Action on NJ Pension and Benefit Study Commission

July 1, 2014: We have a problem:
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Juily 15, 2014: A REALLY BIG problem:
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August 1, 2014: requiring immediate action:
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After 161 days in existence the New Jersey Pension and Benefit Study Commission updated their website with a significant change that tells us exactly where they are headed.

Extinction.

Scroll down at the commission’s website and you will see:

Last Updated: Friday, 01/09/15

Search the site for what changed and you will notice absolutely no reference to any time frame. No thirty days. No sixty days.  No August 1, 2014. No September 30, 2014.  No indication of when it was formed or when it will release any recommendations. This could well have been the last update this site ever sees.

17 responses to this post.

  1. Posted by Anonymous on January 9, 2015 at 10:29 pm

    The answer the the riddle, Christie is the really big problem and he knows it.

    Reply

    • Posted by Tough Love on January 9, 2015 at 11:07 pm

      No, the OBVIOUS problem, is that this Commission’s ONLY sound recommendations MUST entail one or more of:

      (a) huge tax increases,
      (b) huge reductions in Future Service pension accruals, and almost equally as certain, for PAST service accruals as well
      (c) a complete elimination of all retiree healthcare subsidies

      As NOTHING else will MATHEMATICALLY work.

      Since they prefer not to by lynched by either group (the Taxpayers, or the Union workers/retirees), they have chosen to do nothing.

      Reply

  2. Posted by skip3house on January 9, 2015 at 10:53 pm

    Reminds me…couple years back, a political speaker was referring to the adherence to our NJ Republican Party Principles, values,….. I later asked the member if a list was available to be followed, guide us…….

    Later, this Republican Committee person got back to me and said nothing is in print, but a State committee has been formed to draw up something. Last I heard, that committee has never met.

    Reply

  3. Posted by javagold on January 9, 2015 at 11:46 pm

    If you don’t hold it. You don’t own it….the collapse heading this way, will make pensions worthless any way. What don’t people understand about this. Simple math.

    Reply

  4. So do you think this is the prelude to Christie resigning as governor and announcing his bid for the presidency, as you suggested in a previous post?

    Also, have you seen this, it looks pretty interesting:

    http://www.njlawjournal.com/id=1202713770229/NJ-Pension-Restructuring-Will-Be-Messy?slreturn=20150009221325

    This could be the way NJ (and probably other states too) repudiates their pension debt (or at least reduces it to what is reasonably payable without killing the taxpayer), claim sovereign immunity so they can’t even be sued. What do you think?

    Reply

    • Posted by Tough Love on January 10, 2015 at 12:57 am

      Interesting quotes from your link:

      (1) “Bringing the state’s pension obligations in line with politically available resources will involve bitter conflict and inevitable angry disappointment, as promises that government employees have relied on for their old age are scaled back or abrogated.”

      (2) “Our Supreme Court may ultimately reverse Berg and decide that pension benefits are not contractual. Or it may ultimately decide that such a contractual obligation is a long-term debt incurred in violation of the Debt Clause. Or it may—or may not—conclude that a pension restructuring complies with the Contracts Clause because no more moderate course is available to deal with a substantial fiscal crisis.”

      Greed HAS consequences!

      Reply

    • The link requires subscription so doing the google search for the title is the way to get to the article which is below.

      As for what Christie will do it’s likely a war between his ego and reality and I see his ego as winning. The only question is whether he will run for president (unlikely since his track record is so bad) or angle for the vice-presidency by cutting a deal with either Jeb Bush or Mitt Romney and work as an attack dog where his record or governing abilities won’t be scrutinized (i.e. Sarah Palin).

      NJ Law Journal Article – NJ Pension Restructuring will be messy 12/31/14

      It can safely be said that the pension funds for state employees are in financial distress.

