New Jersey is burdened with the nation’s highest property taxes. A major driver of that burden is the cost of local government and school district benefits packages that bear little resemblance to what’s offered in the private sector.

Public sector defined benefit pensions and comprehensive health plans with low employee contribution rates are consuming an ever-larger share of tight municipal budgets in Cape May County. These benefits hit taxpayers twice – once through local government and again through the school districts.

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The cost of public sector health care and retirement benefits

has grown into a burden too heavy for budgets to bear.

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Now the system is showing signs of collapse. A state Treasury Department report says the local government employee health insurance system is in a “death spiral.” New Jersey’s pension plans, despite five consecutive years of full funding, remain among the most underfunded in the country, according to Pew Charitable Trusts.

Compounding the strain are looming cuts in federal support, from programs to capital projects. In Cape May County, this includes the unprecedented omission of beach sand funding – for the first time in 30 years. The impact of these cuts is only beginning to be felt.

It’s time to ask the question: Are public sector benefit systems still sustainable for New Jersey taxpayers?

Start with the state’s three major pension funds: the Public Employees Retirement System (PERS), the Teachers Pension and Annuity Fund (TPAF) and the Police and Fire Retirement System (PFRS). All are defined benefit plans, meaning employees are guaranteed a specific pension payout, with taxpayers assuming all investment risk and funding responsibility.

That’s a sharp contrast to the private sector, where defined contribution plans such as 401(k)s now dominate. These plans depend on employee contributions and market performance, not taxpayer guarantees.

New Jersey’s problem is made worse by a long history of legislative misuse of pension funds to patch holes in the budget. Even when funds are raided or underfunded, the state – meaning taxpayers – remains liable for the promised benefits. This year alone, the state put $7.2 billion into the pension system.

Local governments and school districts have no say in any of this. Their annual pension bills are mandatory, excluded from the state’s 2% cap on property tax increases, and must be paid in full. What happens after the money is sent to Trenton is beyond their control.

Teacher pensions are a particularly flawed system. They burden taxpayers but often fail to serve teachers well. New Jersey ranks last among 38 states offering defined benefit teacher plans, thanks to low benefit accruals, long vesting periods and no cost-of-living adjustments.

Except where unions require it, the private sector has largely abandoned defined benefit plans as unsustainable. Yet these outdated models remain entrenched in the public sector.

The story with health benefits is just as troubling. Public employees often receive more comprehensive coverage with lower out-of-pocket contributions than their private-sector counterparts – another cost borne by local taxpayers. Rising premiums are straining budgets across the state. In Cape May County, six municipalities have already exited the state’s health benefits system because they simply can’t afford to stay.

Those municipalities now have chosen private options, but their departure makes things worse for those left behind. The state health system’s premiums are based on shared risk – towns with healthier workforces were effectively subsidizing those with costlier claims. As the healthiest towns leave, costs for the rest climb further, accelerating the “death spiral.”

This is not a lack of appreciation for public employees. It is a call to fiscal honesty. The current system is failing the very people it’s meant to serve – workers and taxpayers alike.

Quotes From the Bible

“Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?” – Luke 14:28