Tag Archive: pen/ben

The Pen/Ben Impasse: Suggested Solutions

So the state public employee unions and Gov. Christie are at an impasse now. The unions this year showed strength by not bending to the Pen/Ben Commission’s call for extreme changes. However, the unions want a continuing and higher level of state contributions into their plan to insure its solvency. The 2011 law agreed to by both parties was violated by Christie who said he did not have enough money. The N J Supreme Court sided with him that the debt limitation clause did not allow him and the legislature to bind the government to future payments.

In effect Christie can contribute whatever he wants while the fund’s liabilities continue to march toward bankruptcy. Such is not a good scenario for him or the unions. In the meanwhile the annual actuarially sound contribution needed in a few years could exceed $7 billion, be a huge drag on the budget, and continue to increase without a solution. Both Christie and the unions need to come together.

Having violated the very law he touted for years, Christie should take the first step toward a solution. There is now a concurrent resolution (ACR244) passed by the legislature which urges, but cannot require, that the governor make his pension contribution of $1.3 billion by July 15 for fiscal year 2016. The short-term cost of borrowing the money will be far less than the interest received by investing it all early. Also by doing so Christie could not wait until the end of the budget cycle and then say he has insufficient funds. This would be a sign of his good faith toward the unions. Alternately, and less desirable, he could sign bill S3100 on his desk which requires pension contributions be made on a quarterly basis starting August 1. His failure to do either is sheer arrogance and no way to start the bargaining he says he wants.

For bargaining strategy, the difficulties of the process, other options available to unions, and what the Supreme Court said in spite of ruling in Christie’s favor, go below the fold.

2016 Budget Recap

After the legislature’s 2016 Budget Bill (S2016) was passed, Gov. Christie changed it both positively and negatively. Positively he increased the Earned Income Tax Credit for the working poor from 20% to 30%, he increased the surplus from $350 million to $700 million and he accepted the legislature’s addition of $66 million for Open Space. He also increased the Opening Balance, a sign of recent savings and expected tax revenue increase, by $240 million over his original budget. Negatively he vetoed the additional sums the legislature sought for state contributions to Pen/Ben. After all the changes he reduced appropriations by $1.6 billion from what the legislature sought, and by $59 million from his original budget. The changes he made are HERE.

Yesterday the Assembly and Senate  passed a Concurrent Resolution which urges the Governor to pay, by July 15, 2015, the State’s budgeted contribution of $1.344 billion for State Fiscal Year 2016 to the State-administered pension systems. Democratic leaders point out that the cost of borrowing the money to make the immediate payment will be far less than the interest earned by having the funds invested early.

The budget overall is austere, a thing of “shreds and patches.” It lacks funds the departments need to keep up with inflation, underfunds the Transportation Trust Fund, and reduces bus services while increasing fares. It reflect’s Christie’s failure to achieve an acceptable level of economic growth.

The EITC increase he will tout in his election campaign as the “humane” Christie helping the working poor. Likewise his failure to increase the contribution to the pension plan he will say shows he is fiscally conservative and not so subtly anti-union. It is not clear yet whether he will make the early payment into the pension plan, but if he genuinely wants to bargain with the unions this payment would be a small token of good faith following his failure to follow the 2011 law.  

Democratic Budget Plan

Update 3:00pm: The Star-Ledger reports, Democrats are proposing a $35.3 billion budget with $3.1 billion set aside for pensions, in contrast to Christie’s $33.8 billion spending plan which included $1.3 billion for pensions. New proposed revenue sources include a tax hike on income over $1 million and a 15 percent corporation business tax surcharge.

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In a press release this morning Senate President Steve Sweeney (D-Gloucester) and Assembly Speaker Vincent Prieto (D-Hudson/Bergen) announced that the Democratic budget will make a FY2016 pension repayment of $300 million as an FY2015 supplemental appropriation based on stronger-than-expected June tax collections.

The $300 million prepayment, funded out of FY15 revenue, is in addition to the $212 million that Governor Christie committed to add to the FY15 pension payment based on this year’s positive “April surprise” surge in income tax revenues.

