CF9: Who Pays For All This

Page 11 of the Roadmap outlines the panel’s conception  of where the state will get the money to pay off that $180 billion in pension and health benefit liabilities:

…because local health benefits costs are so high, even moderate reforms would result in huge local savings. If aggregated, these savings could permit a higher overall level of post-reform benefits and more equitable State/local allocation of benefit obligations at no additional cost to local taxpayers. In contrast, as illustrated in Table IX in the Implementation Issues section of this Report, a State-level-only reform would generate a need for over $1.5 billion in new revenue at the State level. Given the dire need, the extent to which State funds already play a significant role in funding local benefits, and the fact that local savings would not exist but for statutory and constitutional reforms intended to address the State-level crisis, the Commission believes that it is appropriate to dedicate these local savings to help close the State and local pension funding gaps. At the same time, the Commission is sensitive to the existing burdens on municipalities and believes that the local impact of this approach should be limited to aggregating local savings for use in funding the pension deficit. As a result, this reform would be cost-neutral to local governments.

So how much was the state thinking of offloading?

Page 22 estimates the number:

Funding of education retirement benefits has ballooned into a $2.5 billion annual obligation for local education pensions (if paid in full in 2016) and, absent reform, a projected $1.4 billion burden in 2016 for local education retiree health benefits. In addition, the $750 million annual obligation for local education employers’ contributions to Social Security is also paid by the State. The condition of local benefits is merely the flip side of the State subsidizing what otherwise would be a $4.6 billion annual local obligation.

Participant data from the latest pension actuarial reports shows a breakdown of public employees and retirees as of July 1, 2013:

nj parts
The state wants to transfer that $4.6 billion it is supposed to be paying to cover the health benefits, pensions, and the employer portion of Social Security for about 243 thousand teachers with total active payroll of around $10 billion to local governments who are now paying for 363 thousand people with annual payroll of around $11 billion all with the expectation that it will only take “moderate reforms” to local health benefits to make it unnoticeable to property-tax payers.

7 responses to this post.

  1. Posted by Tough Love on March 2, 2015 at 7:51 pm

    John, I stated in a comment to one of your earlier “CF#” posts that the Taxpayers need a “guarantee” that they will NOT pick up teacher pension and retiree healthcare costs greater than any savings from reductions to other LOCAL worker pensions and healthcare…. to ENFORCE the “cost neutral” effect.

    That guarantee should be iron-clad as part of the constitutional amendments, with costs in excess of savings (IN ANY YEAR, measured annually) AUTOMATICALLY reverting to a “STATE” obligation. I.e., the Locality does not have to pay it (the shortfall in “savings”) …. the STATE does.

    Reply

    • Posted by dentss dunnigan on March 2, 2015 at 8:27 pm

      If this gets out of control you could see towns seek bankruptcy over this ….

      Reply

      • Posted by Tough Love on March 2, 2015 at 9:31 pm

        That’s what I concerned with. EVEN IF it starts out “cost neutral”, as the large cohort of baby boomers retires in the next 10 years, and Local employment likely says level or reduce in number, I can easily see the transferred retiree costs becoming FAR more than the savings from “active” Local worker pension & benefit reductions.

        And the ONLY way to pay for it at the LOCAL level is via increased property taxes.

        Reply

      • Posted by PatB on March 2, 2015 at 11:28 pm

        That could be the point. The state can’t go bankrupt, but municipalities can.

        Reply

  2. Posted by javagold on March 2, 2015 at 9:14 pm

    Foreclosures are going to skyrocket in this corrupt cesspool of a state.

    Reply

    • Posted by Tough Love on March 2, 2015 at 9:39 pm

      It’s a cesspool because decades of legislatures/administrations, and State & Local “elected officials” betrayed their obligation to protect ALL Taxpayer interests, not just the interests of PUBLIC SECTOR WORKERS, whose block-voting and Union campaign contributions were gladly accepted by our elected officials in exchange for their favorable votes on Public Sector pay, pensions, and benefits.

      Reply

  3. Posted by Anonymous on March 3, 2015 at 8:50 pm

    Christie has hidden the fact that in 2014 the pension funds paid over 600 Million in fees. This may be a crime.

    http://www.ibtimes.com/chris-christie-administration-paid-600m-financial-fees-2014-1833872

    Reply

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