My Two Arguments Against the COLA Theft

On April 27th, a superior court judge  in Mercer County, Douglas Hurd,  is scheduled to hear  arguments on New Jersey’s motion to dismiss a lawsuit brought by several retired prosecutors challenging the legality of the statute eliminating their COLAs.  The arguments in the brief filed by the plaintiffs boil down to reciting favorable opinions of other lawyers (in the OLS and AG offices who would have been directly impacted by any COLA diminution).  My two arguments against the COLA theft are a little more direct.

It’s in the handbook

If you retire and your retiree handbook says you get a cost-of-living-adjustment on your pension based on external factors then rescinding that promise is theft.  It doesn’t matter that you don’t have a fixed number.  The pension itself is based on some salary that is unknown when the promises are being made.  If a participant’s salary rose more than anticipated, can the state at retirement arbitrarily reduce a 50% of pay pension to 40% of pay because the base salary rose too high (in their opinion)?

It’s theoretically paid for

The COLA-theft law was passed on June 28, 2011 allowing actuaries to ‘revise’ their July 1, 2010 valuation reports (upon which the costs that appear in the 2012 taxes are based) to lower contributions.  Contributions for all prior years were based on continued COLAs and money was set aside* for future COLA increases.  If those COLA increases are eliminated then the money set aside for them was improperly obtained and now represents a transfer from some (future retirees/past taxpayers) to others (current/future taxpayers).

Being a taxpayer and never expecting to get a public pension these arguments both work against my personal financial interest but there is one overriding incentive for proposing them.  If you can’t trust your government there can be no law.  Maybe that’s a third argument.




* Of course in practice public pension funding is all about keeping costs down using whatever tricks available.  Any correlation to paying for the real cost of benefits is accidental but we’re talking theory here and, in a court of law, this line makes sense.

83 responses to this post.

  1. Posted by skip3house on April 14, 2012 at 5:41 pm

    “If you can’t trust your government there can be no law. Maybe that’s a third argument.”
    Theory be damned. If unfunded promises were made, they are worth zero.
    Those ignorant enough to believe the future will pay the present obligations are at fault, along with the politicians.
    Soon, the reality that government debt is only an imaginary number will spark a revolt.


  2. Posted by Anonymous on April 14, 2012 at 6:15 pm

    tough love is not different than state goverment, she works for an insurance company so she sucks the life out the private citizen for her own benefit.


    • Posted by Tough Love on April 14, 2012 at 6:25 pm

      What was this …. a pre-emptive strike before I even posed a comment.

      You are such an A*hole !


  3. Posted by Tough Love on April 14, 2012 at 6:24 pm

    John, notwithstanding your “*” qualification, your position that the COLA’s were “paid for” (even though we know funds for the COLAs as well as a major share of the basic pension were never actually allocated) is riduculous.

    And you said …”If you can’t trust your government there can be no law. ”

    Well, was our “govermnent” (which I’m assuming includes the elected representative who approve Public Sector pensions) really trustworthy (to the Taxpayers) when they approved these VERY generous pensions, or were their votes colored by the Unions campaign contributions and election support ?

    My position is that they were not …. and THEREFORE the taxpayers have every right to “reform” these agreements to what they likly would have been in the absence of the Union/Politician collusion. COLA eleimination is but one small step in that “reform”. Much MORE is necessary and approriate.


    • That’s a separate issue. Having ignorant flunkies tasked with deciding policy based on bad information from pliant actuaries didn’t work out but it’s done. Flounder gave his car keys to the Animal House crew. He fucked up. He trusted them and he had to live with the consequences. So do we. Stealing someone else’s car isn’t the way I would go.


      • Posted by Tough Love on April 14, 2012 at 6:51 pm

        John, I don’t agree. Why, if there is resasonable evidence to support such Union/politician collusion in approving excessive pensions, should the 3-rd party taxpayers (not only unfairly represented, but betrayed by the politicias elected to represent THEM) pay for this fraud ? Reform IS both appropriate, necessary, and fair.


        • Posted by Anonymous on April 14, 2012 at 6:57 pm

          Because they voted for the ignorant flunkies and they need to face the consequences of their apathy/naivete/willful ignroance, as the case may be.


          • Posted by Tough Love on April 14, 2012 at 7:08 pm

            PERHAPS, if their “apathy/naivete/willful ignroance” only resulted in electing stupid and incompetant elected officials, but NOT when those elected officials COLLUDE (witht the Public Sector Unions) to deceive the Taxpayers and actively (not passively) betray their obligations to those taxpayers.


        • Posted by Al Moncrief on April 15, 2012 at 2:17 pm

          Hi TL, as you know, prospective, legal pension reforms are available to policy makers. Check out the reforms that were adopted by Utah conservatives a few years ago, they didn’t sell their souls.


