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Council briefed on $8M–$10M health-benefits gap as budget talks begin
Summary
City staff told the council health-benefit and liability claims have created an $8M–$10M budget gap, prompting negotiations with unions and discussion of reserve use and potential plan changes.
City staff told the Passaic City Council the municipal budget faces a substantial shortfall driven largely by rising health-benefit costs and insurance claims.
Ricky, a city staff member, estimated the single largest driver is an increase in health-benefit costs: "we're looking at an $8,000,000 deficit in health benefits alone," he said during the budget briefing. He added the city also faces roughly $1,200,000 in general-liability claims, contributing to the near $9M–$10M pressure on the budget.
Staff described options under consideration: continuing negotiations with police and fire unions (whose votes affect plan changes), exploring leaving the state health-benefits plan in favor of self-insurance, and other cost-reduction measures. Ricky warned that while switching to a private plan could lower recurring premiums, the city would need to fund full exposure in an initial self-insured year, which could raise near-term costs; staff said the first-year self-insurance calculation pushed costs higher in their estimates.
Council members pressed staff on other revenue sources and pilot-program timelines. Staff said added assessments from development increase the tax base and can offset some increases but will not close an immediate multi‑million-dollar shortfall. The city has used reserves in previous cycles (staff cited more than $13,000,000 drawn from surplus in a prior budget) and said tighter budgets reduce the ability to replenish those reserves.
Why this matters: Health-benefit cost increases affect the municipality's options for services, reserves and potential property-tax impacts. Staff emphasized this is part of a broader statewide issue affecting many municipalities and that negotiations with unions and the budget presentation will show more-detailed actions.
Next steps: Staff will continue union negotiations, prepare detailed budget proposals, and present the formal budget documents to the council for further review. No formal budget vote occurred at this meeting.
