Pension Guru Predicts

The Wall Street Journal (WSJ) had an article (apparently yesterday) about Chris Christie flubbing the pension situation written by someone who a couple of years ago was trumpeting Christie’s political genius.  Since my link, as a non-subscriber, only got me the first paragraph and anxious to get details I decided to buy the WSJ today (which is when I found out that the Christie pension-mess article would have been in a prior issue).

But it seems like the WSJ has daily coverage of the coming pension implosion in New Jersey with today’s article, Pension Guru: N.J. Problems Getting Worse, offering up some telling quotes (with my emphasis) from the chairman of the Pension Study Commission that was supposed to have come up with solutions back in September:

“The solution mandated payments Gov. Christie didn’t make,” said Thomas Healey, a former Goldman Sachs partner and now chairman of Mr. Christie’s pension commission. “That’s one reason it’s getting worse. Every day you don’t fund it, it just gets bigger.”

High on his list of changes is making sure the state makes its required payments. “They’ve all failed the citizens by not funding it,” Mr. Healey said.

Mr. Healey is expected to submit a blueprint in coming weeks that outlines a range of solutions, which could include switching state workers to a 401(k)-style retirement plan, which many companies use, instead of a defined benefit plan that promises specific payments.

The report will show the system is in even worse shape than when Mr. Christie took office in 2010 and make proposals that are “painful but fair,” Mr. Healey said. He declined to give specifics before the release of the report, but said that everyone would have to make sacrifices to solve the problem.

Mr. Healey and his commission faced problems that were deep and systemic when they began work earlier this year. In 2011, when Mr. Christie and the state legislature touted a solution, “they didn’t really do enough homework” in assessing the challenges, he said.

“You’re under time pressure. Let’s do it and move on. You don’t always get the right answer,” he said. “They thought they had it partially fixed a couple of years ago, but that assumed the payments would be made.”

A judge could still rule what Mr. Christie did was “wrong or illegal,” Mr. Healey said, as several unions and pension funds have filed suit in state Chancery Court to force Mr. Christie to make the required contributions. A spokesman for the governor said on Wednesday the state would respond in court.

Mr. Healey said his commission’s report could spark serious discussion or “be in the library of unread reports.” The report was taking longer than some expected because the committee was still weighing options, he said.

We may not get it solved,” Mr. Healey said. “It’s hard as hell. But if we don’t get it solved in 2014, we’ll never get it solved in 2018. Eventually it will just totally overwhelm the budget.”

This is going to get uglier.

16 responses to this post.

  1. Posted by Tough Love on December 13, 2014 at 2:23 am

    Quoting … “Every day you don’t fund it, it just gets bigger.””

    Or, we might say ….. “Every day you don’t materially reduce the outsized pensions for all CURRENT workers, it just gets bigger.”

    FUNDING (or a lack thereof) is not the “cause” of the pension mess we are in today. Funding requirements FOLLOW from (and in direct proportion to) Plan GENEROSITY.

    And grossly excessive Public Sector Plan generosity is the ROOT CAUSE of the problem.

    Reply

    • Posted by Anonymous on December 13, 2014 at 5:49 pm

      you are happy for failure but you wont be any better off. you would like to thing so. the grossest thing is your ability to hide your head in the sand, thinking this will solve your problem as a millionaire taxpayer.

      Reply

      • Posted by Tough Love on December 13, 2014 at 9:26 pm

        No, I advocate for EQUAL Public Sector Public/Private Sector “Total Compensation” (Wages + pensions + benefits) in similar jobs….. and right now (especially in NJ),Total Compensation in the Public Sector is materially greater and justifiably should be reduced, not just for NEW workers, but for the future service of all CURRENT workers.

        Got a problem with EQUAL?

        If so (and your a Public Sector worker or retiree) you’re a greedy “moocher”.