          • Posted by muni-man on April 15, 2012 at 3:20 pm

            That’s exactly what NJ did when it passed the UNCOLA and increased employee contribution rates. They made prospective changes to the plans, and NJ could do so unilaterally w/o union consent since the NJSC ruled long ago that pension plans are not contracts in this state and NJ reserves the sole right to change the terms of these plans going forward. That’s also why this latest suit is going nowhere. The lower Superior court can’t override the higher Appellate court decision which cited NJ’s Spina decision as settled law. In Spina, the NJ Supreme Court said pensions don’t rise to the level of contracts under NJ’s constitution. The fact that pensions may be contractual in other states is totally irrelevant in NJ. So, the unions got shot down by the Feds who said it’s a state matter, and got shot down by the second highest NJ court which cited NJ’s Supreme Court decision as settled law, yet these dudes persist in trying again before an inferior court to get COLA’s reinstated. This one won’t be going anywhere and will end with a whimper.


    • Posted by muni-man on April 14, 2012 at 7:31 pm

      Since when does a personnel “retiree handbook” on COLA’s trump the Court’s reaffirmation of the Spina decision which grants NO CONTRACTUAL PENSION RIGHTS to employees. NJ has every right to change pension terms PROSPECTIVELY, and that’s exactly what they’ve done. Fuhgeddaboud COLA crap – that’s the least of their problems. Economics is gonna flatten them before the decade’s out.


      • Posted by Tough Love on April 14, 2012 at 7:39 pm

        While I agree with you and that the Plans (meaning the actives and likely those aklready retired) are in for a big hit, unfortunately, I believe that our politicians beholden to the Unions will delay that reform as long as possible …. resulting a signifiant layer of hurt for taxpayer before they finally reform (meaning significantly reduce) pensions and benefits.


  4. Posted by Jeff on April 14, 2012 at 6:36 pm

    The promised benef9its were based on a corrupt system, citizens should NOT be liab3e for payouts based upon that corruption.


  5. Posted by Javagold on April 14, 2012 at 9:27 pm

    if every non public employee left the state , then what ???


    • Posted by Tough Love on April 14, 2012 at 9:35 pm

      While that’s unreasonable, clearly as taxes (income, sales, property, “fees”, etc.) grow beyond what the payors feels reasonable (especially relative to the tax rates in other states), the citizens and businesses WITH the ability to pay more tend to say no, and move away (or the numbers potentially moving into the State decline). Time and again it has been shown that taxes increases are counterproductive.


  6. Posted by muni-man on April 14, 2012 at 10:04 pm

    The real N.J. UNCOLA , the Present Value of $1 Table. It’s a lot less taxpayer-filling. Gotta love it!

    Click to access 4ePresentValueof1_table2.pdf


    • Posted by Tough Love on April 14, 2012 at 10:23 pm

      A better question than …Is it fair to take COLAs away, is …… WHY (with ZERO Private Sector pension Plans include automatic annual COLA increases) should Public Sector Plans include them, ESPECIALLY when the employee’s contributions INCLUDING all the investment earnings over their careers, RARELY pay for more than 10-20% of total Plan costs, with the Taxpayers paying the 80-90% balance?


      • Posted by muni-man on April 14, 2012 at 10:49 pm

        Fairness is subjective at best and is always in the eye of the beholder. I don’t give a rat’s ass about whether COLA elimination is ‘fair’ or not. Fact is, it’s totally permissable under NJ’s constitution, and was recently reaffirmed as such by the NJ Appellate Court. This latest filing is pure garbage – neither the former AG nor the former Office of Legal Services astute ‘interpretations’ of the legal underpinnings of the COLA provisions means diddley!!!


  7. Posted by Eric on April 14, 2012 at 11:11 pm

    You are correct in that the contract has already been performed by the retirees. There is no longer any service to render on their part. There is also a reliance issue of what the prevailing law was at the time of their retirement.
    California is aware of the fact that the existing law at the time service is rendered trumps all and is specified in its handbook as well.
    The Spina decision is “old law” and no longer valid in that modifications have been made since this opinion had been written many, many years ago.


    • Posted by Tough Love on April 14, 2012 at 11:16 pm

      Quoting …”California is aware of the fact that the existing law at the time service is rendered trumps all ”

      In the not too distant future, California “actives” (and likely retirees as well) will find that “reality” and the “math” trumps ALL … not the law, and not the Courts.


    • Posted by muni-man on April 15, 2012 at 7:34 am

      Spina is FAR from being ‘old law’. Spina is much more powerful because it’s SETTLED LAW, if you have any idea what that means. In this case, it means that a change to NJ’s Constitution would be required because NJ’s 1947 Constitutional revamp does NOT give pensions contractual protection. That is why the Appellate court ruled against the publics before and specifically cited NJSC’s Spina decision as settled law in it’s reason for doing so. The Legislature can’t overrule constitutional provisions, much as publics would like to think so. The unions tried to get the 1947 NJ constitutional convention to grant pensions contractual protection like NY did in 1940 – THEY FAILED! These hooples are merely venue-shopping hoping for a sympathetic ear somewhere out there. This suit is going nowhere. If it ever gets to the Appellate Court, they’ll refuse to hear it and just throw it out.


  8. Posted by Eric on April 14, 2012 at 11:58 pm

    Yes, Tough Love, the world is scheduled to end on the 21st Day of December of 2012.


