1998 New Jersey Legislative Action

1998 New Jersey Legislative Action

The Two Hundred and Eighth Legislature of the State of New Jersey recently returned from its summer recess and is geared up to tackle some weighty issues, including solid waste reform, energy deregulation, and transportation trust fund renewal. Before the Legislature adjourned in June, it passed the largest State budget in history and enacted measures to reform automobile insurance and the hospital certificate of need process. It also authorized State income tax exclusions for Roth IRAs and eliminated certain onerous regulatory requirements for traffic and parking by the Department of Transportation. Governor Whitman has signed 112 bills since the beginning of the new session in January and has 20 bills awaiting her action.

The New Jersey Legislature is a socially diversified body consisting of 22 minority and 20 women members. The Legislature consists of various professionals including 33 attorneys, 28 business owners and/or executives, a physician, a Certified Public Accountant, five college professors and two dentists. Additionally, there is a chiropractor, restaurateur, pastor and a farmer. Although the New Jersey Legislature is a part-time body, 23 members serve on a full-time basis. Members of the Assembly will run for election in November of 1999, but Senators do not run until November of 2001 along with the Governor.

Solid Waste Reform Expected in the Fall

In the wake of the United States Supreme Court decision in the Atlantic Coast case where the Court declared New Jersey's mandated system of county-controlled trash disposal unconstitutional, the Legislature and Administration have begun discussions to resolve the issues involved in solid waste disposal particularly with respect to deregulation of the industry. This is an issue that impacts New Jersey's businesses and homeowners on a daily basis since the State's trash disposal costs are the highest in the country.

Legislation signed by the Governor on August 2, 1998 revises two early bond acts - the Natural Resources Bond Act of 1980 and the Resource Recovery and Solid Waste Disposal Facility Bond Act of 1985 - to allow for forgiveness of certain loans the State made to counties to finance waste disposal facilities (Public Law 1998, chapter 66).

Legislation was released from the Assembly Solid and Hazardous Waste Committee, but has been awaiting consideration by the Assembly Appropriations Committee until a compromise is reached between the Legislature, the Administration and the interested parties - the haulers, disposers, counties and users. Senator Henry McNamara is the author of similar legislation pending in the Senate Budget and Appropriations Committee. The most controversial component involved in the solid waste initiative is how to finance the debt incurred by the counties - whether through environmental investment charges (EICs) or an appropriation from the State Treasury. There is no doubt that this is a front-burner issue for the counties, disposers and haulers faced with uncertainty as a result of conflicting court decisions.

Transportation Funding Initiative

The Legislature is also expected to consider legislation to renew and fund the Transportation Trust Fund which supports the State's highways, bridges, railroads and other transportation projects. John Sheridan served as Commissioner of Transportation under then Governor Tom Kean when the Transportation Trust Fund was first created in 1984. The renewal of the Trust Fund has the support of labor, and business representatives.

The first Constitutional dedication of funds for transportation purposes took effect almost 15 years ago on December 6, 1984 in connection with the creation of the Transportation Trust Fund. At that time, the Legislature recognized the importance and need for the Trust Fund to finance the State's share of transportation capital projects. Almost fifteen years later, the importance and need for renewal of the Trust Fund has expanded to a $3.5 billion program. What was first envisioned as a four-year construction program at $250 million a year has blossomed into a $700 million program.

The Trust Fund serves as a conduit for financing construction and improvement projects on New Jersey's roads, which are the busiest in the nation. The Trust Fund has spurred the State's economy, providing over one hundred thousand construction and other jobs on transportation projects. The State has made it a priority to continue to fund transportation projects into the next century in order to keep New Jersey on the road to a good economy and to improve the quality of life of its residents.

Legislative Response to Energy Deregulation

Deregulation of the electric, power and natural gas industries has begun in California, New York, Pennsylvania, Massachusetts, Rhode Island and Connecticut and is expected to occur within the next 12 to 18 months here in New Jersey. Competition in the electric retail market is highly likely given the fact that New Jersey's electric rates are the ninth highest in the country. Assemblymen Paul Di Gaetano and Rich Bagger introduced a bill, the "Electric Discount and Energy Competition Act," on September 14, 1998 (A-10) which is expected to be considered by the Assembly Policy and Regulatory Oversight Committee in October or November. A similar measure (S-5) was introduced by Senator Pete Inverso on September 24, 1998 and will be considered by the Senate Economic Growth, Agriculture and Tourism Committee on a similar schedule as the Assembly companion bill. The Board of Public Utilities has proposed to allow groups to pool customers into buying groups known as "private aggregators" and allow citizens to opt in or opt out of the group. The main issues appear to be stranded cost recovery and level of mandated rate reduction.

School Construction

The New Jersey Supreme Court recently issued the latest in a line of decisions concerning challenges to the State system of funding New Jersey's 28 Special Needs School Districts (SND). The Court's May 21, 1998 Abbott v. Burke opinion, among other findings, directed the State Commissioner of Education to implement the Department of Education's (DOE) own plan to remedy the facility deficiencies in the SNDs.

The Court opinion sets forth the State DOE's charge as follows:
According to the time-frame the State has submitted, the Plans and the enrollment projects will be completed by January 1999, and the architectural blueprints will be completed by the fall of that year. Construction will begin by the spring of 2000.

