Local governments are piling up debt at such an alarming pace that this blogger called it the next crisis “nobody saw coming”.
New Jersey put a cap on the amount local governments can raise by taxation so to keep their gravy trains fueled at least one local government has taken to bonding to make up the difference and nobody with any oversight capacity seems to care. State governments, accountants, rating agencies, and the media all do not want to see the crisis because that would not be to their advantage.
Each year Union County borrows about $40 million for various capital projects but when you look at what they say they will spend the money on by going through those bond ordinances for 2011, 2012, 2013, 2014, and 2015 and putting individual items into a spreadsheet it becomes obvious the county is making up for the loss in taxes and state and federal aid by bonding for it. Consider that over those five years Union County was supposed to have spent $212 million on items like:
- $7.5 million for fixing dams
- $5.6 million to upgrade fire alarms and sprinkler systems
- exactly $206,000 in three separate budget years for storage tank remediation
Then you have expenses for various unspecified improvements and new equipment that are supposed to last between 5 and 15 years but inevitably reappear annually.
All this should be obvious to those on the hook for paying back the money but it’s not been made obvious to them because that would not be in the best interests of those receiving that money.
Burypensions Blog 
Posted by Anonymous on August 9, 2015 at 8:30 pm
Hey John, I heard on television the experts saying that Christie could be replaced in the top ten by Fiorina. Do you agree. It really make me feel good that Christie is floundering miserably. They are all saying that he missed his chance that he would have been the front runner if he had run in the last election. Do you think he has any chance of being chosen as the VP for whoever gets nominated?
Posted by burypensions on August 9, 2015 at 10:13 pm
To veer this thing back on topic:
No, no chance and the situation outlined in this blog is a prime reason. He is an awful governor. He talks the talk but when it comes to action his ill-thought out reforms of public pensions, property taxes, ethics in gov’t, etc. (think Atlantic City revival) have failed miserably. Where is his Local Finance Board when Union County is bonding like this and stealing from their Open Space trust fund?
Doing his Farley ‘fat guy in a little coat’ shtick has gotten him as far as he is likely to go and those 3% will evaporate once they grasp what he has wrought here thus leaving nobody to support him except those comparatively few who have benefited personally from his actions as US Attorney or as governor. They have the money to float him (thanks in part to to Christie himself) but not the numbers.
As for Carly Fiorina I always thought she would a close also-ran being a woman and well-spoken, two attributes that she has pretty much to herself in this field.
Posted by Tough Love on August 10, 2015 at 12:02 am
Just my opinion, but I do not agree that Christie’s has …”ill-thought out reforms of public pensions”.
Perhaps he’s simply being honest in recognizing the great magnitude and urgency of the problem and proposing (perhaps through the Pension Commission) the only type of reforms that really have a chance of working. IS that not better than more PHONEY (tinkering around the edges) proposals?
Isn’t the REAL problem that our Elected Officials (still desirous of continued Public Sector Union campaign contributions and election support) REFUSE to confront the Unions’ untenable position of ZERO to VERY minimal givebacks.
Pension/Benefit status quo means a very painful amount of hurt for BOTH the taxpayers AND Public Sector workers/retirees ……..and only a few years away.
Posted by Anonymous on August 10, 2015 at 7:50 am
Second term, no more blame game. He owns this P&B problem now. He dropped the ball on the funding part of his initial reform. His bombastic approach ruined any chance for immediate additional reforms. Well within his authority to change up health coverage to help meet funding and use that as a catalyst for conversation. But now?
Posted by Tough Love on August 10, 2015 at 9:59 am
You too are ignoring …..” the great magnitude and urgency of the problem” …. and apparently are of the same mindset of your Unions…… little to no ivebacks.
HE doesn’t “own” the problem (as he HAS , via the NJ Pension Comission proposed a solution that “may” work). It’s NJ’s BOUGHT-OFF Legislature that “owns it” but won’t pursue the NECESSARY Union givebacks.
As to your changing healthcare suggestions …..
Definitely needs to be part of the solution, but NJ has a MAJOR structural PENSION problem in that the current formulas are unaffordable by a factor of at least 2 (i.e., needs at least a 50% reduction when factoring in the generosity of BOTH the formulas and all the generous “provisions” such as very young full/unreduced retirement ages and COLAs, should they be reinstated) and without such reductions for the FUTURE Service of all CURRENT workers, we just keep digging the financial hole we are in deeper every day.