    • Posted by Tough Love on April 15, 2012 at 12:04 am

      No, but it I’m sure some residents of Stockton, Mammoth Lakes, and perhaps LA will be feeling that way soon. It’s clear you (or a family member) are a Civil Servant. With no less in “cash pay” (than your private sector counterparts), what justifies the continuation (for FUTURE service) of higher pension accruals and better benefits? Are you “special” and more deserving ?


  9. Not even false, John. You should know better, and you certainly know the math. First, what about politicians’ promises to and social contract with taxpayers? They violated that. Why their actions are not crimes is beyond comprehension. Governors’ and legislators’ misfeasance and malfeasance have made null and void any agreements based upon them. They poisoned the well. It’s an ancient principle of common law. But, really, what it all gets down to is: What happens when the money runs out? You know it will, soon. And you know the unfunded liability is beyond any capacity to raise taxes and cut spending, as if NJ politicians ever could summon the will to do that. Ultimately, the people are sovereign. When this one starts hitting their tax bills, they will wake up and exercise that sovereignty. Maybe even public workers will wake up and realize who betrayed them. Taxpayers did not betray them.


    • Posted by Tough Love on April 15, 2012 at 12:44 pm

      Frank, I scanned through your linked article. You summed up the thought process of many Gov’t workers when you said …”Delusion and denial are so entrenched many propagating the lies actually believe them. ”

      There are safety workers out there who still justify thier rich pension based on the myth that they typically die 10+ years earlier that non-safety retirees .. and are adament that it’s factually based.


    • Posted by muni-man on April 15, 2012 at 1:02 pm

      Exactly on point, especially the part about “the unfunded liability is beyond any capacity to raise taxes and cut spending”. That’s all taxpayers should care about and ultimately will care about. There’s no way taxpayers will tolerate being massively gouged in the future to keep these plans going. Simply no way. The pols know it but will never ‘fess up to it, so instead they continue to lay down a never-ending smoke screen. Meanwhile, the union scholars haven’t digested this fact yet.


      • Posted by Tough Love on April 15, 2012 at 1:08 pm

        Oh the Union scholars have indeed digested it. It’s just that they’re afraid they’ll be lynched by the membership if they fess up.


  10. Posted by Javagold on April 15, 2012 at 12:47 pm

    even FDR and JFK were against PUBLIC UNIONS !!!!


  11. Posted by MJ on April 15, 2012 at 5:40 pm

    None of this debt for overly generous pensions, colas and life time health benefits is constitutional and all of it should be repudiated as soon as possible. Public “servants” were promised this and promised that, we were all promised rose gardens and now it is a thicket of thorns. John, I must say that for all of the corruption you bring to light in Union County, you should know better than to even suggest this is theft. The only ones being robbed are the taxpayers. Where is the social contract for the taxpayers who may be left with the burden. Are the public servants more special thatn anyone else? Everyone deserves to make a decent living and benefits should be in line with what the market will bear. Is it any coincidence that towns and cities across the country are buckling under the weight of these outrageous promises? Contracts and promises can be broken, it happens every day. Economics trumps fantasy every time. Real estate taxes will be the death of NJ if things don’t change,.


  12. “But you prooooooooomised!!!!!”

    If the benefits have been paid for, then yay. No issue. The money will be there.

    Of course, they haven’t been paid for. “Theoretically” doesn’t count even in horseshoes.

    Some people need to rethink the kinds of promises government can actually make. Promising 30 years ago for a cashflow 30 years hence? Maybe they’re not actually able to do that.

    I’m talking reality, not legality. When it’s law v. reality, reality always wins.


    • Posted by Al Moncrief on April 16, 2012 at 4:49 pm

      Hey Mary, the reality is that courts will force states to meet contractual obligations prior to making discretionary expenditures. The revenue stream is going nowhere.


      • Posted by Jeff on April 16, 2012 at 7:36 pm

        How will courts enforce that? As a previous writer noted, we paid our taxes once, we are NOT going to pay again.


      • Posted by Tough Love on April 16, 2012 at 7:44 pm

        That’s “pension recipient” thinking (and prayer), but not reality.


      • Posted by Tough Love on April 16, 2012 at 7:49 pm

        Al, Were you aware that the Alabama Courts repeatedly instructed Prichard Al. to fund it’s pensions. It never did because it’s citizenry and property owners could not “afford:” to pay additional taxes. The town never funded those pensions, Plan assets actually dropped to zero, and the pensions stopped. I believe a settlement was reached a year or so later agreeing to pay 1/3 of promised pensions out of operating income..

        So much for Courts “ordering”.


  13. Posted by Eric on April 16, 2012 at 9:23 am

    Tough Love:
    Remember I teach math at a private college? I am not a public servant.


    • Posted by Tough Love on April 16, 2012 at 1:29 pm

      WERE you a Public Sector woker …. with a pension in your future?

      Are ANY family members Public Sector wokers (or were any … with a pension in their future) ?


  14. Politicians sent citizens tax bills; citizens paid in full. Contract fulfilled in good faith by the paying party of the first part. Case closed.


    • Posted by Tough Love on April 16, 2012 at 3:04 pm

      Frank, In line with your comment ……” David Skeel, a law professor at the University of Pennsylvania and prominent expert on bankruptcy, in a recent working paper which argues that states should be granted the same right as municipalities to file for bankruptcy, Skeel suggests public-sector workers’ property rights only cover funded pension benefits – not unfunded ones.”

