Tag Archive: NJ Pension Plan

Five Things Christie’s pension commission Does NOT want NJ residents to know

Matt Arco in his “dumb it down” and “keep it simple” Star-Ledger article today writes about 5 things Chris Christie’s pension commission wants New Jersey residents to know. The commission report issued yesterday had nothing new to tell us: “The unfunded pension and health liability is massive, blame can be spread across the board, the 2011 reforms weren’t enough, and failure to fix the problem will cost millions more.” So what was left unsaid?

Here is another “dumb it down” and “keep it simple,” summary of What the commission does Not want us to know:

1.  The solution – It probably is still in the discussion stage, is politically difficult, will necessitate buy-in from the legislature and its leaders, and is awaiting the propitious moment for a “Grand Announcement.”

2.  The NJ court will have a say in the matter – It will likely rule soon that the 2011 union contract is valid and that the State has to continue contributing its share to the pension fund. It has already ruled that retired public workers have a contract right to cost-of-living adjustments.

3.  The unions will suffer – In spite of court rulings there will likely be a revised, less costly plan to the state for newly hired government employees.

4.  A tax increase at some point will be necessary – Credit rating agencies will only be satisfied when NJ raises its revenue sufficiently to meet its obligations and presents a more structurally balanced budget. To comply with future pension payments a tax increase will be necessary.

5.  A bitter pill – The plan will help but will be hard to swallow.

Pension Reform: “It’s NOT My Way or the Highway”

“The lower [bond] rating reflects our concern regarding the stresses from the state’s poorly funded pension system, substantial post-employment obligations and above-average debt levels.” – Standard & Poor’s analyst Jeffrey Panger (02/09/11)

Governor Christie has been delinquent in carrying out his duties to fund the pension system. In early 2010 he removed monies in Governor Corzine’s budget and did not make the anticipated State contribution to the plan. Likewise, in his current budget he has no funds to pay into the plan. Nor has he committed to making a payment in the upcoming year.  It is not surprising for an analyst to point out “the state’s poorly funded pension system.”

The Democratic led legislature in March 2010 working with the governor passed reforms that required public workers to contribute 1.5 percent of their salaries toward health insurance and removed part-timers from the system.  This week Senate President Sweeney introduced a plan that in part would in part create labor-management boards to set workers’ annual pension contributions based on the solvency of the system. The Governor and Republican legislators have their own more draconian proposal.  

Borrowing with reasonable rates is important for all states. However, Christie’s efforts to blame the lower bond rating on the Democrats is lame. It is a shared responsibility, and with roots in past administrations. Rather than his “My way or the highway,” approach, it is time for the governor to engage in substantive negotiations with the Democrats. Those who have invested into the system have every reason to demand him to contribute to the plan and to seek a workable solution with the legislature. The problem is real, but posturing and playing the “blame game” won’t solve it.