Posted by Anonymous on August 10, 2015 at 8:57 am
Nobody saw it coming including Tough Love! Excluding Employee Retirement Funds are piling up debt a an alarming rate. A gigantic tax increase in the making, get ready cause here it comes. Nobody escapes this not even TL. Of course she wont see it coming, her head is buried in the sand.
Posted by Tough Love on August 10, 2015 at 10:18 am
Quoting …. “Nobody saw it coming including Tough Love! ”
With respect to NJ’s pension problem…………..
Since my work does address pensions (although not as a primary focus) I was always (20+ years ago) aware of the high level of generosity of Public Sector DB pensions, especially Police pensions. What perked my attention when NJ retroactively enhanced Police pensions from 60% of final pay to 65% of final pay about 15 years ago. Knowing how EXTREMELY generous they already were, this really raised my advocacy, not because of the magnitude of the increase, but the audacity of NJ Legislature in do it AT ALL. I indeed “saw it coming”, just not when, and have been commenting on this issue for about 10 years …. much more actively in the last 5.
With respect to OTHER Debt ……. yeah, I knew there would be future pain (due to the net effect from all sources) but I felt much further removed from that than from the impact of LOCAL pension & benefit excesses. The USA borrows 40 cents of every $1 it spends (and has done so for years). Anyone one with modest intellect should realize that eventually THAT will mushroom into a REALLY big problem.
Posted by BH on August 10, 2015 at 3:41 pm
So let me guess! You want to take even more away from the public sector to shore up the cost to do other business like equipment and infrastructure?
You do realize that we taxpayers can’t have it all ya know. You wanted tax relief…. We got it. With a 2% cap, and the cost of things, what did you think would happen?
Posted by Tough Love on August 10, 2015 at 7:43 pm
BH, My position has never changed. As a group ALL NJ Public Sector (STATE and LOCAL) workers are overcompensated, mostly via grossly excessive pensions & benefits.
This excessive generosity exists INDEPENDENT of Plan “funding levels” and VERY material reductions (of 50+%) in the pension accrual rate for the FUTURE Service of all CURRENT State AND Local workers are eminently justifiably, and safety workers with excessive base pay and ludicrously generous pensions & benefits are the group MOST in need of reductions.
Posted by S Moderation Douglas on August 10, 2015 at 11:43 pm
Janitors, clerks, laborers, etc.? They’ll have to be cut a lot more than 50%. We can use some of the money we save there to raise the pay of public sector doctors and lawyers. And maybe the governor. It’s insane that the chief executive of a major state makes less than a fireman.
Posted by S Moderation Douglas on August 10, 2015 at 11:50 pm
As Willie Sutton said, “That’s where the money is.”
Or was that Willie Loman?
Nelson?
Anyway, those janitors are way overpaid.
Got a problem with EQUAL?
Posted by Tough Love on August 11, 2015 at 12:10 am
S Moderation Douglas,
We’ve been through this several times before.
If the Total Compensation” of the Private Sector janitor is $40K/yr then that all it should be in the PUBLIC Sector.
If the idiotic “structure” of grossly excessive PUBLIC Sector pensions and benefits results in $25K in pensions and benefits then (to get to NO MORE THAN $40K/yr) all we can offer in “wages” is $15K.
So be be !
The answer is NOT to over-compensate the Public Sector janitor, but to FIX the crazy “structure” so that a higher share of the Public Sector Janitor’s “Total Comp” can be in the “wage” component.
Posted by S Moderation Douglas on August 11, 2015 at 12:35 am
So be be !
Posted by S Moderation Douglas on August 11, 2015 at 2:11 pm
“We’ve been through this several times before.”
And yet we haven’t solved even half of the world’s problems.
It’s clear that the lowest skilled public workers are compensated higher than their private sector peers. Before you “FIX the crazy “structure”, perhaps you should learn more about it.
First, it’s not new. The relative pay compression of public workers (or higher dispersion of private sector pay) has been around for a long time.