      His commentary can be found here:

      And his “Working Parer” on this subject here:


      • Thanks Tough Love. I might have missed that. I check ssrn regularly, but get overwhelmed. Will check it out. And, to Al Moncrief, yes, legislatures are schizophrenic. I recommended decades ago that as long as they were passing all those drug and alcohol testing requirements for some jobs, they should impose same on themselves. Mental illness or massive drug and alcohol abuse are the only things that could explain some of the things legislators do.


  15. Posted by Al Moncrief on April 16, 2012 at 4:50 pm


    If two contradictory positions peacefully coexist in the mind of an individual that person is schizophrenic, but is it possible for an entire organization to exhibit schizophrenia? Be the judge.

    The Colorado General Assembly has recently endorsed the following two public policy positions:

    #1 – “Colorado is in a fiscal crisis, Colorado PERA pension contracts must be breached!”

    #2 – “Colorado is not in a fiscal crisis, we are free to grant $100 million in property tax relief!”

    How is it that this glaring inconsistency is readily apparent to me, but cannot force its way into the minds of our state legislators?

    In 2000, Colorado voters amended Article X of the Colorado Constitution to allow the General Assembly, at its discretion, to exempt up to $100,000 of the value of a qualifying senior’s home from property taxation. To qualify for the tax relief, a senior must be 65 years old or older, and must have lived in his/her home for a decade or more. If tax relief is granted by the General Assembly, the state is required to reimburse Colorado local governments for any resulting loss of property tax revenue.

    Tax relief under this 2000 constitutional amendment is optional. The General Assembly is not compelled to return state revenues to taxpayers while it is in breach of its contractual pension obligations. Providing property tax relief may be laudable; however, it is a discretionary allocation of state resources. Meeting one’s contractual and moral obligations (for example, honoring pension contracts that were earned over a thirty year period) is not discretionary.

    The General Assembly may be schizophrenic, but it is not ignorant of its pension obligations. Every year Colorado PERA pension administrators hire an actuary to determine the amount of money that must be contributed to the PERA pension in order that it remain financially sound. This figure, (the “annual required contribution”) is routinely provided to the Legislature, and has been routinely ignored by the Legislature. The figure has grown to exceed a cumulative $3 billion.

    New heights of absurdity are reached when one learns that the Colorado General Assembly provides funding to pensions that ARE NOT its legal obligation, while simultaneously ignoring pension debts that ARE its legal obligation. Over the last two decades the Colorado General Assembly has pumped more than half a billion dollars into pension obligations that are not its responsibility, those of local governments (old local government fire and police pension obligations). Much of this money was sent to the local government pension plans in years during which the General Assembly ignored its own PERA annual required contributions.

    In the coming years, judges may legitimately ask “Why should the state of Colorado be permitted to breach its contractual pension obligations in years that it has provided discretionary tax relief, ignored its annual required contributions, or directed state resources to pension obligations that are not its own?”

    How can the Colorado Attorney General argue with a straight face that it is “actuarially necessary” for Colorado to breach its pension contracts, when the state is giving back tax revenue, ignoring its annual required contributions, and voluntarily paying pension obligations for other governmental entities?

    While states across the nation are enacting prospective, legal, moral pension reforms, the Colorado Legislature has adopted a retroactive pension reform bill (SB 10-001). While states across the nation are reducing their unfunded pension liabilities (albeit slowly) the Colorado General Assembly is attempting to claw back deferred pension compensation that was earned over the past thirty years.

    The Colorado General Assembly distills the political preferences of all Coloradans. Our character is reflected in their actions, by observing the Legislature we know ourselves better.
    So, who are we? The verdict is ugly. Collectively, through our elected representatives, it appears that we will commit fraud when it is financially opportune. We will construct elaborate rationalizations for outright theft. We will abandon our contractual obligations when convenient. We will be distinguished by our moral laxity.

    Friend Save Pera Cola on Facebook, Visit, Support the Colorado pension theft lawsuit!


    • Posted by Tough Love on April 16, 2012 at 4:56 pm

      South Dakota Courts just said COLA reductions are legal.

      Look at it this way Al, even w/o annual COLA increases, your pension is likely twice what would have been approved if those doing the approving were appropriately looking out for Taxpayer (not employee) interests, and weren’t voting so favorably in return for campaign contributions and election support.


      • Posted by Al Moncrief on April 17, 2012 at 12:13 pm

        Hi TL, I think there will continue to be a few similar rulings in lower courts, until the cases rise from the muck. The judge in the South Dakota case has gained prominence in recent years as a jurist AND as a politician (Republican candidate for Governor a few years ago.)

        Here’s a state Supreme Court decision for you:


        “The opinion by the state’s highest court finds the judges were vested the day they were appointed and changing terms of their pension benefits was unconstitutional.”

        “Friday’s Supreme Court decision validates what New Hampshire’s public employees have been saying during recent legislative action to reform public pensions, said David Lang, president of the state firefighters’ union.”

        “The firefighters, as well as the members of the Retirement Security Coalition, have long argued that the contract protections attach at the time the employee gets hired,” he said.

