Scott Shepard, author of a new study on New Jersey pensions published by the Mercatus Center, had an opinion piece in nj.com where he proposes these “painful fixes”:
Next comes the harder part. The state should then figure out — using theoretically sound rates of expected investment return and without the all-too-common accounting gimmicks — exactly how big the rest of the bill is for work already performed.
If it’s too big to realistically pay, then New Jersey will need — finally — to do the politically ugly but financially necessary thing: start cutting already-earned pension benefits.
There are relatively equitable ways to do this. Set an absolute cap of perhaps $100,000 or $125,000 per year, indexed to inflation, on benefit payments. Cut benefits that pay current or future retirees more than they earned in base salary while working. Reduce “spiked” benefits. Do this while completely safeguarding benefits below a certain comfortable-retirement threshold.
There is precedent for New Jersey cutting benefits arbitrarily and illegally so applying a cap is a logical next step. However, based on updated retiree payout data through June, 2018, Mr. Shepard’s suggested cuts will not be nearly enough.
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