Wrong System Under Fire

Today’s New York Post had an editorial that included another fat-pun, recognized that New Jersey has a serious pension problem, and then completely misdiagnosed the cause:

The pensions that ate New Jersey

Of the many challenges New Jersey faces — sky-high taxes, budget projections that keep falling short, a Supreme Court that likes to mandate spending — there is no darker cloud over the state’s future than its massively underfunded pension system.

That much ought to have been clear when Gov. Chris Christie last month suspended promised state contributions to the pension system to close a budget shortfall. He promised to lay out a plan for pension reform some time soon.

It can’t come soon enough. Back in January, a report from the Common Sense Institute of New Jersey warned that without serious reforms, the system is headed for bankruptcy. The main reason for this is the outdated system of promising defined benefits rather than the defined-contribution system that dominates in the private sector.

As one coauthor of the report put it: “Defined-benefit plans and politics are a toxic combination.”

What the Post misses is that politics and anything is a toxic combination.

Politics is basically the science of rewarding politicians themselves and the campaign donors who give the money to influence the thinking of an apathetic public.

To that end government must spend at least 20% more money for whatever they do and they demand that something (anything) be done or built so they can accumulate their vig.  Nobody needs a $25 million golf clubhouse more that the campaign donors who build it.  Nobody needs the government to spend money on curing the disease-of-the-day more than the government itself that can siphon off 7.5% for their general budget or the administrator who will be getting a six-figure salary, six weeks vacation, personal days, free insurance, and a defined benefit pension.

A defined benefit system works fine but, as with a gun, you can not put it in the hands of someone who does not know what they are doing.  In New Jersey not only has it been handled by children but it’s  loaded, cocked, and aimed.

17 responses to this post.

  1. Posted by bpaterson on June 1, 2014 at 12:39 pm

    at we, taxpayer…..just to finish your blog entry’s last sentence.

    Reply

    • The blog was finished as far as I know. I have no idea where the gun is aimed. It could be taxpayers. It could be public employees. It could explode on the politicians.

      Decisions are being made behind closed doors right now and we’ll probably find out who is likely to take the hit in a couple of weeks.

      Reply

      • Posted by Tough Love on June 1, 2014 at 1:51 pm

        While there is no way the structural imbalance (between revenue and expenses) can permanently be addressed without VERY MATERIAL reductions to the future service DB pension accruals of CURRENT workers, and very likely (to a smaller degree) to the PAST service accruals of both actives and those already retired, the expected screaming from the Unions combined with the fear and gutlessness of our politicians (i.e., the Union-bought-off Democratic Legislature) tells me that the day of reckoning will again be put off by more gimmickry …… perhaps by revisiting a sale of the Turnpike and/or the GSP.

        Reply

  2. Posted by Tough Love on June 1, 2014 at 1:40 pm

    Yes indeed…

    And nobody (meaning Taxpayers) needs Public Sector Capital projects that demand “prevailing wages” (defined as “Union wages”), when legal/licensed/qualified labor can be hired for FAR less money.

    And nobody (meaning Taxpayers) should be forced to fund the vast majority (80-90% of total costs) of Public Sector pension & benefits that are always AT LEAST 2x greater in value at retirement than what comparable Private Sector workers get from their employers, MOST OFTEN 3x-4x greater, and for safety workers, USUALLY 4x-6x greater.

    And nobody (meaning Taxpayers) needs Gov’t to act as an employment agency for the well connected, the ineffective, or the marginally employable …. with the latter 2 categories protected from justifiable termination via arcane Civil Service or Tenure rules.

    Reply

  3. Posted by Anonymous on June 1, 2014 at 3:20 pm

    shut your pie hole you dim witted self absorbed broken record ,bad smelling schmendrick. Okay get for her best and brightest rant. Too funny folks. Queen of Denial. She has no issue with the crooks we elect to run our governments. Maybe she is one of those crooks!

    Reply

  4. Posted by Anonymous on June 1, 2014 at 3:51 pm

    Thats not what I meant to say, I swear it was the spell check! bwahahahahah!

    Reply

  5. Posted by Javagold on June 1, 2014 at 4:01 pm

    All Ponzi scams , come to an end. The NJ pension ponzi, has come to its end.

    Pension = IOU.

    Reply

    • Posted by Tough Love on June 1, 2014 at 6:29 pm

      Not even that (IOU’s can often be cashed in). Not in this case (too far gone)

      NJ’s Pensions are “Toast”

      Reply

  6. Posted by Anonymous on June 1, 2014 at 5:32 pm

    I love to pull her strings, so darn easy! Politicians will suck the taxpayers dry, pensions or no pensions! And there is plenty left

    Reply

  7. Posted by Tough Love on June 2, 2014 at 12:59 pm

    To all the “Anonymous” trolling Public Sector worker “takers”, I bet you’ll like the 2 comments I posted to an article (titled… “Alameda Unified facing pension cost hike”) here:

    http://thealamedan.org/news/alameda-unified-facing-pension-cost-hike

    These comments EQUALLY apply to the Public Sector Pension and Retiree Healthcare Taxpayer-ripoff in NJ. In case you’re too lazy to look for yourself, I pasted them just below … ENJOY !
    ———————————————————————————————
    (1) Dear Taxpayers,

    You should contribute NO MORE toward Public Sector worker pensions than YOU get from your employer …. which is RARELY more than your employer’s 6.2% of pay (up to a cap) contribution into Social Security on your behalf, and perhaps 3% of pay into a 401K Plan.

    Which of course means that IF the worker does get Social Security (and on average 75% of Public Sector workers DO get SS), you should contribute NO MORE than 3% of pay.

    Guess what? You are ALREADY contributing MORE than that.

    NO additional Taxpayer funding. If these greedy workers want these fat overstuffed pensions (and retiree healthcare subsidies that YOU don’t get), tell them to fund everything above what YOU get from your employer by themselves.
    ————————————————————————————————-
    (2) Follow-up to my last comment ….

    Per CalPERS own actuaries, the cost of providing retiree healthcare benefits to CA’s Public Sector workers is equivalent to a level annual 12% of pay ….. per the following link (in the next to last paragraph):

    http://www.publicceo.com/2014/02/resolving-one-debate-on-public-sector-pay/

    It’s the VERY rare Private Sector company that provides ANY retiree healthcare benefits to their employees today. And for the few that do, it’s no longer a promised to pay the costs or premiums, but a modest (usually about $300) annual contribution into an HSA (Health Savings account).

    There is ZERO justification for YOU, the Taxpayers, to pay for lavish retiree healthcare benefits that YOU do NOT get.

    Demand that they end, and refuse to pay ANYTHING (above that same $300 annual HSA contribution) towards these benefits.

    Reply

  8. Posted by jackdean on June 2, 2014 at 1:53 pm

    > > A defined benefit system works fine but, as with a gun, you can not put it > in the hands of someone who does not know what they are doing. >

    Amen!

    It’s for this reason that I’m a hardcore DC guy. As long as politics is involved, they’ll figure a way to enhance DB formulas and create more unfunded liabilities.

    Reply

    • Posted by Tough Love on June 2, 2014 at 2:30 pm

      They were FAR too generous (vs what comparable Private Sector workers get from their employers) even without ANY of the enhancements.

      Reply

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