Second, it’s not just a New Jersey or California phenomena. As Biggs shows, it is the national pattern. Also, as it happens, in the UK, the lower percentiles in the public sector earn more than the private sector, while the higher percentiles earn much less than their private sector peers. As far as I have read, this is typical in most, if not all, OECD countries. Once you successfully cut the pay of New Jersey janitors, perhaps you could take your reforms international. The slogan of the Tough Love International Pay Equity Foundation could be: “Got a problem with EQUAL?”
One snag you might run into: part of the reason for the difference in pay at the lower levels is the increased ratio of women and minorities in the public sector. Groups which are notoriously low paid in the private sector. Should public sector women and minorities be underpaid equally to their private sector peers?
“Got a problem with EQUAL?” might cause even more problems there.
………………
Maybe more than you’ll ever want to know about public sector pay compression (and private sector pay dispersion):
“CHANGES IN THE STRUCTURE OF WAGES IN THE PUBLIC AND PRIVATE SECTORS”
Lawrence F. Katz Alan B. Krueger. 1991
…………………
More and more, it seems to me that SAWZ is correct. It is a race to the bottom. And Juvenal is correct:
” you are just wrong about the comparison of public sector and private sector total compensation (except at the level which requires no education–sorry for giving them benefits other than Medi-Cal).) ”
Posted by Tough Love on August 11, 2015 at 2:21 pm
SS Moderation Douglas,
Throwing the kitchen sink into a conversation already discussed ….. in every way … doesn’t change the FACTS.
Overall, for all worker combined, the is a modest Public Sector worker “wage DISADVANTAGE that swings to a much greater Public Sector “Total Compensation” ADVANTAGE once the far greater value of Public Sector pensions & benefits are included. It is that Total Compensation ADVANTAGE that must be eliminated …. taking into account that some (the Public Sector PHDs and Professions) may deserve “increases” calling for greater “decreases” for with w/o such high level credentials.
Private Sector Taxpayers are NOT here to OVER-COMPENSATE Public Sector workers regardless of the COMPONENT of that compensation (wages, pensions, or benefits).
Posted by S Moderation Douglas on August 11, 2015 at 3:47 pm
au contraire mon frère
That kitchen sink has been there all along. You just couldn’t see it.
Tunnel vision. Don’t feel bad, most other people didn’t, either.
TL said: “A helpful technique I’ve used in business analysis for decades is to test the validity of a position by examining an extreme example.”
Here’s an extreme example: Walk into any state, city, or county legislative body and tell them you have undeniable proof that that janitor (Fresno County) who makes $28,000 a year is OVERPAID due to pension and medical benefits. (California State Controllers office show an example janitor at $28,000 with a total of $21,000 in pension and healthcare costs.*)
We should reduce his pension or healthcare, or both, by at least $10,000. (Can’t reduce his pay that much without violating minimum wage laws.)
We can use that money to increase the compensation of the Assistant District Attorney who makes only $121,000 ($160,000 with benefits) who clearly earns less than his peers in the private sector. Might need two or three janitors to increase his pay adequately (Got a problem with EQUAL?)
I don’t think that pay experiment will fly anywhere (Except maybe a few parts of Texas.) Willie Nelson: “I’m from Texas, and one of the reasons I like Texas is because there’s no one in control.”
*The data on the janitor included $8,000 in healthcare costs. Almost certainly, the value of RETIREE healthcare was not included in his total compensation of $49,000.
Juvenal, I reiterate:
” you are just wrong about the comparison of public sector and private sector total compensation (except at the level which requires no education–sorry for giving them benefits other than Medi-Cal).) ”
Posted by Tough Love on August 11, 2015 at 5:30 pm
Yes S moderation Douglas, That’s exactly what we should do.
And Earth to S Moderation Douglas …..Private Sector janitors make no where near $49K in total comp. …and deserve no more than their Private Sector counterparts ….. on the Taxpayers; dime.
Posted by S Moderation Douglas on August 11, 2015 at 5:55 pm
Posted by S Moderation Douglas on August 11, 2015 at 6:36 pm
Just kidding, brother. Did you see what I did there?
It’s called legerdemain, or prestidigitation.
Diversion?
Nobody seriously wants to cut the pay of public clerks and janitors. Nobody really wants to increase the pay of public engineers or doctors. Even Charles St. Claire. He had a good career and is satisfied that he chose a decent retirement rather than a more lucrative private sector salary. It’s called deferred compensation. And it is a valid choice.