The Court directs that the formulation of these Plans be undertaken immediately. The proposed time-frame seems reasonably feasible, and the Court declines now to impose additional or unrealistic time constraints. The Commissioner is directed to ensure that the Plans are completed and that the deadlines are met.

On July 17, 1998, the State DOE adopted regulations designed to fulfill the agency's responsibility under Abbott. Among the provisions is a requirement for the SNDs to provide the DOE with a facilities management plan "on or before January 15, 1999."

Recent news reports pegged the cost of the SNDs facility construction at over $2 billion. Under the DOE plan adopted by the Court, the State Educational Facility Authority ("EFA") is set to act as the lead agency in charge of financing and completing the projects. The EFA's current jurisdiction is limited to higher education projects. If the Legislature follows the DOE facility plan, enabling legislation to broaden EFA's jurisdiction would be necessary.

The Legislature's consideration of a school facility program could also affect suburban schools. Governor Christine Todd Whitman has stated publicly that the facility program must include all schools, and recently proposed a $5.3 billion school construction plan, of which $2.7 billion would go to other than the special-needs districts. Estimates of statewide school facility needs approach a staggering $10 billion. Given the State's limited resources, it is highly unlikely the final program will be close to that figure. Pending bills in the Legislature provide a maximum of $500 million in project funding Statewide. Clearly, some compromise is in order.

School systems, other than SNDs, would be well advised to follow facility enabling legislation as it moves through the Legislature this fall. The stakes will be enormous as the State sets criteria for funding. Some districts, particularly those that are relatively more wealthy, will be candidates for less or no aid as Trenton tries to set its spending priorities.


Recent Enactments

Workers' Compensation Fraud

New Jersey employers and employees who commit acts of workers' compensation fraud will face criminal penalties under a new law signed by Governor Whitman (Public Law 1998, Chapter 74). This new law, which took effect immediately upon being signed by the Governor on August 14, 1998, makes it a fourth degree crime for anyone (1) to purposely or knowingly make a false or misleading statement, representation or submission in filing a workers' compensation claim; or (2) to engage in practices designed to avoid making full payment of premiums or benefits under the workers' compensation law. This law also imposes fourth degree criminal liability on anyone who purposely or knowingly coerces, solicits or encourages any other person to make a fraudulent claim. A fourth degree crime is punishable by a maximum of 18 months in jail and/or a $10,000 fine.

In addition to criminal liability, those who commit workers' compensation fraud may also be sued civilly for their actions that cause injury to any other individual and may be held liable for damages and attorneys' fees. The submission of a false claim may also lead to the termination or denial of benefits with respect to the filed claim. Additionally, a person who makes a false claim is liable for repayment to the employer or carrier of the amount of the benefits wrongfully received, plus interest on that amount. If full repayment is not made, the amount owed will be deducted from future benefits. Likewise, an employer who is found to have engaged in practices in order to avoid paying its full workers' compensation premiums, or who wrongfully denies or delays payment of benefits is liable for the proper amount owed, plus interest.

Certificate of Need

The Governor signed the New Jersey Certificate of Need Reform Act of 1998 which took effect on August 14, 1998 (Public Law 1998, chapter 43). This law deregulates certain health care facilities and, as a result, eliminates the Certificate of Need ("CN") requirement for certain facilities. For those health services not deregulated by the Act, the Department of Health and Senior Services ("DHSS") will have greater control over CN applications. This law gives DHSS greater control over appeals from denials of such applications and removes the Health Care Administration Board from this process.

This Act also creates a new 15-member CN Study Commission to determine the impact of the reform on urban hospitals, access, quality, Statewide and regional services and the General Fund, including the Medicaid program. The Commission will examine which health services should continue to be governed by the CN process.

Hedge Fund Investments

Governor Whitman recently signed a law to clarify the exemption from gross income tax of nonresidential earnings from hedge fund investments (Public Law 1998, chapter 106). The law also provides an additional remedy for taxpayers assessed deficiencies, affects certain State penalty provisions and changes the requirements for estimated quarterly payments.

Regulatory Developments

In the wake of the enactment of the Automobile Insurance Cost Reduction Act in May, the Department of Banking and Insurance has proposed extensive revisions and new additions to its automobile insurance regulations that are designed to assist insurers in developing a lower cost alternative to the existing mandatory automobile insurance coverage. The rules create new standards to determine what medical tests and treatments are eligible for coverage. The Department expects to adopt the regulations in December.

Other Key Legislative Initiatives Signed into Law

On July 31, 1998, Governor Whitman signed legislation to grant a five-year extension on the upgrade of certain regulated underground storage tanks that exceed 2,000 gallons and store heating oil for non-site consumption in non-residential buildings (Public Law 1998, chapter 59).

The Governor also signed legislation to provide $100 million in loans to local governments and water authorities for clean water and drinking water projects around the State (Public Law 1998, chapters 83 through 87). The five bill package also includes $15 million for the purchase of land along the Passaic River and its tributaries that have been plagued by flooding. (Public Law 1998, chapter 84). The land is intended to be used for conservation and recreation purposes.