“Making the payment upfront, rather than next June, will generate more than $21 million in additional investment income over the course of the fiscal year, based on State Investment Council projections,” Senate President Sweeney said. “It is important that we get every dollar we can into the pension system because every $1 we put in now saves us $3 in the future.”

“Democrats are committed to fiscal responsibility,” said Speaker Prieto. “Underfunding the pension payment has put the state deeper in debt, lowered the state’s credit rating and hurt the economy. The state should balance its budget and fully fund its pension obligation, and this prepayment is part of our efforts to fix these problems and move the state’s economy in the right direction.”

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Blue Jersey will have more commentary on the budget which must be finalized by June 30. As of this moment Governor Christie has issued no response to the Democratic plan.

 

“Show me the money”

“We don’t need no education

We don’t need no thought control

All in all you’re just another brick in the wall”
– Pink Floyd

From Gov. Christie we have had enough Republican education and thought control spin. What our state government needs is more revenue.  In the past week he said the Pen/Ben law was excellent, but he does not have the money. He realizes the transportation fund is broke so he scrounges to transfer funds and take on more debt. He says there are other worthy projects, but guess what, we can’t even meet our current obligations. It’s time for him to show us the money.

The basic problems is that our economic recovery is floundering. Until possibly the current year (ending June 30) the governor’s revenue forecasts have exceeded the income received, leading to cut-backs in important expenses. We don’t want more cuts, we want a better economy. He has failed our state grievously – so far “just another brick in the wall.”

Three key economic measures of where we are now:

  • U. S. real gross domestic product (GDP): In the U. S. it grew 2.2 per cent in 2014, but in NJ it grew by only 0.4 per cent ranking our state as 46th in the nation. All our neighboring states did better.

  •  Unemployment: The U.S. rate is 5.4%, but  ours is 6.5% ranking us 44th in the nation. All our neighboring states did better.  
  • Median household income: Since 2010 it has declined 12.2 percent, compared with an average drop of 3.9 percent for the U.S.

    If Christie were head of a large corporation he would be fired. Sure companies sometimes have to cut expenses and they did so during the Great Recession, but to thrive they need to grow their revenue. The U.S. recession is over and corporations are expanding investments to increase return to their shareholders. The New Jersey shareholders deserve no less. (There will be more on how to do this as we approach the budget deadline.)    

  • Gov. Christie’s pension battle: “Weird NJ”

    Cross-posted with Marie Corfield. Promoted by Rosi.

    Governor/Presidential Candidate Christie tours the country touting bipartisan pension and health benefits reform as the signature accomplishment of his administration. Part of that reform was his legal obligation to make regularly scheduled contributions in order to get the system off life support. (See here for CliffsNotes on the long history of the state’s underfunding of the system.)

    Today, the Supreme Court of New Jersey will hear arguments in the ongoing pension battle between the state’s public employee unions and the Christie administration because the governor has decided he can’t come up with the full, legally obligated payments that he signed into law.  

    Christie pays a visit to New Jersey

    Governor Christie this week spent time in Missouri, Washington DC, and New York. This morning he visited Cedar Grove before leaving this afternoon to Boston. Nonetheless, that did not stop him from saying at the “Town Hall,” “I prioritize my day job.”

    Christie today was visiting a Republican town which is not representative of the county as  a whole. Cory Booker won re-election to his U. S. Senate seat in Essex County by 106,472 to 29,527 votes, but lost in Cedar Grove to Republican Jeff Bell 1,339 to 1,671. Likewise in the congressional race Republican Rep. Rodney Frelinghuysen won 1,883 to Mark Dunec at 996. The event was held at the Essex County Police Academy, a place which might be intimidating to some. (Given Christie’s NJ polling data he might be planning a future forum at the Trenton State Police headquarters.)

    Upon entering the academy campus attendees were greeted by members of NJ Working Families holding posters protesting fare hikes and route eliminations. Carl from East Orange explained the bus hikes “affect the littlest people who can least afford them and can’t do much to prevent them.” Craig from Princeton was concerned that there was a proposal to end the 655 bus which takes staff and low income patients to the hospital.