      According to the September 2014 status report of the New Jersey Pension and Health Benefit Study Commission, the seven pension funds that cover teachers and state government employees are only 54 percent funded on an actuarial basis, which is to say that they only have on hand 54 percent of the money they will need to pay retirement benefits to current retirees and to current active employees when they retire, assuming projected return on investments.

      Only the Illinois, Kentucky and Connecticut state funds are less solvent. Under federal law governing private pension funds, funding of less than 80 percent would mean that the plan is considered to be at risk.

      In dollar terms, the shortfall is at least $37 billion, depending on the projected rate of return. To put that number in proportion, the state’s budget for the current fiscal year is $34 billion. Unfunded pension liability has led the rating agencies to downgrade the state’s credit rating.

      As the commission reports, it has taken a bipartisan effort over 15 years to reach this sorry situation. As late as 2000, the plans were overfunded. In 2001, the Legislature enacted a 9 percent retroactive increase in pension benefits for the two largest funds. Then the state made no contributions at all between 2001 and 2004, and again in 2010-11; the contributions in other years were only a fraction of the amount needed to make up the shortfall.

      “The unfunded liability of the state plans,” concludes the commission, “reflects a long-term disconnect between the willingness to provide public employees with benefits and the willingness to pay for them.”

      The post-2008 recession hasn’t helped, but the fundamental problem is the disconnect between the desire to promise and the aversion to tax.

      Depending on the projected rate of return used, it would take between $3 billion and $6 billion per year, over a period of 20 to 30 years, to restore the state plans to solvency. The longer payment is deferred, the greater it would have to be.

      Payments on a scale of 10 to 20 percent of the present state budget could only be made, if at all, by some combination of drastic tax increases and drastic cuts in other expenditure. The political will to do this for the benefit of state government workers is, to say the least, questionable. At some point in the foreseeable future, policy makers will find themselves considering how to bring the state’s commitment to its employees into line with what the voters and taxpayers are willing to tolerate, or, in plain English, cutting the vested pension benefits that have been promised to existing state government workers.

      The state’s freedom of maneuver is legally constrained because the courts have held pension benefits to be contractual obligations protected against impairment by the Contracts Clause of the U.S. and New Jersey constitutions.

      In 2011, the Legislature suspended cost-of-living pension increases for current and future retirees, which cut unfunded liabilities by $11 billion. Retirees sued. In June of this year, the Appellate Division held in Berg v. Christie that a statute enacted in 1997, N.J.S.A. 43:3C-9.5(a) and (b), was intended by the Legislature to create a nonforfeitable contractual right to pension benefits, including cost-of-living increases, for employees with more than five years’ service. It also held that the Legislature’s creation of this contractual right did not violate the Debt Clause of the state constitution. The appeals court remanded for the trial court to consider whether the termination of cost-of-living increases complied with the Contracts Clause because it served a substantial public purpose and no more moderate alternative was available. Unless and until a higher court holds otherwise, Berg means that any retrospective changes to existing pension benefits will have to satisfy the judicial understanding of the Contracts Clause.

      However, Berg is not the last word on judicial review because it did not consider whether the state is immune from any suit to compel payment of pension benefits. Unlike municipalities, states cannot use the federal Bankruptcy Code to scale down their debts. They do, however, have the expedient of sovereign immunity.

      After the economic depressions of 1837 and 1857, and again after Reconstruction, a number of states simply repudiated their bonded debt. The U.S. Supreme Court held in Hans v. Louisiana that, under the Eleventh Amendment, states were immune from suit in the federal courts to enforce payment, thus leaving each state to determine, under state law, whether it would be immune from suit in its own courts.

      In 1970, the New Jersey Supreme Court ended the state’s common-law sovereign immunity from suit on its contracts in P.T.& L. Constr. Co. v. Commissioner, and the Legislature responded by fixing the limits under which the state could be sued on its contracts in the Contractual Liability Act. Berg was brought under that statute. In 2001, the court held, in Allen v. Fauver, that the state could not be sued without the Legislature’s clear and unambiguous consent, which had not been given with respect to noncontractual wage claims. Allen appears to leave it open for the state to protect any modification of existing pension rights against judicial review by amending the Contractual Liability Act and withdrawing consent to suit for benefits accrued under prior law. But to provide complete assurance of sovereign immunity, an amendment to the state constitution would be required.

