CF3: Why a Ballot Question

For the proposed pension reforms to work the New Jersey State Constitution needs to be changed and the reasons are explained on page 12 of the pension commission’s report:

This Report differs from other reform proposals in recognizing that some existing benefits must yield to put in place a program that is affordable, sustainable and fair to all. A particular source of difficulty for adjusting benefits is a 1997 statute that, for over a decade, extended to vested employees a “nonforfeitable right” to receive pension benefits as provided under the laws governing the retirement system at the time they reached five years of service.  As events have transpired, employees with sufficient length of service—currently 89% of all employees participating in PERS at the State level and in TPAF—have been spared any reduction in their right to future pension benefit accruals. This has kept pension costs unsustainably high and has impaired the effectiveness of almost all subsequent reforms of pension benefits, as these reforms have been limited to employees who lacked the seniority at the time of the reform to claim nonforfeitable rights.

Because of claims of constitutional protection, the ability of the Legislature to reduce pension benefits for individuals claiming nonforfeitable rights protection has been questioned. As a result, the Commission believes that the best means of ensuring the freedom to effect meaningful reform would be to amend the State Constitution to confirm, notwithstanding anything in the Constitution or laws of the State of New Jersey to the contrary, the power of the State to reduce existing pension and health benefits. If sufficient health benefits savings can be achieved to permit funding
of the reduced pension obligations, it would be possible to include in the amendment a guarantee of the pension funding specified in the payment schedule.

The amendment process requires approval by the voters in a general election. Given the public’s stake in the issue, having the public agree to the terms of this solution should be seen as a virtue.

What this means is that the commission feels that the 1997 reform agreement precludes freezing accruals so they want put a question on the November ballot that would invalidate that provision of the law.  Wording on the ballot question will be hotly debated but if they want to be honest about it:

Public Question #1:

Official wording: Do you approve amending the Constitution to allow reductions in existing pension and health benefits for public employees?

Unofficial interpretation: Christie Whitman in 1997 wanted to reduce income taxes so she played games to get the state to not have to make any contributions into the pension system but to get that concession from the unions she had to obligate the state into guaranteeing benefits (even future accruals) for participants in the plans with at least 5 years of service. The state did sharply reduce (even eliminate in some years) their contributions and now benefits have to be reduced since there is not enough money in the system to even pay 50% of what would be due to the retirees ALONE. Hence, this ballot question.

 

13 responses to this post.

  1. Posted by Tough Love on February 25, 2015 at 9:29 pm

    Well, since I just don’t trust politicians, even “If sufficient health benefits savings can be achieved to permit funding of the reduced pension obligations” in year 1, politicians might subsequently increase those health benefits, REDUCING the “savings” so that they no longer offset the ongoing pension obligations.

    To protect the Taxpayers from such potential future abuse, the wording protecting pensions should be such, that the continued pensions WILL BE REDUCED $ for $ to the extent healthcare savings becomes insufficient to fund the ongoing pensions.

    Reply

    • I agree to an extent, but where would the cut off be for those who are truly
      disabled and cannot work ? As stated in a prior post I’am one of those truly
      disabled, and not from a staple in the trigger finger, which is absurd and should
      not be tolerated.
      I pay for my medical insurance which is deducted monthly from my allowance
      which is under $25,000.00 a year. Furthermore mj stated “perhaps I’m not
      truly disabled, but embellishing my injuries” . Anyone who would lie about such injuries
      have more guts than I do, that’s something you just don’t do.
      Thank you for your kind words in your prior post.

      Reply

      • Posted by Tough Love on February 25, 2015 at 11:40 pm

        Duke,

        I was really only trying to make a point by example …. that being that Local Taxpayers should NOT take-on and “guarantee” a fixed pension cost (that they do NOT pay for today …. teacher pensions) without an equal “guarantee” that the purported “savings” will be there today AND tomorrow.

        The Unions will definitely try to improve the healthcare deal post-implementation, and the politicians will likely go along. NEITHER can be trusted.

        Reply

      • Duke, if you bothered to read my post and put into perspective, I was making the point that b/c so many of your fellow brothers have trumped up disability such as the staple in the finger example that I think twice about anybody who says they are so disabled that they can’t work. Its just the perception that you have all created. Heck, when I go to my gym I hear people bragging that they are on disability and can’t work but must go to the gym and work out to help with whatever is the reason why they can’t work, Don’t be so defensive, you and your brothers in arms created this charade, not me.

