Chris Christie is proposing changes to health benefits and pensions for teachers and other public workers that will raise the retirement age, slash pension payments, and hike employee health care costs to a level where teachers will effectively take a 7% pay cut.
Christie promises these reforms will fix the pension crisis. Should we take him at his word?
I will protect your pensions. Nothing about your pension is going to change when I am governor. In fact, in order to ensure your retirement savings are safe, I believe we must prioritize the protection of pension fund dollars and investigate the cause of Jon Corzine's large investment losses to our pension system. Currently there is a $34 billion deficit in the State's pension fund, which threatens the retirement and lifeline of so many teachers. We must do better for our teachers, future teachers and retirees. As Governor, I will work to close unfunded liabilities and make sure our state lives up to its promises, unlike Jon Corzine. I will not raid your pension fund to cover budgetary shortfalls like previous governors of both parties have done. One of the changes I will bring to Trenton is responsible management, investment, and oversight of state pension dollars.
He knew there was a huge pension liability. He knew we were in a recession. He knew the state hadn't paid into the pensions for years. And yet he still made that promise.
It's time to state it outright: Chris Christie is a liar. His word is worth less than nothing. None of his promises are to be trusted.
Colorado, Minnesota and South Dakota have already taken the unprecedented step of reducing promised cost-of-living increases for their government retirees. In New Jersey State Treasurer Andrew Sidamon-Eristoff recently said that changes in pension or medical benefits for retired state workers could be included in the recommendations he is making to Christie.
Any decision by Christie and the Democratic-controlled legislature to reduce pension benefits, cost-of-living adjustments or retiree medical benefits would certainly end up in court, as the Colorado, Minnesota and South Dakota cases have.
But the sheer magnitude of the nation's public employee pension shortfall -- which the Pew Center on the States recently estimated at $1 trillion -- has state governments crying "actuarial necessity" and "fiscal emergency" as they weigh benefit cuts that run counter to decades of court decisions establishing pension promises as irrevocable property rights.
How anyone can claim "actuarial necessity" when we've turned our states into tax havens for the wealthy is beyond me. But I guess keeping promises to retirees who worked hard their whole lives and paid into their pension systems is not as important as giving out corporate tax gifts and slashing rates for the rich. I'm sure Taco Bell can use the extra help; seniors, get off your duffs if you want to keep getting those pills!
But don't worry, wealthy folks; this issue continues to be framed to your liking:
"We're having a heat wave,
A tropical heat wave,
The temperature's rising,
It isn't surprising." (Irving Berlin)
NJ's long, hot summer has been made all the more unpleasant by a governor, bursting with self-aggrandizement, who refuses to budge (for "financial reasons" he says) on family planning clinics, continues to flog his divisive "Tool Kit," meddles with medical marijuana, vetoes a homebuyer tax credit, hints he won't make a pension plan payment next year, amazes us with his non-transparent Reform Jersey Now affairs, issues half-baked commission reports, and disputes the OLS projection of another $10.5 billion deficit next year.
One has to hold a certain admiration for his abilities. He is able to maintain party discipline with Republican legislators toeing the line. He is a media darling in national circles. He is flexible enough to "find" the money when it's absolutely necessary for him. For better or generally for worse, he has cut the budget and tax rebates, decreased monies to municipalities, mistreated an un-tenured Supreme Court member, stood firm against a higher millionaire's tax, capped property tax hikes and school superintendent pay, and unrelentingly taken on teachers. So far he retains about the same level of popularity among voters.
I wish him a long and happy out-of-state vacation. We all deserve a rest. Maybe even the heat wave will subside.
The numbers are mind-numbing. As of June 2009, the state's pension systems faced unfunded liabilities of $45.8 billion. That number assumed an annual 8.25 percent return on investments, an actuarial standard that many experts are now declaring as unrealistic. In the past decade, the pension system averaged 2.56 percent a year, not nearly enough to keep pace with projected costs.
More pessimistic assumptions about rates of return peg the pension system liability as high as $173.9 billion - not to mention some $55 billion in unfunded health care costs.
Experts and officials have begun to say it more clearly: There is no way New Jersey will ever be able to pay for the promises it has made to current and retired workers.
Let me tell you a story:
Back in the '90's, Jim Florio played a little actuarial game with pensions and the state budget. Christie Whitman was happy to play along when it was her turn to (not) lead, especially since she had a booming market to help. Of course, when the market tanked, everything turned to dreck, but by then she was in Washington. Jim McGreevey did little to help; Jon Corzine, to his credit, made some contributions, but backed off when things got really bad. Now Christie won't pay anything into a system he says is "broken."