        Here’s the full story:

        A PDF of the New Hampshire Supreme Court decision can be viewed here:

        Click to access 2012035cloutier.pdf


  16. Posted by Jeff on April 16, 2012 at 7:33 pm

    I don’t think the arguement that the voters elected crooks so it is the voters’ fault is valid. After all, in almost every election in the last 40 yrs was won by those candidates whose votes were won with the support of the public unions or those living in public houseing or receiving welfare. Those votes were purchased with taxpayer funds, we cannot blame the honest taxpaying citizen for that.


  17. Posted by Eric on April 17, 2012 at 4:57 pm

    Tough Love:
    Family member, not yet vested.


    • Posted by Tough Love on April 17, 2012 at 5:01 pm

      Gee, maybe that colors your thinking about the very needed MATERIAL reforms … meaning reforms for CURRENT workers (such as your family member), not just for NEW workers ?


    • Posted by muni-man on April 17, 2012 at 5:53 pm

      Publics should chew on this as to why they ain’t a gonna get COLA’s. The last paragraph of the 3/12/10 Appellate Court decision shooting down TPAF funding. Note items (1,3) below and the last sentence in FN (footnote) 11. NJ doesn’t even
      have to fund $1 of future pension benefits (item 4) – they just have to cough up enough for accrued benefits which are non-forfeitable. Future, unearned benefits, are totally unprotected constitutionally, and therefore, subject to being reduced or even eliminated if the Legislature so chooses. NJ definitely got it 100% right on this one.

      “In conclusion, we find no constitutionally-protected contract right to systematic funding of the TPAF. Any such right is foreclosed by:  (1) our own constitutional jurisprudence, which never recognized such a right and in 1947 rejected a proposal that would have expressly designated public employee pension benefits as contractual;  (2) well-settled constitutional principles placing limitations upon any legislature to bind its successors as to appropriations and impliedly suspending prior fiscal enactments by each annual Appropriations Act;  (3) Supreme Court precedent in Spina, explicitly rejecting a “contractual” basis for State employee retirement benefits;  and (4) current provisions of our pension statutes and their legislative history, which do not clearly and unambiguously evince a legislative intent to extend a non-forfeitable right to pension benefits to future appropriations.   Having concluded there is no such constitutionally-protected contract right, we need not determine the prospective effect of the appropriations shortfalls in FY 2004-2007, and whether they constitute a “substantial impairment” in any constitutional sense”.

      FN11. A delegate introduced Proposal Number 11, which would have provided that “benefits payable by virtue of membership in any State pension or retirement system shall constitute a contractual relationship and shall not be diminished or impaired.”  Proceedings of the New Jersey Constitutional Convention of 1947, vol. I at 73.   That proposal was referred to the Committee on Rights, Privileges, Amendments, and Miscellaneous Provisions.  Id., vol. I at 73-74.   A representative of the New Jersey Education Association testified about the need for such protection, and mentioned the existence of such a provision in the New York constitution.   Id., vol.   III at 103-06.   Other public employee organizations took the same position.  Id., vol.   V at 494-95, 519-20.   The Committee voted against the proposal.  Id., vol.   III at 192.

      GAME, SET, MATCH ——————–> TO N.J.


      • Posted by Tough Love on April 17, 2012 at 7:02 pm

        NJ May have “gotten it right” with respect to not guaranteeing Pensions for FUTURE service, but it CERTAINLY screwed up by allowing Union campaign contributions to buy the votes which lead to the excessive pension formulas in place today, the ROOT CAUSE of the huge financial mess we are in ……… huge underfunded pensions for PAST service, because the formulas are so rich, we simply can’t afford to fund them.

        I’m hoping that Law Professor Skeel (of UP) is correct. He has opined that constitutional guarantees, contract law, and property rights ONLY extend to protecting what is ALREADY funded , and does NOT guarantee that taxpayers are on the hood for the underfunding associated with PAST service.


  18. Posted by muni-man on April 17, 2012 at 9:23 pm

    You raise an interesting point – what’s the real liability today for accrued vs. future, unearned pension benefits. I don’t know, maybe JB has an inkling though. What this decision clearly indicated to me though is that NJ really doesn’t have to concern itself with funding for future benefits if it so chooses, hence the Legislature’s decision to do the 1/7th , 2/7th, staggered, partial ARC funding for pensions thru 2018, which had publics saying WTF. Well, WTF is legal in NJ, as item (2) said about legislatures being limited in binding their successor legislatures as to appropriations and impliedly suspending prior fiscal enactments by each annual Appropriations Act. So, in essence, the state can pretty much do as it wants from budget-to-budget insofar as pension funding is concerned since each newly enacted budget supercedes any funding agreements made in previous budgets. They’ve got a lot of leeway to boogie here. Personally, as a taxpayer I want to pay the absolute minimum possible into what is a failed, moribund pension sinkhole that’s a costly millstone to me in property taxes, and have the backing of the law behind it. Constitutionally, it seems that’s what this ruling allows. If the PV of total ACCRUED pension benefits are within reason, I think the state should give final lump-sum payouts to all retirees and current vested employees and completely end the DB plans. Give them modest, hybrid 401K/cash balance plans going forward and be done with this once and for all. If cashouts are beyond available pension fund assets, then permanently and substantially reduce future, unearned benefits to levels that will stabilize the plans without ANY further taxpayer funding. NJ appears to be liable for the value of accrued benefits (as a property right), but definitely not any future benefits whatsoever (i.e. NJ doesn’t recognize unearned benefits as deferred compensation). Legally, I believe they could terminate all future benefits if they wanted to with proper notice at any time. Who knows, Skeel may be right about liability being limited to funded benefits only, but NJ sure has a tremendous amount of greater flexibility than most other states to bring this runaway train under control thanks to the foresight of the members of the ’47 NJ Constitutional Convention. They were a group of very savvy legislators.