But!
You haven’t said anything, at least for a while, about police and fire compensation, which is the real concern of a lot of people, and has absolutely nothing to do with any of factors in the Biggs study. Police and fire pay is a totally different dynamic. I don’t know how much they are “worth”. It is my impression that, in California, at least, safety workers got substantial increases in both pay and pensions* in the last decade.
Are they overcompensated now, or were they under compensated before? Or a little of each. I don’t know. It would be nice to figure that out without all the rancor.
*Coincidentally, in California, state engineers also got fairly substantial increases from about 2004 to 2007. As I recall, they got a 25 to 30 percent increase over a three year contract, due to the increasing difficulty in attracting and retaining qualified engineers. I hope Charles retired after the raise.
Posted by Tough Love on August 11, 2015 at 7:36 pm
Are CA’s safety workers, MANY of whom make $200+K in Total Annual Compensation over-compensated ?
Yes, likely by a factor of 2.
A good START in fixing this gross excess would be to requiring an appropriately calculated actuarial reduction of no less than 5% per-year-of-age for any safety worker who begins COLLECTING a pension before age 62 ….. other than for a LEGITIMATE on-the-job disablement.
Social Security recipients below Normal Retirement Age (NRA) (of 66 or 67) get a 6% reduction per-year-of-age if they begin collecting before their NRA. There is ZERO justification to provide safety workers in CA with pensions that are ROUTINELY worth 5 to 6 times that of a Private Sector worker retiring at the SAME age, with the SAME “wages”, and the SAME years of service.
Posted by S Moderation Douglas on August 11, 2015 at 9:16 pm
On the other hand……look at all the taxes these guys must be paying.
President Harry S. Truman once said he wanted an economist who was one-handed. Why? Because his economic advisors would typically give him economic advice stating, “On the one hand….And on the other….”
Seriously, I asked an economist for her phone number once……..she gave me an estimate.
Posted by Anonymous on August 10, 2015 at 9:58 am
J Giles Band…..Love Stinks, H*ll Yeah!
Posted by Equal Time on August 10, 2015 at 11:07 am
Nobody outside NJ cares about the fiscal mess the state and its cities may be in. NJ is not the center of the universe. The state’s residents will have to deal with it, and that will mean paying higher taxes for the cost of the decisions made by those chosen to fill elected office over decades of poor decision making. Hang on to your wallet, or move to Texas!
.
Posted by Tough Love on August 10, 2015 at 12:10 pm
The ability to move away (which some BIG businesses have recently chosen to do in NJ, Mercedes being one of the last few) is why increasing taxes is NOT the answer …. very material pension & benefit reductions are the answer, and for all CURRENT (NOT just new) workers.
Posted by BH on August 10, 2015 at 3:43 pm
Paying what is required into the pensions decades ago!!!!
Let companies leave….. Others are moving in just as fast.
http://www.choosenj.com/Site-Selection/Resent-Relocations-Expansions.aspx
Posted by Tough Love on August 10, 2015 at 5:52 pm
Quoting …”Let companies leave….. Others are moving in just as fast. ”
Clueless ………..
Posted by larrylittlefield on August 10, 2015 at 11:44 am
The problem is debt in general. All kinds of debt has soared in the Generation Greed era — federal, state, local, private, personal. Put state and local debt in a chart with all the other debt and it is clear that it is just one part of a large problem.
The way I calculate it, nationwide the pension debt is approximately equal to the on-the-books debt.
Then there is the inadequate past infrastructure investment debt.
Nobody saw coming?
http://www.ipny.org/littlefield/civicunion2020.html
Posted by Equal Time on August 10, 2015 at 6:43 pm
Somewhere recently, but I can’t remember where right now, I saw a calculation of the estimated shortfall in retirement savings (including 401(k’s) in the private sector for the workforce to have a secure retirement in order for all to be able to maintain their standard of living in retirement, and it was $27 trillion That seems huge to me..
Posted by Anonymous on August 10, 2015 at 7:10 pm
http://www.nj.com/politics/index.ssf/2015/08/christie_vetoes_quartely_nj_pension_payments_bill.html#incart_2box_politics_index.ssf