    Inside the facility set up for 200 people, I sat next to a woman on the left side who explained to me that “Democrats don’t follow the ten commandments,” and “Republicans are denying Jesus’ teachings to feed and care for the poor.” She is a retired teacher who voted for Christie the first time but decided not to vote for either candidate in the last election. The person on my right overheard the conversation and said I was a “proselytizing leftie.” The person in front was a friend of Blue Jersey who raised a small poster in protest  – against Christie’s pen/ben plan.

    Shortly before the event began local dignitaries went behind the rear curtain to greet the governor. After a couple of minutes they came back to their seats except for Democrat County Executive Joe DiVincenzo. He spent more time with Christie and then came out to introduce the governor calling him “my good friend.”

     

    The Supreme Court assumes jurisdiction over the Pen/Ben case

    Suspense over the court’s decision regarding Pen/Ben has just been ratcheted up a notch. Superior Court Judge Mary Jacobson had ruled in February that Christie broke the law when he reduced payment for the system in the current budget by $1.6 billion. She also ordered the governor and legislature to find a solution. Christie first appealed the ruling to the Appellate Court and more recently asked the N. J. Supreme Court to intervene.

    Today the Supreme Court  announced it would assume jurisdiction over the case. It set May 6 for oral arguments. The Plaintiffs (unions and others) must present their briefs by April 20 and the Defendant (the State) must submit its brief in response by April 24.

    There has been no apparent solution from the governor and the legislature working together. The governor argues the court erred and Democratic leadership wants the governor to make a full payment. With a decision in May there would only be a few weeks to remove $1.6 billion from the current budget if the court were to make such an order. Whether the legislature and governor could reach some compromise acceptable to the court is unclear.

    What do you think the Supreme Court will rule?

     

    The budget: “When life gives you lemons, make lemonade”

    The Democrats on the senate and assembly budget committee meetings this week were less confrontational than in the past toward the State Treasurer who represents Gov. Christie’s interests. That was because in part the governor’s revenue estimate was more realistic and several important large-ticket items crowd out other unmet needs. So it might seem there is little to argue over, but such is not the case.

    More so than in recent years there is insufficient revenue to meet the state’s required needs. The fact that our economic recovery during the Christie years has been poor only exacerbates the problem. Furthermore Christie’s presidential pandering to the far right makes reasonable solutions all the more difficult.

    Billions of additional dollars are seemingly unavailable to meet state Pen/Ben contributions, to create a self-sustaining Transportation Trust Fund, and to support essential programs which are being starved. It would also help if there were billions more in the upcoming or succeeding years from Exxon-Mobile instead of the paltry  $225 million settlement. All of us would like lower property taxes, and those in Atlantic County desperately need more state assistance, which if not forthcoming could lead to bankruptcy and endanger the credit of other struggling municipalities.

    What’s a Democratic legislator to do in this quandary? Make lemonade. All assemblypersons are up for re-election this year and increasing taxes is never popular. Nonetheless, hard decisions will have to be made by June 30. There are options available.  

    In Fair Lawn Christie’s show must go on

    The 129th “Town Hall” this morning was polished but boring. Outside Mother Nature was teasing us with 45 degree weather but we still had to walk blocks through snow and slush under the watch of local police. No demonstrators protested outside, perhaps, believing their best efforts were in the courts. After going through security we entered the “theater in the round” – more accurately a basketball court. There was no high tech glitz projected on walls as in past events. Instead above the court were four banners with reproductions of pie charts and bar graphs from Gov. Christie’s budget warning us about debt and Pen/Ben problems. Some 300 attended – primarily the elderly and youth.

    Fair Lawn is a town where in the last General Election Democrats Cory Booker and Roy Cho won their races and where all three state legislators are Democrats. You would not necessarily know that from the warm welcome Christie received as he strode in toward the center of the room. Fourteen video camera operators plus photographers leaped into action. A somewhat slimmer but still portly person, he exuded his usual confidence and spoke in a calm, reasonable-sounding way to the audience. His speech lasted about 25 minutes rehashing what he said in his budget address. He praised himself for reducing the size of government and promised no new taxes or even surprisingly user fees (a dubious promise.) Without him in Trenton he said there is no adult supervision, so presumably he will be providing little supervision in the future. He waxed on about what he did in 2011 to reduce Pen/Ben costs and launched the same arguments for his current Pen/Ben proposals. (“No other way to fix the problem.”) Nothing new here.