No Simple Solutions to New Jersey Pension Mess

An opinion piece by Edward Buttimore, a former administrator in the New Jersey Attorney General’s Office, Criminal Division and current retiree getting $66,953.16 annually sees three simple steps to solving the problems New Jersey has with its pension system:

1) Make 12 monthly pension installment payments rather than one lump sum pension payment, often at the end of the fiscal year.
2) Cap the rate of future revenue projections to a figure determined by an independent objective party.
3) Honor the pension payment obligations of Chapter 78, passed in 2010.

(1) is a gimmick, (2) is nonsensical as the governor would only pay people who are not independent objective parties, while (3) is unachievable since the whole idea here is that the state can not afford to make anything more than token contributions.

The solutions that Chrisite’s people are likely to come up with sometime this summer will be much more complicated so as to distract everyone with figures, especially figures that the state will be paying their experts to provide.  They will also have one goal in mind: to reduce the state’s contributions for retiree benefits.  I see a more complicated three steps:

1) Defined Contribution plan for all new hires.

2) Massive reduction in health care coverage either through some state system or something George Norcross thinks up.

3) Taxing pensions with the revenues from that tax to offset state contributions.

(1) is a gimmick to divert attention from the other two real cost-savers, (2) is acceptable to the courts so it will be pushed as far as possible, while (3) would essentially reduce benefits permissibly (it can be argued) while limiting (or eliminating if the state redefines the ARC again – 1/9th this time?) the state’s contribution obligation.  The state gets what it wants and no one is any the wiser, as per usual.

12 responses to this post.

  1. Posted by Anonymous on July 5, 2014 at 4:18 pm

    Politicians can not be trusted to run the pension system. Simply the truth. No law or reform will ever be enough as the Politicians who mostly are lawyers will find ways around following these reforms or laws as they always have. Government can not sustain itself. It desires to steal more than is available to steal.

    Reply

  2. Posted by Anonymous on July 5, 2014 at 6:03 pm

    If there was no problem, the government would create a problem, therein lies the problem. Its a now win situation, anything which is funded will be raided, so there is no hope whatsoever.

    Reply

    • Posted by Tough Love on July 5, 2014 at 7:57 pm

      If you raid 401K (DC) Plan assets, you go to jail …. period.

      EVERYONE (INCLUDING all CURRENT workers for their future service) should be moved to DC Plans.

      Reply

      • Posted by Anonymous on July 6, 2014 at 6:47 am

        Not if you are a politicians who does favors for a judge. Oops wait that is all of them!

        Reply

  3. Posted by Tough Love on July 5, 2014 at 7:53 pm

    Since we certainly need the additional savings and it would be eminently just for taxpayers (who get no better deal), we SHOULD be (in addition to putting all new hires in a DC Plan) shifting the future service of all CURRENT workers into DC Plans.

    I guessing that your healthcare reductions guess are in lieu of that as easier to do (and not get it reversed).

    John, do you believe their is any chance of freezing (or materially reducing the pension accrual rate) the current DB Plans for the future service of CURRENT workers?

    If not, why don’t we pursue outsourcing is a BIG way……. as we need to STOP digging the financial hole we are in even deeper, and as long as these DC Plans continue unchanged for CURRENT workers, that’s exactly what we are doing every day …digging the hole deeper.

    Reply

    • Anything, and beyond, is possible. Who thought that defining a ‘required’ contribution as 1/5th (and then 1/7ht) of what you were told to put in would be a ‘solution’ and people would take it seriously? Or taking away contractually guaranteed COLAs?

      Christie might have some equally stupid idea ready to roll out but I doubt it will have anything to do with freezing accruals since he would likely need something less expensive to replace DB accruals and I don’t think he can come up with a system so easy to manipulate as the public pension funding methodology.

      Reply

      • Posted by Tough Love on July 5, 2014 at 10:37 pm

        That’s a good point, From his perspective, it’s only what he MUST pay-in NOW that matter (to him), not the value of the benefit promised even if MUCH larger (as is the case with continuing the DB Plans)..

        Reply

  4. Posted by Eric on July 6, 2014 at 12:12 am

    If contractually guaranteed cost of living adjustments are taken away for people who retired BEFORE the law was changed, and the courts agree to this fiasco, there is no more law in NJ. NONE.
    At that point, ANYTHING AT ALL is possible, since completed contracts with a non-forfeitable right status, such as the cost of living adjustments, can be broken with impunity by saying, we have squandered the money. Don’t have it. Never put it in. Took pension holidays. Spent it on other things. Gave property tax rebates. Will not raise taxes or stop tax breaks for select entities. IT IS OVER. Loan us more money at your own risk. Good luck with your bond market! NJ is the joke of the nation. I now agree with that. How utterly embarrassing. What a crap state with crap leadership.
    I do not care if you are a public employee or not. A COMPLETED contract that may not be broken is viewed as nothing. We are a banana republic for sure.
    What a “punt” from the Appellate Division. These judges are paid good money to play games and send the case back to the law division for questions of “law and fact.” The question is legal ONLY. The Appellate Division should be dissolved. That is the first step to saving real money in NJ.
    Eric

    Reply

  5. Posted by Anonymous on July 6, 2014 at 3:15 pm

    IF YOU DO NOT HOLD IT, YOU DO NOT OWN IT !!!…..REPEAT IT TO YOURSELF AS MANY TIMES AS NEEDED UNTIL IT SINKS IN

    Reply

  6. I am an advocate of taxing the net present value of pension benefits as they are earned, since the ability to collect is not impaired by pensioners bailing out of NJ as. soon as they retire. The Supreme CT has found it unconstitutional to tax non residents for their pension benefits (Virginia tried it in the 1990s if I recollect).

    Reply

  7. Posted by Eric on July 6, 2014 at 4:47 pm

    Anonymous:
    You are correct.
    Eric

    Reply

    • Posted by bpaterson on July 8, 2014 at 11:06 am

      anon that would make some sense. Tax the pension benefits distributed as income then dedicate that 7% collection of tax monies to help fund the pension funds. That revenue would be at least $500 mill to 750 mill to help defray the underfunding.

      Reply

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