The Manhattan Institute released a report today on reforms in public pensions since the Great Recession which, according to njspotlight, cited New Jersey as an example where there has been meaningful pension reform. It’s not.
The third paragraph of the executive summary got it right:
On the surface, it seems that state politicians did not, in Rahm Emmanuel’s now-famous dictum, “let a serious crisis go to waste.” However, many observers believe that few of the aforementioned reforms fully addressed states’ long- term fiscal problems. Most of the changes apply only to new hires, not to existing employees or those already in retirement. Therefore, the savings from these plans will take decades to materialize. That even passing mild pension reforms proved contentious reflects powerful political alignments that militate against retrenchment. The key players in pension reform have strong incentives to push costs into the future and avoid tough choices in the present. Consequently, most states did just that.
But then the next paragraph takes us seriously off the rails:
But a handful of states took more dramatic action, genuinely trying to do something about their pension systems with a view to the long term. States where major reform did occur stand out: they include (but are not limited to) Rhode Island, Utah, Virginia, and New Jersey. These few states offer lessons about when and why pension reform can work. They point the way toward successful political strategies for serious pension reform that might be emulated elsewhere.
I can’t speak to the other three states but the New Jersey reforms have made the situation far worse in that:
- Changes in the benefit formula and retirement age DID only apply to new hires.
- The COLA elimination was illegal and will need to rely on getting at least four New Jersey Supreme Court justices to be addled enough not to see that in order to sustain.
- The rush to fund the plan entirely through investment earnings has left the trust highly susceptible to this next crash we are now experiencing.
- The false sense of accomplishment manufactured by the 2011 reforms has wasted another four years of NOT getting real reforms.