Everyone who knows anything about our pension problems knows this part of the story; now let's add something else:
Michael Symons at Capitol quickies brings our attention to the fiscal note that went along with SCR1, the constitutional amendment legislation that would require the state to begin fully fund its pension contribution over the course of seven years, each year adding one-seventh of the overall tab to its actual contribution. From the note we learn just what that would mean:
The Division of Pensions and Benefits in the Department of the Treasury estimates that the actuarially required contribution to the State-administered retirement systems for the State will be $3.477 billion in State FY 2012, $3.718 billion in FY 2013, and $3.940 billion in FY 2014. The phase-in payments under this concurrent resolution, if the State pays the minimum amount required, are estimated to be $540 million in FY 2012, $1.157 billion in FY 2013, $1.887 billion in FY 2014, leaving $2.94 billion in FY 2012, $2.56 billion in FY 2013, and $2.05 billion in FY 2014 unpaid.
This year, the Christie administration played the same games that got us into this mess and made no payment into the pension fund, even though they were supposed to pay more than $3 billion.
There are 15 sponsors to the SCR1 version of the bill in the Assembly including the Speaker and Minority Leader, but it hasn't moved out of committee since it was passed in March. The fact remains that even if it passes, we're still just passing a bill to make partial payments on a fund that's already short.
While the Governor has used public worker pensions as a club to beat them into submission, all of his talk has lead to making a bad problem even worse when you look at the numbers:
The budget skips a $3 billion pension payment, which means the state pensions system, already underfunded by $46 billion, will fall further in the red. Christie and his administration have promised to propose bold pension reforms, setting up a potentially large battle later this year.
So he's making a very bad problem even worse, in order to solve it at a later date. The fact is, that $46 million figure could seem conservative according to the latest news:
A new report from George Mason University says it's closer than you think.
The university's Mercatus Center studied public employee systems across the country and used New Jersey's as an example of how bad things can be.
"New Jersey's defined pension systems are underfunded by more than $170 billion, an amount equivalent to 44 percent of gross state product and 328 percent of the state's explicit government debt," said authors Eileen Norcross and Andrew Biggs.
The reason we have this problem in the first place is because Legislators and Governors from both sides of the aisle played the exact same game Christie is. They talked tough and then when the public wasn't looking, failed to fund their obligations. Of course, those same legislators and governors are also collecting pension benefits from the system they vilify. And now those Legislators and the Governor want to scapegoat the people who were promised benefits because they didn't live up to their end of the bargain, while failing to do so once again. Typical.
As a side note, is anyone else scratching their heads over the continued underfunding of our current pension obligation in Christie's "no gimmicks" budget? I know he's pushing hard for pension reforms, but when does underfunding current annual obligations cease to be a "one shot" to balance the budget? Just curious.
Just another promise broken for the Governor, but it's ok because he made those when he was a candidate. Maybe he thinks he can't be held responsible for things he said on the campaign trail. He says he is making the tough choices, but John Bury at NJ.com says he's taking the easy way out by not making a payment into the pension fund and ensuring further problems:
Chris Christie took the coward's way out, a well worn path trodden by every New Jersey governor in recent memory, by punting.
Offering the feeble excuse that "our pension system must be reformed before we can or should fund a broken, out-of-control system" Christie assured that it will remain broken and careen more out of control under his watch.
Not only is he skipping the payment, but he's continuing to include the number in his structural deficit calculation even though there is no such appropriation. It's ok though, because he's doing that with the property tax rebates as well to mislead the public into thinking a pretty bad problem is that much worse. Just another day in the Christie administration.
No one should be surprised by the report released today on the state pension funds. Observers have been saying for years that the people who handle the state's money have bailed on their fiduciary responsibility, preferring instead to push problems off into the future.
All three pension/health-care-benefits reform bills (S-2 Text and S-2 Statement, S-3 Text and S-3 Statement, and Senate Bill S-4 Text and S-4 Statement) passed today by votes of 36-0. I understand Turner, Rice, Allen and Baroni are the four non-voters. Click on the "Text" link to see the full legislative language or the "Statement" link for a more comprehensible summary. S-2 limits new enrollment in the pension system to full-time employees working at least 35 hours a week. Part-time employees making $5000 are eligible for a Defined Contribution Retirement Program, i.e. something like a 401(k). Benefits for future participants also go back to the old 1/60 formula. If you have multiple jobs, only the best counts towards the pension. Under S-3, current employees will have to contribute 1.5% of their salary to their health benefits, and newly hired employees will have to contribute 1.5% of their pension when they retire. S-4 limits sick leave payouts, you'll remember the recent outrages over some very large payouts.
Note that the most interesting reforms apply to future participants in the pension system, if you're already in the system you evade most of these reforms.