        Reply

    • Posted by Anonymous on February 25, 2015 at 11:00 pm

      you finally said something of great value and insight TL. You dont trust politicians!

      Then why do you keep looking to them to solve the pension issue or any other issue for that matter? Come on, do you really think you will ever get any satisfaction. Even if the public workers get nothing, I promise you it wont help your situation , not one bit.

      Reply

      • Posted by Tough Love on February 25, 2015 at 11:46 pm

        The “politicians” are in charge (and legislate changes)…. so we have to deal with them.

        P.S. …… I don’t really like Christie …. but he’s really trying to address a problem with ONLY really painful solutions. Ignoring it will only make it worse.

        Nor do I expect my taxes to be reduced. I just do NOT want them to continue to rise simply so we can CONTINUE to over-pension and over-benefit NJ’s Public Sector workers.

        Reply

  2. Posted by Jim Buettner on February 25, 2015 at 10:53 pm

    This ploy is right out of “The Good Wife”. Get the taxpayers to fall on the sword for voting to take away the promised benefits to the unions or having taxes raised to pay for their largess. Either way the Governor deflects the responsibility. Nice move. Not unexpected.

    Reply

    • Posted by Tom on February 27, 2015 at 1:14 am

      It was the taxpayers who got rid of Florio and reelected Whitman. So why shouldn’t the taxpayers take the blame for the fallout from 20 years of pension non-funding?

      Reply

      • Posted by Tough Love on February 27, 2015 at 2:15 am

        “Non-funding” …. is NOT the “ROOT CAUSE” of the problem.

        Taxpayers must stay focused on the fact that “funding” requirements
        FOLLOW from (and directly in proportion to) Plan “generosity”. Not being able to fully fund a very “generous” Plan is usually NOT due to a lack of political will, but due to the fact that the HUGE sums needed to do so are simply not available (while meeting a city’s essential service needs)….. with the ROOT CAUSE of this (incorrectly labeled) “funding problem” being directly traceable to grossly excessive pension/benefit “generosity”.

        “Funding” problems are a CONSEQUENCE of that excessive generosity, not a CAUSE of the financial pension mess many States and Cities now find themselves in.

        To truly “fix” the problem, Taxpayers must address the REAL CAUSE (excessive “generosity”) and must demand either:

        (a) a hard freeze (zero future growth) of all Public Sector DB pensions for the future service of all CURRENT workers. The current absurdly excessive DB Plans should be replaced (for future service) with a DC (401K-style) Plan with a Taxpayer %-of-pay “match” of 3%-5% of pay, just like Private Sector Taxpayers typically get from their employers, or

        (b) If (a) above is not possible (after exploring ALL legal avenues and options to do so), then the pension accrual rate for the future service of all CURRENT Public Sector workers should be reduced by 50% for all non-safety workers and by 66% for all safety workers (with the most egregious pensions) …… and even AFTER such reductions, the resultant pensions would STILL be greater than the pensions granted 90+% of comparable Private Sector Taxpayers.

        For the TYPICAL Public Sector Pension Plan, if you took ALL of the employee’s actual contributions and accumulated them to the date of retirement (INCLUDING all the investment earning on those contributions), RARELY would the accumulated sum be sufficient to buy more than 10-20% of the VERY generous promised pensions. The Taxpayers are “supposedly” on the hook for the 80-90% balance.

        ———————–
        Looks like Gov. Christie agrees with me ….. as his Commission has just proposed (a) above as the “solution” to this pension mess..

        Reply

  3. Posted by Eric on February 27, 2015 at 12:29 pm

    John:
    Please correct me if I am wrong, the 50% figure above applies only to the teachers’ pension, correct? This is not the entire system since Police and Fire is funded at a much greater level.
    Thanks,
    Eric

    Reply

    • Police & Fire is broken down between state and local as is PERS and both take into account contributions that come in for those employees so with the state making no or mini-contributions for so many years while local governments make their contributions (lowballed as they are by faulty actuarial methods) the funded percentages for the local portion of PFRS and PERS looks better but they are all abysmal using honest assumptions.

      Reply

      • Posted by Tough Love on February 27, 2015 at 1:13 pm

        The Public Sector commentators who REPEATEDLY state how “well funded” NJ’s Local Plan are (with the goal of trying to shield THEM from reductions) should read the last 8 words in John’s above comment …. about 10 times.

        Reply

  4. […] Pension Obligation Bonds that would eliminate contribution requirements came at a price of having benefits protected as a contractual right. As it turned out those protections were […]

    Reply

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