Fixing New Jersey Pensions – the Union Way

Charles Wowkanech, president of the New Jersey State AFL-CIO, had an op-ed this morning where he offers what he sees as a “realistic path toward meeting N.J.’s pension obligation” with a four-pronged approach that he thinks would raise $1.6 billion annually as follows:

  1. $600 million from not paying fees for alternative investments
  2. $87 million from making the pension payment 11 months earlier
  3. $600 million from higher taxes on people making over $1 million a year
  4. $300 million in unanticipated revenue

He is dangerously wrong on all counts and, if his suggestions were implemented, the likely result would be:

  1. $0 since if you don’t pay the investment fees you don’t get the investment.  Alternatives have been a scam to inflate the value of trust assets but if those $600 million fees were not paid New Jersey would not be able to claim they have $80 billion in plan assets.
  2. close to $0 overall since, if New Jersey had an extra $1.3 billion lying around at the beginning of the year, they could be earning money on it outside the plan as easily as inside it.
  3. $600 million possibly but much of that would be going to Florida and Pennsylvania treasuries.
  4. ???? – “unanticipated revenue”? Would the pension then also have to cover unanticipated shortfalls as occurred in FY14?

If union leaders are seriously interested in saving the pensions of their members they must all face the truth and not their own prejudiced interpretations of what is possible.

34 responses to this post.

  1. Posted by Anonymous on July 18, 2015 at 9:45 am

    Oh but this is just for everybody except public safety workers, right? Their “local” pension’s are better funded and their P&B less generous? Soley supported by NJ’s extremely low and affordable property taxes!

    Time’s a wasting, let’s get on with the P&B Commission reforms before we’re staring at them in our rear view mirror.

    Reply

      • Posted by Anonymous on July 18, 2015 at 10:15 am

        Guess you can believe the things you want to hear. Remember the Governor, before being elected, said he wouldn’t touch your pensions. Then after signing c.78 he didn’t/couldn’t follow the ARC funding schedule. Whatever’s convenient for the moment.

        Reply

        • Posted by Tough Love on July 18, 2015 at 10:24 am

          Sure, and the Police are there to “Protect and Serve” ….. and ripoff the Taxpayers when the opportunity arises…
          —————————————————

          About 5 years ago the Allentown PA Police Union hoodwinked the town’s Mayor and ROYALLY screwed the town’s Taxpayers …. and likely, once back in the Union hall, high-5-ed each other at their “accomplishment”.

          While the Police Unions were undoubtedly well versed (and professionally advised) on the “important” and “valuable” drivers of it’s pension Plan, clearly the town’s mayor knew VERY little about such drivers, and was WAY outclassed to be undertaking such negotiations on behalf of the town. The major agreed (in an MOU) to an early retirement package that allowed the town’s Police Officers to determine their “pensionable compensation” by annualizing (i.e., multiplying by 12) the SINGLE highest one-month’s wages in a forward-looking window of about 6 months.

          Now this wouldn’t be a big problem IF the town’s methodology did NOT include overtime in “pensionable compensation” … but it did. The result was that all eligible Officers (about 1/3 of the entire Police force) worked as many hours as possible in a single month and then retired, with most getting pensions DOUBLE what their pension would have been in the absence of that deal, and with many of those pensions far above their annual salaries.

          Unusual, only in the magnitude of it’s consequences.

          Reply

          • Posted by Anonymous on July 18, 2015 at 10:47 am

            A proposed change to the P&B Commission to include a Mary Poppins suggestion; “just a spoonful of sugar helps the medicine go down, in the most delightful way”.

          • Posted by Anonymous on July 18, 2015 at 1:13 pm

            One last point, chitty chitty bang bang we’ll see who loves who?

          • Posted by Anonymous on July 18, 2015 at 1:25 pm

            A solution, all pension deals must go through an independant actuarial review to show the short and long term costs of the change. If you can find an independant actuary.