      As Charles I and Louis XVI could testify, fiscal crises become constitutional crises when the government has exhausted the population’s willingness to be taxed. Bringing the state’s pension obligations in line with politically available resources will involve bitter conflict and inevitable angry disappointment, as promises that government employees have relied on for their old age are scaled back or abrogated. Berg signals that the judiciary intends to have the last word if and when that happens.

      Our Supreme Court may ultimately reverse Berg and decide that pension benefits are not contractual. Or it may ultimately decide that such a contractual obligation is a long-term debt incurred in violation of the Debt Clause. Or it may—or may not—conclude that a pension restructuring complies with the Contracts Clause because no more moderate course is available to deal with a substantial fiscal crisis.

      If the political branches want to be sure that they have the last word, sovereign immunity will be their ultimate weapon. But if we reach that dishonorable point, it will be because the voters and taxpayers of New Jersey refused to honor the promises made in their name.

      Reply

      • Posted by Tough Love on January 10, 2015 at 1:48 am

        The LAST 2 words above (“their name”) should have been …. “via collusion between the Public Sector Unions and NJ’s elected officials BOUGHT-OFF with Public Sector Unions campaign contributions and election support.”

        Reply

      • Posted by dentss@yaoo.com on January 10, 2015 at 7:13 am

        “it will be because the voters and taxpayers of New Jersey refused to honor the promises made in their name” …..Taxpayers knew about the backroom deals being made in their name ,the 9% pension is a glaring example .And it’s not refusing to make it’s can’t possibly make payments even with a gun pointed at our heads .

        Reply

        • Posted by Tough Love on January 10, 2015 at 12:41 pm

          Gov. DeFrancesco cooked up the 9% retroactive pension increase on the eve of the elections to solidly Public Sector Union/worker support. That was nothing but a theft of Taxpayer wealth with ZERO “consideration” in return.

          That increase should be at the top of the list for retroactive rollback WHEN (not IF) these pensions fail.

          Reply

  5. Posted by MJ on January 11, 2015 at 7:58 am

    Can someone please explain to me in very simple language how any one entity can make any financial promise into perpetuity to another entity such as a defined benefit plan? How can anyone predict what will happen 20, 30, 40 years down the road? Just doesn’t make any logical or mathematical sense.

    Reply

    • Posted by Tough Love on January 11, 2015 at 1:22 pm

      Collusion ….. between the Public Sector Unions and Elected officials,legal because those who would make it illegal (the Elected Officials) BENEFIT from not doing so.

      Reply

    • Posted by skip3house on January 11, 2015 at 2:52 pm

      EXACTLY. Today’s Trenton not allowed to obligate next Trenton, or pay today’s bills,…..!

      Reply

    • Posted by Tough Love on January 11, 2015 at 8:00 pm

      Big woop …. New Jersey spent nearly $1 million on travel expenses for its state police Executive Protection Unit during Christie’s four years and nine months as governor …

      VS at least $3 Billion (ANNUALLY) on just the unnecessary, unjust, unfair, and unaffordable (roughly 50% share) of their grossly excessive pensions & benefits that the PUBLIC Sector Unions have BOUGHT from NJ’s Elected Officials with campaign contributions and election support.

      Which one is a more pressing problem ?

      Reply

      • Posted by Anonymous on January 16, 2015 at 4:46 pm

        If the trips had been to DC for monies for child protective services, Sandy victims, Transportation Trust Fund, etc, then the expense would be justified, CC’ s trips were to test the 2016 nomination possibilities at NJ’ s expense.

        Reply

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