With 36-0 votes, we need to include both Republican and Democratic quotes, so here goes:
"These reforms are necessary to restore New Jersey's long-term fiscal footing and return sanity to a pension and benefits system that was allowed to spiral out of control," said Senate President Stephen M. Sweeney (D-Gloucester/Cumberland/Salem). "Without these changes, the state would soon have no option but to break its promise to career public servants."
"New Jersey's pension system is on life support," said Senate Republican Leader Thomas Kean (R-Union/Essex/Morris/Somerset). "If we don't act now, it will be too late to avoid a crisis that would be costly to both taxpayers and government employees who depend on the system. These are common-sense reforms that have bipartisan support."
One imagines that future State Senators will have to get their health benefits from their full-time job, unless there is a loophole somewhere.
State Senator Sandra Cunningham (D-Hudson) introduced a bill this week that, if approved, will allow New Jersey municipalities to delay for one more year their contributions to the public employee pension fund.
Cunningham, who was named last month to Governor-elect Christie's transition team, explained that the legislation is a stop gap measure to soften the blow of the recently announced decision to hold back millions of dollars in promised aid to municipalities.
"Some mayors have a need for this," said Senator Cunningham. "They need this, so I hope we can get it done as soon as possible."
Deferring pension payments was a controversial measure enacted several months ago by the Corzine Administration. At the time, candidate Christie called the idea "deceitful trickery." As he prepares to take his place in the Front Office, however, one wonders whether the eight billion dollar budget deficit has given him reason to reconsider?
The Governor-elect is not known to be shy about expressing his opinion. If he opposes Cunningham's bill, he should say so. If he supports it, he should explain why. Thus far, his transition team has had no comment and there's no word whether the bill will gain traction with legislative leaders. However, what Christie has said is that he supports deferring the state's contributions another year. Couple that decision with Cunningham's bill allowing municipalities to do the same, and with a few pen strokes, Trenton will significantly add to the long term fiscal insolvency of the pension fund.
For the record, Governor Corzine invested more money in the state pension fund than any other governor since Brendan Byrne.
New Jersey's pension funds lost $2.9 billion in value in February.
The value of the state's pension investments plunged to $56.3 billion as of the end of January, according to the latest monthly report issued by the state Division of Investment. It was $59.2 billion at the end of January, a loss of 4.35% for the month. The pension funds had been worth $77.7 billion when the fiscal year began July 1; the market loss, not counting reductions in the funds' value due to actual pension payments, is 25.5% in eight months.
Those returns reflect the situation at the end of February, but things should look better when the March report is announced in mid- to late-April. The Dow, S&P and Nasdaq are up between 8% and 10% this month, with today the last day in March.
New Jersey's unfunded liability in the teachers retirement fund rose almost $3 billion to $15 billion for the 2008 fiscal year from the previous year, the state treasurer said on Thursday.
Actuaries valued the fund's assets at $36.6 billion but the accrued liability is $51.7 billion, Treasurer David Rousseau said in a statement.
That means if the state were to be asked for all it is obligated to pay right now on teacher pensions, it will come up more than 25 percent short. Payments to retired workers and teachers in New Jersey total $5.5 billion annually, money that comes from taxpayers and revenue from pension investments.
Now obviously all obligations won't come due now, but that's still pretty staggering. These funds, along with just about everyone and everything else in the economy, could use a few good months at this point. The hope is over the long term as the economy recovers, the funds will rise along with it, but looking at these big losses each month is pretty difficult to see.
Rough numbers, there is $60 billion in the pension funds and the pension funds have a forecast liability of $120 billion. And that was the December Number. And then January, Senator Barbara Buono was saying the other day, going through all the ways you could measure how bad January was, you know the worst January ever in the 113 year history of the Dow, a 5 month rate of return that is the worst since the 1930s.
Our current outstanding liabilities are nearly double. I could see why the unions fear this latest pension deferral. It's going to be hard to climb out of the hole we have already dug.
The Governor put out a video talking about how he is trying to avoid many of the double digit tax increases with his plan that will allow municipalities and counties to defer half their pension payments. He says these extraordinary times call for extraordinary measures. See for yourself:I understand the Governor is trying to soften the blow, but the questions will come up regarding the mix between politics and practicality with this situation. People are certainly struggling, but it's also harder to run for re-election defending enormous tax increases. Eventually we are going to have to pay for this and it may be a larger amount with the interest that will be factored in. What happens if towns are still struggling in 2012, do we defer again? At some point we are going to have to start working on the cause of the illness, not just the symptoms.
Back in June the state invested $180 million in in a cash-raising stock sale by Lehman Brothers, an investment that was put at risk on Monday when Lehman declared bankruptcy.