          • Posted by Tough Love on July 18, 2015 at 6:41 pm

            Anon, It fact, it IS common practice to “require” an actuarial review before approving pension increases.

            While THAT’s the way it’s SUPPOSED to work …. so that BOTH the Public (i.e., the Taxpayers who usually pay for all or nearly all of the increases), and the Elected Officials who will vote on the increases, are fully informed of the financial impact (both short AND long term)….. in practice, it works VERY poorly, or not at all.

            Example …. Marin County CA. Ten years ago Marin County quietly approved material pension increases while violating MULTIPLE safeguards (as described above). When uncovered, a Grand Jury was charged with reviewing the specifics and reporting their findings. The Grand Jury Report can be found here:

            http://www.marincounty.org/~/media/files/departments/gj/reports-responses/2014/pensionsreport.pdf?la=en

            While the full 30 page Report is long and dry, an article summarizing the improperly-approved pension increases can be found here:

            http://www.marinij.com/government-and-politics/20150417/marin-grand-jury-flays-pension-benefit-secrecy

            Where in just the first brief paragraph it says:

            “Marin officials repeatedly broke the government code by approving pension benefits without public notice, ballooning liability for taxpayers and raising questions about the legal standing of the benefits involved, the civil grand jury disclosed Friday.”

            So wouldn’t you think that such increases that …”repeatedly broke the government code” … should and WOULD be reversed ?

            Well not in the world of ANYTHING that benefits Public Sector workers. Here’s an article on how Marin County responded:

            http://www.marinij.com/government-and-politics/20150627/marin-county-analysis-rejects-grand-jury-pension-report

            Essentially, the Unions and the County dug there heels in, rejecting the Grand Jury Report, and while admitting that the County did not “fully comply” with the rules, the County hired an attorney who found the county to be in “substantial compliance” with the law despite jury contentions to the contrary, and that in any event too much time had passed to roll back the pension increases.

            Really, you mean THEY HIRED an attorney …. perhaps like Gov. Christie hired an attorney to say that HE had no part in the Bridgegate Scandal ?

            In Private Sector Pension Plans ERISA allows (demands ?) that errors (other than de minimis ones) be corrected …… why not here, when it’s the Taxpayers holding the bag ?

        • Posted by Anonymous on July 18, 2015 at 1:35 pm

          I’m sure the unions or the adminstration could recommend some.

          Reply

  2. Posted by Anonymous on July 18, 2015 at 10:24 am

    Furthermore teachers and public safety workers were the reason he got elected in the first place (reelected is another story). Everyone thought his tough talk was aimed at “State” workers, well surprise. Now that’s he’s in because of you and yours no reason to be excluded from the party.

    Reply

  3. Posted by Tough Love on July 18, 2015 at 3:56 pm

    As you indicated John, a ludicrous proposal from Charles Wowkanech, president of the New Jersey State AFL-CIO ………….. i.e., putting blinders on as to the ROOT CAUSE of the problem (the grossly excessive pensions & benefits promised ALL Public Sector workers ….. always MULTIPLES greater in value at retirement than those typically granted Private Sector taxpayers retiring at the SAME age, with the SAME pay, and the SAME years of service) …. and suggesting nothing but calling for the Taxpayers to pay MORE and unjustly shoveling MORE of their wealth to the insatiably greedy Public Sector workers..

    Reply

    • Posted by Anonymous on July 18, 2015 at 5:03 pm

      And so the blogging continues, as does the P&B problem…..

      Reply

      • Posted by BH on July 18, 2015 at 6:28 pm

        So….let me get this straight! The same 5 people who post on this blog… Still think:
        Police and fire are scum
        Unions are a cancer
        We should all be equal

        Ok….just checking!! Lol. Losers…..