        Reply

  2. Posted by Eric on December 13, 2014 at 9:55 am

    Tough Love:
    Part of the solution is the proposed “book deal” that paves the way for much higher salaries for the politically connected in return for the gov enriching himself and his political career.
    We have heard nothing but crickets from the republicans. I know that they are so very money conscious and are budgetary hawks. This is almost gallows humor.
    Eric

    Reply

  3. Posted by Titon7 on December 13, 2014 at 12:55 pm

    The increased employee contributions for the last reforms were used to lower the actuarial contributions of the state (already discounted by 5/7) and locals (previously full contributions). I.E. the increases made it into the system on paper but were absorbed by actuarial rebates. Unfortunately, I do not see any path to a solution with the current governor. His administration is committed to keeping the issue tied up in the courts until they move on to greener pastures. The panel chairman seems to be waving the white flag. He realizes the report is probably going to wind up on a shelf.

    Reply

    • Posted by Tough Love on December 13, 2014 at 1:27 pm

      Because ANY real solution (even one that includes material tax increases) MUST include pension & benefit reductions for all CURRENT workers FAR more than they would willingly “negotiate”, I don’t see any way to a solution until our legislators (who likely CAN fix this over time if they so desired) see no benefit in supporting the Unions, and the only way THAT will happen is when Public Sector union campaign contributions (directly OR indirectly) are declared illegal (with serious jail time for both the giver and receiver).

      Reply

      • Posted by Pat on December 13, 2014 at 3:16 pm

        I would agree with the campaign contributions as long as they apply to everyone, including private donors. Maybe a $2K limit would take care of the cash corruption. I would also want jail time similar to ERISA for withholding pension payments. The problem would have been resolved 15 years ago if the politicians either paid into or “fixed” the systems.

        Reply

        • Posted by Tough Love on December 13, 2014 at 3:50 pm

          Quoting …”I would agree with the campaign contributions as long as they apply to everyone, including private donors. ”

          I would LOVE to see ALL Campaign donation declared illegal as they do nothing be support BOUGHT “special interests”. America would be FAR better off if we (the Taxpayers) directly paid for elections.

          Reply

  4. Posted by Anonymous on December 13, 2014 at 7:48 pm

    You’re fooling yourself

    Reply

  5. They’ve all failed the citizens by not funding it.”

    Those that benefitted from lower taxes and are gone to Florida, and those who got retroactive pension increases and will be dead before the consequences are fully felt, weren’t failed. They were pandered to.

    Younger and future public employees and taxpayers were screwed.

    Reply

    • Posted by Tough Love on December 15, 2014 at 6:53 pm

      Well, the ROOT CAUSE is what the “it” is in the words “funding it”.

      If that “it” wasn’t grossly excessive pension promises, the VERY high “funding” requirements that Mr. Healey correctly notes were not met, would have been a GREAT DEAL lower ……. especially if the promised Plan “generosity” was no greater than that of the pensions typically promised Private Sector workers.

      As I have pointed out many times before, “funding problems” are NOT a CAUSE of the pension mess NJ is in, but are a CONSEQUENCE of the ROOT CAUSE …..grossly excessive pension Plan generosity.

      Fix THAT (for the future service of all CURRENT workers) via a 50+% reduction in the pension accrual rate, and the funding problems “may” be able to be addressed (over an extended period).

      Reply

  6. Posted by Tough Love on December 17, 2014 at 12:03 pm

    While applying to Pension problems elsewhere, Mike Shedlock said it best here :

    “Ultimately, bankruptcy is where all these cases are headed. Taxpayers certainly don’t deserve preposterous tax hikes while inept politicians look for ways out, because there are no ways out.

    In the meantime, collective bargaining of public unions needs to go the way of the dinosaur. Public unions and the hack politicians who support unions have wrecked more city and state budgets than the next 10 things combined.”

    ———————-

    Source: http://unionwatch.org/californias-cities-arent-alone-unions-trample-finances-in-scranton-pennsylvania/

    Reply

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