Smart move for strapped cities

By Harry Pozycki

and Bob Shinn

The city of Camden is poised to adopt more stringent, competitive procedures for purchasing insurance under a model municipal policy that has saved communities millions of dollars. Such savings are urgently needed in the city, which is struggling to deliver necessary services and maintain public safety.

Camden is not alone. Municipalities and school districts across New Jersey have been hard-pressed to find the money to fund essential services in recent years. That's why local officials are beginning to embrace this money-saving proposal, which has been championed by local citizens. The policy was recently adopted by the city's school board, and it's expected to be considered by City Council today.

Local governments and school districts spend millions of dollars on insurance for health care, property, liability, and workers' compensation. But unlike most municipal contracts, the purchase of insurance is exempt from competitive bidding requirements. As a result, insurance contracting throughout the state has been rife with corruption and largely devoid of healthy competition among firms.

Currently, many New Jersey communities have a "broker of record" to solicit quotes for insurance coverage. Instead of directly hiring a broker, they designate one to secure quotes and make recommendations to the governing body. The broker is then paid by the selected insurance company based on a percentage of the cost of the coverage. This process provides a strong incentive for the broker to secure the best deal for the insurance company and himself - not for the city, town, school board, or other local government entity that's paying for the insurance.

To address this problem, the Citizens Campaign has developed a model ordinance for municipalities and a model resolution for school districts. It requires that insurance coverage be obtained on a competitive basis and that brokers be hired directly by governing bodies.

Several municipalities and school districts have embraced this way of doing business and saved millions as a result. Citizens in Cherry Hill conducted their own study of the school district's insurance coverage and found that the district could save $6 million over two years by switching to the state School Employees Health Benefits Plan. The Perth Amboy schools found they could save $3 million on insurance coverage, while the Toms River schools saved $1 million on broker's fees.

Now Camden has a chance to realize comparable savings. We hope citizens throughout New Jersey will bring this important reform to their towns as well, securing a statewide victory for good, efficient government.

Harry Pozycki is the chairman of the nonprofit advocacy group Citizens Campaign. Bob Shinn is the group's Camden County chairman.