        Reply

        • Posted by BH on July 18, 2015 at 6:32 pm

          I just got back from a beautiful day on the boat…. Many beers!! Enjoyed my family. Great food. Friends!!! We are all private sector…. And I told them about TL and the various anonymous comments….. Raising taxes….. Blah blah blah. We all giggled. Drank. Laughed!!!! And supported our public sector workers!!!
          And I had to log on to show them how miserable and jealous you are all as I see the time stamps!!! As private sector tax payers…… We giggled some more. Heading back out,,,,,, keep the light on TL,,,,,lol

          Reply

          • Posted by Anonymous on July 18, 2015 at 7:07 pm

            Interesting that you would spend what sounds like to be a fun time with your family talking about TL. Quite telling!!

          • Posted by Anonymous on July 18, 2015 at 7:34 pm

            Telling no touching, hope the hangover is as enjoyable! Just to clarify, when you say private and publics you really with P&FRS.

          • Posted by Tough Love on July 18, 2015 at 9:15 pm

            Anon,

            Indeed, quite “telling”, because BH is scared that the big pension payday (is for his family members as he has states, or really for him ???) is just going to be an empty/unpaid “promise”.

            All it takes is for the politicians to change sides, and knowing what’s of primary importance to NJ’s Elected Officials (getting re-elected), together with the lack of ANY other options, they will indeed be changing sides and supporting material pension/benefit reductions (for CURRENT workers) within the next few years.

          • Posted by S Moderation Douglas Is Wrong Again on July 23, 2015 at 3:10 am

            TL spends so much time in your head he should be paying you rent….

        • Posted by Tough Love on July 18, 2015 at 7:49 pm

          I am aware of nobody on this (or any other Blog) who has called Police, Fire, or any other “workers” scum. Honest, productive, hard-working employees (whether Public or Private Sector) and no matter what they do (extreme white or blue collar) deserve our gratitude and respect ….. but NOT, unnecessary over-compensation..

          I HAVE called the Public Sector “UNIONS” a CANCER inflicted upon Society … and I stand by that statement.

          Reply

    • Posted by Tough Love on July 18, 2015 at 11:55 pm

      The 2% Cap is there for a valid reason. … and too bad it doesn’t INCLUDE the worker’s pensions and benefit (sure WOULD ramp up taxpayer demand to freeze the overstuffed pensions & benefits).

      While this proposal might not be a bad idea, it should ONLY apply to grants received IN EXCESS OF the average of grants receive in the prior 3 years. Without doing that, it just a BS end-run around the cap.

      Reply

  4. Posted by Anonymous on July 18, 2015 at 11:34 pm

    • New Jersey: Of the Public Sector, By the Public Sector, For the Public Sector. God bless the Public Sector; how would we possibly live without them?

      Reply

  5. Posted by George on July 19, 2015 at 12:31 pm

    “$600 million from higher taxes on people making over $1 million a year”

    That should read: $600 million from higher taxes on people making over $1 million IN ANY year.

    That is because many if not most millionaires are people who sold a house or small business. Usually a once in a lifetime event.

    Hey how about considering retirement a taxable event? When a public servant converts their retirement obligation into an income producing asset they will pay taxes on the difference between the actuarial value of the pension and the amounts paid into the pension plan (aka cap gains tax) with a reconciliation at the time of death with a tax or refund paid to the estate. Retirement income would be taxed as income, although they could defer that until death and pay estate tax (aka double taxation but so what). My guess is there will be 10s of thousands of Jersey millions minted each year.

    Reply

    • Posted by Anonymous on July 19, 2015 at 1:14 pm

      Pensions are taxed but on a cash basis. What you’re proposing would certainly be opposed by all of the muli-millionaire and billionaires, don’t you think? Or are you suggesting they be exempt?

      Reply

    • Posted by Tough Love on July 19, 2015 at 1:58 pm

      Why all the contrived “fixes” when the ROOT CAUSE should be DIRECTLY ADDRESSED?

      Simply reduce the Public Sector pension accrual rate for all current workers by 50% and institute a true actuarial reduction (of about 5% per-year-of-age) for anyone who begins collecting their pension before age 65.

      Reply

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