    • Posted by wakeupandsmellthepolitics on April 18, 2012 at 1:34 pm

      What all you idiots don’t realize is that the pension system ( especially Police/Fire) would not be in the red if the politicians (led by former Gov. Whitman) didn’t steal the funds from the system many years ago to use elsewhere. Had that money – 3 BILLION – been left alone as it should have, it would have continually compounded interest and been in fine shape.

      Keep drinkin’ that Kool Aid and buy what Tubbo is selling but the fact of the matter is that this “crisis” was created by the dirty politicians. My argument would be that they purposely took that money out in order to unstabilize it in order to try to default on their obligations.


      • Posted by Tough Love on April 18, 2012 at 2:10 pm

        If you did a bit of research instead of repeating the garbage from your Union, you would find that Whitman did was sell POBs (Pension Obligation Bonds). While that has indeed screwed the Taxpayers, it not only did NOT take money FROM your pension fund, but infused money into it, money that it likely would not have received in the absence of the sale of those POBs.

        You are highly “cash paid” (many would say too high), and without doubt, WAY over-pensioned and over-benefitted, and Taxpayers are determined to reduce that excess …for CURRENT (not just new) workers.

        By-the-way, DEFAULTING or RENEGING on your pension obligations … so fraudulently obtained via the collusion between your Union and our elected representatives (via the tradeoff of campaign contributions and election support in return for favorable votes on pay, pensions, and benefits) is a very real and appropriate Taxpayer response.


        • Check the exact number, but I think you still are paying $750 million year on the POBs Whitman issued to “fully fund” public pensions. Of course, subsequent politicians of both parties and their union pals immediately began looting that to enrich themselves. Public workers have a right to be enraged, but they should focus that rage on the people who robbed them. Politicians and union leaders did that; taxpayers did not. Taxpayers got their tax bills — highest in the nation, right? — and paid them in good faith. Don’t come back now and ask them to pay again for services rendered.


          • Posted by Tough Love on April 18, 2012 at 2:43 pm

            You used the word “looting”. The choice of words isimportant (especially with the tendency of pension supporters to exaggerate and distort the truth). No money has ever been taken OUT of Plan assets or “looted”. Of course, NJ has not paid anywhere near it’s ARC for many many years. While that’s certainly not a good way to run a pension Plan (e.g., it you can’t afford it, change it, but ignoring a rapidly growing problem does not help) it certainly is NOT “looting” of Plan assets.


          • Posted by Tough Love on April 18, 2012 at 3:16 pm

            Frank, We understand each other. But of all people, you should know that those who fight reform will twist the non-payment of ARCs to outright theft of funds from existing Plan assets when the word “looting” is used. That is not helpful to pension reform efforts, which clearly you (and I) support.


            • Reform? In NJ it’s going to take a nuke. Fed studies just came out admitting in some states and municipalities current employees and pensioners are going to have to take a benefits hit. No way around it. I worked NJ, I know how ugly that’s going to get. And you can bet for sure the ones who get hit the hardest are the truly dedicated, honest, hardworking public employees (yes, I knew a lot of them) and the few who slip by unscathed will be the corrupt clique of insiders. I tell you one thing, now maybe with nothing to lose the honest NJ public employees will stand up and start blowing the whistle on the cesspool of corruption. And, yes, Whitman put the pension fix on the state credit card, and then there is no doubt the politicians and union bosses looted the money. It’s gone. Taxpayers already paid their taxes and still are paying off Whitman’s bill, so anybody who comes back around now and tries to tax them again for it finally could run into a wall. When are NJ taxpayers going to get informed, get involved and show some guts?


        • Posted by Tough Love on April 18, 2012 at 7:24 pm

          I know it’s a VERY big long shot to fixing things in NJ. A nice but an extraordinarily difficult first step (given the political climate in NJ and with the Unions in bed with the politicians) would be to freeze FURTHER growth in these pensions for CURRENT workers. Replace them with 401K-style Defined Contribution Plans with a MODEST Taxpayer “match” … just like virtually all Private Sector workers get.

          And even doing this does nothing to reduce the unfunded liability for PAST service accruals. Dealing with THAT will be much MORE complicated.