Now the state thinks maybe, uh, it's possible, well, there's a chance they didn't get accurate info before buying so it's off to court!
New Jersey may sue Lehman Brothers officials after losing more than half of the $200 million they invested with the bank in June, because, state officials charge, they are not sure they were given accurate information before they paid into the company.
Lehman this week filed for bankruptcy protection.
"That will potentially be the subject of litigation," William Clark, director of the Division of Investments, said during a heated meeting of the State Investment Council in Trenton Thursday.
The pension funds closed the books on a disastrous foray into Lehman this week, collecting between 22 cents and 32 cents a share for 1.8 million shares of Lehman they had bought for $28 apiece in June, the division reported Thursday.
Wow. I wonder how we would recover money from a company that is under bankruptcy protection and, if their piecmiel sale works out, doesn't exist. The lawsuit would cost money and we'd never see a dime, making our loss even greater.
Especially since we aren't even sure they gave us bad info. Amazing.
In chess, a spite check is a checking move played with no purpose other than to delay inevitable defeat. Since the recipient of the check must then make a move to defend against it, the game is prolonged without the result being affected. This somewhat unsportsmanlike behaviour is probably more common in amateur play, however it is not unheard of for a master to throw in a spite check as his last defiant action before resigning a game.
If that sounds familiar, here's a description and comment on the Assembly GOP's actions yesterday which caused the vote on pension billls to be held open for over 4 hours...
The scene was partly surreal, partly role reversal as the minority party in the lower house grabbed the spotlight and reveled in Democrats' inability to push the measure through. "They give us a hard time, all the time," said Assemblyman Richard Merkt (R-Morris), as GOP leaders blasted the bill as watered- down reform. "It's kind of nice once in a while."
Eventually the measure passed overwhelmingly because Speaker Roberts didn't give in to their stunt. Apparently he threatened to gavel closed the session leaving the GOP holding the bag exposing their ploy for what it was. They never intended to stop the bill; they just wanted to make a scene because remember boys and girls, they are for good government. I know some will say that's just politics, but that doesn't mean we can't call them on their games.
As New Jersey copes with its increasing budget woes, perhaps the Legislature should consider several measures that would help reduce out-of-control spending: unannounced audits and the elimination or transformation of pension credit for part-time government work.
The Senate passed a bill to create a commission to study town mergers and a bill to eliminate (at least partially) pensions for elected officials convicted of corruption charges. Action on the proposed 20% propTax cut and the 4% cap on propTax increases stalled. Voting on the comptroller bill also stalled when, according to Senate Pres. Codey, the Republicans refused to vote for it. Sen. Barbara Buono also refused support because it had been too watered down.
The pot calling the kettle: also in the Star-Ledger article, Sen. Sharpe James, who held the office of mayor of Newark for six of his seven years serving in the Senate, will re-introduce a bill to ban the holding of two elected offices at once.
A compromise is being proposed so that Atlantic City could ban smoking in casinos but allow up to 25% of the gambling floor to be designated a smoking section, enclosed and with separate ventilation. Councilman Bruce Ward pointed out that there will still have to be people who have to work in the smoking sections.
The mayor and two councilmen of Logan Twp. left the Republican party and became Democrats due to dissatisfaction with their local party leaders. Apparently the move was a surprise to Gloucester County Dem officials.
The Corporation for Enterprise Development, an economic development research group, has given Our Fair State a grade of B for quality of life and work for 2006. We ranked high in education, personal income and job quality, but lower in pay growth, income distribution, and the number of people moving away.
But starting this year, you can get divorced quickly! Irreconcilable differences divorces can be completed in six months, according to a new law signed by Gov. Corzine yesterday. The AP reports that "It was supported by the New Jersey Bar Association and opposed by the New Jersey Catholic Conference." No kidding!
You're on candid camera: new buses which NJ Transit plans to purchase will come equipped with security cameras. Big Brother is always watching.
Open Thread: What's on your mind today, Blue Jersey?
This is going to be a long year for advocates of clean government and property tax reform in New Jersey. The trajectory, beginning with the four joint legislative panels and continuing through the opening salvo in the legislative wars this week, has been to water down proposals to protect vocal constituencies and avoid conflict.
Nearly 16,000 Goodyear employees are facing the holidays without paychecks. These United Steelworkers (USW) members are sacrificing for all of us, fighting the fight for good jobs. Being without a paycheck any time is painful -- but right before the holidays, it's especially hard. Every penny of your contribution will go to striking Goodyear workers and their families.
.....
Goodyear executives can buy their children all the gifts they want-while the striking USW members are struggling just to make it through.
If you're busy this weekend and cannot leaflet in support of the Steelworkers, maybe you can spare $5 to make a family's holiday a little brighter.
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