CF5 – Ballot Question Hustle

For the Christie Freeze to work public employee pension and health care benefits must be cut significantly and the cleanest way to accomplish this is to put it into the New Jersey Constitution. However a ballot questions saying ‘benefits can be cut at any time to whatever level we damn well please’ probably won’t pass so they coupled it with a completely useless provision to ‘guarantee the certainty of a pension funding payment with a constitutional amendment’ and that is what Governor Christie emphasized:
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But what good is a guarantee of a payment number that you get to pick?  The 2011 pension reform law also had a guarantee and that didn’t amount to much.

There were two pages on the proposed constitutional amendment in the Roadmap and the amendment had two parts:

  1. Modification of Existing Benefits
  2. Creating a Sustainable and Certain Pension Funding Obligation

If both parts pass is a stronger guarantee worth anything if the contribution amount being guaranteed is now completely within the state’s control.  If  you get the ability to modify (i.e. reduce) benefits then do you also not get the ability to reduce contributions?*

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* This would be in addition to the existing ability to intimidate/cajole/bribe your actuaries into getting you lowball contribution numbers.

15 responses to this post.

  1. Posted by Anonymous on February 27, 2015 at 12:24 pm

    In my opinion: This reports release was coordinated with the so called budget address to give Christie a rally point for his presidential run which will come to a grinding halt very soon.

    This report is not the last word and will be studied by almost everyone and possibly some of its recommendations will be adopted. There are already arguments that the cash plan or whatever it is called is not going to be the best way to go. Christie thinks the the legislature will just go along with his “blue ribbon” panel and adopt everything, this will not happen. This will be a long process concessions and modifications will be made by both sides.

    Reply

    • Posted by Tough Love on February 27, 2015 at 1:09 pm

      Quoting …. “the best way to go” ?

      From which perspective, the Taxpayers or the Unions/workers ?

      If the latter had it’s way, they would DOUBLE the generosity of the EXISTING Plans …. They don’t give a crap about NJ’s “taxpayers”.

      Reply

      • Posted by Anonymous on February 27, 2015 at 1:44 pm

        Decide for yourself I have no opinion whatsoever at this time as I have not researched it enough and do not want to make a rash judgement.

        http://www.dol.gov/ebsa/faqs/faq_consumer_cashbalanceplans.html

        Reply

        • Posted by Tom on February 27, 2015 at 5:48 pm

          Cash-balance plans are just defined-contribution under another name. There is the fig leaf of guaranteed results, but that’s just a matter of buying some equity puts.

          That makes it quite simple to evaluate. Defined-contribution plans are very familiar in the private sector.

          Reply

          • Posted by Anonymous on February 27, 2015 at 7:53 pm

            A cash balance plan is a defined benefit plan that defines the benefit in terms that are more characteristic of a defined contribution plan. In other words, a cash balance plan defines the promised benefit in terms of a stated account balance.

            In a typical cash balance plan, a participant’s account is credited each year with a “pay credit” (such as 5 percent of compensation from his or her employer) and an “interest credit” (either a fixed rate or a variable rate that is linked to an index such as the one-year treasury bill rate). Increases and decreases in the value of the plan’s investments do not directly affect the benefit amounts promised to participants. Thus, the investment risks are borne solely by the employer.

  2. Posted by Tough Love on February 27, 2015 at 12:57 pm

    Personally, even though I REALLY believe this is EXACTLY what is necessary to SOLVE the pension mess NJ is in, I doubt the Unions will go along, as the older, longer service workers (who control the Unions) will get a third less in total (old + new Plan) pension benefits if their pensions are frozen …. but no different than what has been going on in the Private Sector for the past 10-20 years.

    Reply

    • Posted by Tom on February 27, 2015 at 5:31 pm

      Even if it doesn’t work out now, it will still hover in the background of any future pension discussions. Once it has been put on the table, it’ll stay there as an alternative to some other harebrained scheme.

      The longer we wait, the more attractive a freeze looks. TPAF has a depletion date that’s just 9 years away. Whether it’s Christie or someone else, Republican or Democrat, even if we increase the contribution this year, eventually it’ll get to a crisis point. Given the choice between a freeze and a dramatic increase in taxes, we will get a freeze.

      As for the ballot question, why not submit the pension plan to the same federal actuarial regulations as private pension plans?

      Reply

  3. Posted by Anonymous on February 27, 2015 at 9:00 pm

    The existing retirees would be grandfathered because their contracted benefits are guaranteed under the Constitution. The news constitutional reform would address the present and future.

    Reply

    • Posted by Tough Love on February 27, 2015 at 9:37 pm

      Unfortunately …..

      That PAST service pension accruals are off-limits from reduction (EXCEPT in a CH 9 Bankruptcy Proceeding), does NOT Change the fact that these grossly excessive accruals were ALWAYS unnecessary, unjust, and unfair to taxpayers.

      AND ….. are now and will continue to make LESS in pension benefits available to those that follow them. The younger shorter-service “actives” should certainly look with disdain at the greed of (and harm caused by) those already retired and soon to retire.

      Reply

      • Posted by Anonymous on February 28, 2015 at 6:56 am

        Not true employees are each year of employment can contribute to the 403b of the hybrid cash balance plan up to the federal contribution limit.

        Reply

  4. Posted by Anonymous on February 27, 2015 at 9:21 pm

    LOL
    Unlike tough love who had the chance to object to prior contarcts by contacting her reps or even running herself then, before the bill is due NOW, I will call my reps and actually tell them in no way do I support any of the proposed changes. 🙂

    Reply

    • Posted by Tough Love on February 27, 2015 at 9:41 pm

      Your ONLY choices will be:

      (a) accept less now (for FUTURE Service only), or
      (b) have an even greater reduction FORCED upon you later (likely with reductions to BOTH Past AND Future Service).

      Reply

      • Posted by Anonymous on February 28, 2015 at 7:00 am

        Not true the cash balance hybrid 401a and 403b will produce a larger payout, the freezer assets become a part of group premium under an insurer.

        Reply

        • Posted by Tough Love on February 28, 2015 at 12:25 pm

          We will never buy benefit levels equal to those of the frozen Plan from a Private insured because current Plan assets are about HALF the amount that a Private insurer would change to sell such annuities.

          Reply

  5. […] it could be to draw straws to see who spearheads that ballot question initiative that would guarantee pension payments (as well as allowing for benefit cuts but that part would be […]

    Reply

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