        • Posted by muni-man on April 18, 2012 at 8:04 pm

          NJ doesn’t have any constitutional obligation to fund future benefits. They have an obligation to pay off accrued benefits, that’s it! They have no requirement to fund ARC’s if they choose not to and as a taxpayer looking out for my own financial interests, I hope they don’t. Force NJ to lance this pus-filled pension ulcer once and for all. NJ could announce a permanent freeze on future pension accruals tomorrow and have constitutional authority to do so. Everyone knows the union-pol collusion that went into creating this financial snake-pit. That’s a given. Are publics gonna suffer – you bet. As you said, we taxpayers coughed up our dues once already, and we ain’t about ready to get gouged again. As for the publics – c’est la vie! They should have been doing their own due diligence on the real health of their plans during their careers, instead of being on financial autopilot like 99.998% of them are and continue to be, expecting that ‘great gooberment power’ in the sky to take care of all their financial needs forever, at the expense of all the rest of us. Taxpayers are simply fed up with that crap.


          • Posted by Tough Love on April 18, 2012 at 8:59 pm

            U Of P’s Law Professor David Skeel has opined that we don’t even have an obligation to pay off the unfunded liability associated with PAST service accruals, our liability extending ONLY to existing Plan assets.

            It would quickly open the door to REAL reform if the Courts upheld that position as CURRENT workers would more willingly negotiate MATERIAL reductions with the loss of already accrued benefits now on the table.


          • Posted by muni-man on April 18, 2012 at 11:31 pm

            Limiting liability to existing plan assets would be a watershed event. I don’t think that’s gonna happen, but it’s academic in any practical sense. The road to real reform is gonna be the brutal laws of economics. That’s what’s gonna crush ’em and there isn’t a court in the land that will be able to stop it. I doubt most courts will cede any significant ground on these issues if for no other reason than their own self-interest, but the truly beautiful part of it is they have absolutely no way to implement any solution that can come close to solving the funding gap. Taxpayers will simply refuse to pay, and boatloads of publics will be thrown out of work along the way to keep budgets in line with what TP’s are willing to pay for.

            Constitutionally, NJ looks to be in really strong shape to overcome any battle against the publics on pension/benefit matters and that’s all I care about – the ability to keep my taxes under tight control.


          • Posted by Tough Love on April 19, 2012 at 12:25 am

            Quoting: “……but the truly beautiful part of it is they have absolutely no way to implement any solution that can come close to solving the funding gap. Taxpayers will simply refuse to pay, …”

            While I agree that “solving” this mess is near impossible, given the power of the Unions and the weak stomachs of our elected representatives (as well as their continued desire for campaign contributions) for battle, I envision that kicking-the-can-down-the-road will continue for a few more years, during which time I fear our property taxes may increase significantly. Remember, employee pensions and benefits are outside of the 2% budget caps, increases for which are generally paid via property taxes.

            And while saying “Taxpayers will simply refuse to pay” is interesting, taking a stand by not paying your property taxes is a REALLY bad idea.


            • Governors can decree, legislators legislate, judges rule all they want, but Reality always wins. The Federal Reserve Banks of Cleveland and Atlanta just released three articles based on a year of research that quietly but accurately admits to Reality. Public pension plans are unsustainable and all eventually must run out of money, some even with real reforms and infusions of more money. Some current employees and retirees are going to have to take reduced benefits. The Fed also explores the systemic economic risk and legal barriers to reform. Historically whenever a privileged elite has for too long ruthlessly preyed upon the producing class, they provoke economic collapse at the least, revolt at worst. New Jersey’s false promises of retirement benefits to public employees create a debt that is beyond the state’s capacity to pay through service cuts and tax increases. Though some state and local government retirement systems may be able to pull out of this death spiral, the Fed studies show in aggregate they cannot.


          • Posted by Tough Love on April 19, 2012 at 12:34 am

            Muni-Man, In response to your comment that …”I doubt most courts will cede any significant ground on these issues if for no other reason than their own self-interest”………….

            U of P’s Law professor David Skeel’s opinion that ONLY Plan assets (not the unfunded portion of past service accruals) are guaranteed, was in the context of a bankruptcy, be it a town, city, or State (should that be allowed in the future). Such proceeding would be adjudicated in a FEDERAL Court, not a STATE Court with self-interested judges making the decisions.


          • Posted by Tough Love on April 19, 2012 at 1:11 am

            Here’s a really good Q&A discussion with Professor Skeel on his position:



          • Posted by muni-man on April 19, 2012 at 1:19 am

            Valid point. I guess a bankruptcy scenario would eliminate the pesky issue of
            state judicial prejudice, but a state bankruptcy seems extremely remote.


          • Posted by Tough Love on April 19, 2012 at 1:28 am

            Muni-man, It doesn’t have to be the State of NJ bankruptcy. If say Camden went bankrupt, the case is heard in FEDERAL Courts.

            Granted, it does get confusing, as many employees of towns, cities, (and teachers, police, etc.) are in State-administered Plans. But ANY bankruptcy is heard in Federal Court.


          • Posted by muni-man on April 19, 2012 at 10:13 am

            It’s the ‘infusions of more money’, as in my money, I want to see stopped. The collapse of the plans is inevitable w/o big benefit reductions, but that’s the publics’ very real dilemma, not mine.


  19. Posted by Eric on April 18, 2012 at 12:16 am

    Tough Love:
    Family member and I are not on speaking terms. How appropriate this comment is in light of your name. If anything, my thinking would be “colored” to have the whole damn thing revamped. I am, however, fearful of a “banana republic” as is John, if the law no longer has any meaning.
    Enough wasted time regarding my personal matters.


