost billions of dollars annually to do so, across the board. No new estimates for the fiscal impact of full COLA reinstatement are currently available, according to Treasury officials.

What retirees have lost

Still, an NJ Spotlight News analysis of federal inflation data shows that a retiree would need more than $100,000 today to maintain the same buying power as an annual pension that was worth $75,000 in 2011.

Sauickie said the legislation he is sponsoring, along with Assemblymen Robert Clifton (R-Monmouth) and Joe Danielsen (D-Middlesex), would initially restore COLAs for an estimated 32,000 retired first responders.

The bill’s estimated price tag is $86 million annually, to be covered by a state appropriation that would fund the reinstatement costs for both state and local governments, meaning the policy change would have no immediate impact on property taxes, Sauickie said.

“We did try to balance taking care of those that needed it most with fiscal responsibility,” he said.

The measure has also been endorsed by several influential labor unions, including the New Jersey Fraternal Order of Police and the Professional Firefighters Association of New Jersey.

Sauickie also noted the Legislature’s majority Democrats last year added some $700 million in last-minute spending to Murphy’s final draft of the annual budget. Amid these eleventh-hour additions were line items that funded upgrades at minor league baseball stadiums and dozens of other legislative pet projects, according to budget documents.

“When you go in there and see what’s in [the budget], funding cost-of-living adjustments for these folks, frankly, is easy,” he said.

“There’s just a lot of waste in our budgets that easily could have covered more important priorities — and I keep using that word, it’s about priorities — more important priorities, like cost-of-living adjustments for our public employees, police and fire to start,” said Sauickie, who added he is the son and spouse of teachers.

In addition to drawing bipartisan sponsorship, the measure has also been endorsed by several influential labor unions, including the New Jersey Fraternal Order of Police, the Professional Firefighters Association of New Jersey and the New Jersey State Retired Police and Firemen’s Association, according to a news release distributed by the Assembly Republican Office.