    • Posted by muni-man on April 18, 2012 at 8:02 am

      The law has meaning – NJ can legally eliminate COLAs or other unearned benefits as it sees fit and that’s just what they’ve done. An employee retirement handbook isn’t the law by any stretch. They should have researched things before publishing this august tome in the first place, by inserting a COLA disclaimer. There’s no ‘banana republic’ stuff going on here.


      • Posted by Al Moncrief on April 19, 2012 at 11:01 am

        I recall that a judge recently forced Goldman to cough up several billion based simply on the contents of plan documents.


        • Posted by muni-man on April 19, 2012 at 11:32 am

          Goldman ain’t NJ, Chief!

           ”(3) Supreme Court precedent in Spina, explicitly rejecting a “contractual” basis for State employee retirement benefits”. (NJ Appellate Court, 3/12/10)


  20. Posted by MJ on April 19, 2012 at 5:00 pm

    Everybody is talking about the outrageous pension obligations but what about the unfunded health insurance for current and retired public workers? What’s going to happen with that?


    • Posted by Tough Love on April 19, 2012 at 6:39 pm

      (1) What Public Sector workers SHOULD get is comparable healthcare benefits afforded Private Sector Taxpayers, which means generally:
      (a) active employee only ….. Taxpayers pay 75% of a MODEST (not “Cadillac”) Plan Premiums. Employee pays the Balance.
      (b) Family Coverage …. Taxpayers pay 66% of a MODEST (not “Cadillac”) Plan Premiums. Employee pays the Balance.
      (c) Retiree coverage ….. Taxpayers NEVER pay more than 50% of a MODEST (not “Cadillac”) Plan Premiums, and the 50% subsidy should ONLY be for workers who retire with 35+ years of FULL TIME service, and a proportionately smaller subsidy for those with less service. Retiree pays the Balance.

      (2) What Public Sector workers WILL get …… I don’t know, but it’s clear this is “lower hanging fruit” (for reform) than pensions.


      • Posted by muni-man on April 20, 2012 at 11:37 am

        Active publics covered by S.S. should get ‘modest’ coverage until they are eligible for Medicare as you outlined above. Then retirement coverage should reduced since they’re covered for full Part A (hospitalization) under Medicare and most of Part B (doctors). They should be required to buy their own Medigap plan (Part B supplement) and Part D (drug) coverages. Part B supplement plans (which are guaranteed-issue policies) and Part D plans amount to less than $4K/yr., of which the state should pay no more than 50% max. Publics should pay the rest.

        If they don’t have S.S./Medicare eligibility, then the state should pay for Parts A & B coverage in full, less the comparable amount paid for supplemental coverage for Parts B & D by those who do have Medicare above.

        NJ has no constitutional obligation to provide any retiree medical coverage in the future since these benefits are solely prospective and can be changed or eliminated by NJ at any time. While the political will isn’t there today, they’ll eventually be forced, kicking and screaming, to make big cuts in them in the future just as with pensions, if these benefits are gonna survive at all. All these public benefit plans are wheezing harder and harder every month now in a futile attempt to keep going but the buzzsaw is really gonna start hitting them in earnest soon.


        • Posted by Tough Love on April 20, 2012 at 11:41 am

          That “buzzsaw” will indeed hit the publics, but given NJ politics, it will likely hit the Taxpayers (again) first.


          • Posted by muni-man on April 20, 2012 at 12:13 pm

            I don’t think it’s gonna be as bad as you think. Pols, even Dems, are getting increasingly leery of jeopardizing their electability by caving in on this stuff. Taxpayer backlash is growing and they damn well know most folks are really pissed off about this BS. The whole landscape is gonna change dramatically when the first really big city capitulates and admits it simply can’t operate under these burdens any more. That’s not far off.


  21. Posted by Anonymous on May 13, 2012 at 3:51 pm

    Tough Love works for the insurance industry. If you cant trust the insurance industry to fleece you, who can you trust? Maybe a used car salesman?


  22. Thanks for taking the time to discuss this, I feel can locate any data in post and discus forum


  23. Posted by Anonymous on April 18, 2013 at 11:07 am

    I am only receiving 16k per year pension. I was counting on the COLA since I was forced to retire early due to chronic pain. I dont want to go on disability. Is it possible to have partial COLA reinstatement for those in need. Or is that totally out of the question. I noticed there is a bill introduced by Shirley Turner which speaks of reinstating COLA. Thanks for your input.


  24. Posted by Anonymous on April 18, 2013 at 11:17 am

    S1568. Reinstates automatic COLA for retirement benefits of members of the State-administered retirement systems.


  25. […] is what overturning the COLA theft means for future ‘reforms’ which, if not allowed, WOULD move the system to pure […]


  26. […] Republicans in New Jersey filed suit to prevent democrats in New Jersey from borrowing $10 billion to run the state in an exercise in futility. Not because there is no merit to their argument but because there is no rationale to New Jersey Supreme Court decisions in cases that politicians who install those judges really want decided their way. (Witness the tortured justification for the COLA theft). […]


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