Sweeney Told

New Jersey Senate President Stephen Sweeney had an op-ed piece in njspotlight today defending his idea for a constitutional amendment to require the state to make pension contributions (though still leaving it to collusive actuaries and a confused legislature to define the amounts) that perfectly illustrated the ignorance that allowed the plans to go bankrupt.

Here is the full editorial with my comments:


Every year we don’t properly fund the pension system, the future cost goes up exponentially.

Apparently ‘exponentially’ is a scare-word for politicians regardless of its meaning in this context.

Four and a half years ago, the governor and the Legislature passed bipartisan legislation designed to fix the pension system for teachers and state employees, which had developed a $50 billion unfunded liability due to the failure of both Republican and Democratic administrations to make the required pension payments over the previous 14 years.

The 2011 reforms consisted of a bunch of tweaks to the system (except for the COLA elimination which had real savings but is likely to be adjudicated illegal) that were ‘designed’ to make it appear effectual to those disinclined to thinking.

The plan called for shared sacrifice. Retirees gave up cost-of-living increases, and public employees paid thousands of dollars more out of their salaries every year for pensions and healthcare — all of which would save the pension system $121 billion over a 30-year period.

If the savings were $121 billion over 30 years then how much is the base cost going to be over those 30 years? $500 billion?

In return, the law required the state to ramp up from making no contributions the year before to full actuarially required funding of the pension system by 2018. It wasn’t going to be easy, but the $650 million a year annual increase could have been handled through normal growth in state revenues.

So where was the $650 million in 2014 generated by that normal growth?

Sticking to the plan would have fixed the pension system, stabilized the state’s finances, and ended the cycle of bond downgrades that is ruining the state’s credit.

A few of those downgrades came after the ‘reforms’ were adopted and before Christie decided not to play along.

Gov. Chris Christie’s failure to make the agreed-upon payments will cost New Jersey taxpayers $30 billion more in future pension costs. And while there is plenty of blame to go around, the governor has now underfunded the pension system by $17.5 billion over his first six budgets — twice as much as Democratic governors did in the preceding six years.

It will probably be more than $30 billion, which presumably is the $17.5 billion as adjusted for interest, if those future taxpayers are in 2030 or, what is more likely, there will be no cost to them since Defined Benefit plans in the public sector would have been long gone by then.

Every year we don’t properly fund the pension system, the future cost goes up exponentially.

This is not a cut-and-paste mistake.  Sweeney did repeat that nonsensical opening line.

That’s why I introduced legislation asking voters to approve a constitutional amendment requiring the state to ramp up to full actuarially required funding of the pension system by 2022 — four years later than required under the original law.

And everyone will misinterpret this to mean that the plans will be fully funded by 2022 instead of what it actually means – seven more years of exacerbating the underfunding.

We have no choice, and I believe voters will agree when this proposal goes on the ballot in November.

Since doing what is right and honorable is never an option in New Jersey when it conflicts with political expediency.

New Jersey’s courts have already ruled that public employees are entitled to receive the vested pension benefits they have earned.

Unless the courts allow COLAs to be taken away in which case those base pensions are next.

The only question is how and when we pay for it — and how long New Jersey taxpayers are going to let their state government leaders kick the can down the road while the bill grows bigger and bigger.

Based on past experience that is not an anomaly but a governing strategy that you need to adopt to get elected.

This constitutional amendment would require the state to ramp up to full funding of the pension system by 2022 — a burden that will fall mostly on the next governor, not this one. No ifs, ands, or buts. By doing so, we would fix the pension system once and for all.

Inside politics stuff that translates as:

  • Christie won’t have to do anything
  • I, as the next governor, will take care of it
  • We can continue to pretend this will all work out during my administration

The payment schedule called for under the constitutional amendment is not much different from the new seven-year phase-in Christie laid out in Treasury documents six months ago that would have gotten the pension system to full funding by 2023.

Since we have no new ideas.

We are simply requiring the governor to make the phase-in payment in 2018 that he has already promised to make; that payment is projected at $2.414 billion.

By 2018 payments out of the system will be about $12 billion whereas when you add that $2.414 billion to local and employee contributions it will come to about half of what would be going out.

If additional revenue is needed by the next governor to complete the remaining four-year ramp-up to full funding, it can be made up entirely by a millionaire’s tax — a tax on the one percent of New Jerseyans that is the only group whose real income has been rising.

Additional revenue is definitely needed and confiscating rich people’s money is an option if you can figure out how to get Florida residents to pay New Jersey taxes.

What is important is that the constitutional amendment would require the governor to actually make the payment, whether he wants to or not.

Again, a payment that collusive actuaries and a confused legislature define.

New York does not have a pension crisis because its constitution already requires full pension payments. The pensions of New Jersey’s police, firefighters, and local government workers are solvent because county and municipal governments have made their pension payments.

New York does have a crisis in coming up with their $9.5 billion while New Jersey puts in their $887 million.

Furthermore, this constitutional amendment requires the state to make its pension payments on a quarterly basis, rather than on the last day of the budget year, to ensure that the state’s pension contribution earns investment income throughout the year.

A silly tweak that has not worked in the private sector where MAP-21 and HATFA were pushed through to lower contribution requirements.

Making payments on a quarterly basis would save taxpayers $8.5 billion over the next 30 years and cut the unfunded pension liability by an additional $4.9 billion, based on the current 7.9 percent projected rate of return. Even under the most conservative investment earnings projections, the net savings are likely to be $10 billion.

Theoretically wouldn’t the state still be making earnings on that money if it were there – only outside the pension system?

Quarterly pension payments are sound public policy, which is why the federal Employment Retirement Income Security Act requires quarterly payments for private pensions that are less than 90 percent funded and added a requirement for accelerated quarterly payments for pensions considered “at risk” because they have funding ratios below 80 percent.

This is not a requirement for private plans as it only increases the contribution if quarterly payments are missed so it is more a planning tool.

It is  not a question of whether we can afford to make the payments. It is a question of whether we can afford not to.

Standard line that Sweeney likely puts in all his editorials but it is particularly out of place in this one.

New Jersey’s state pensions are just 54 percent funded, and Moody’s projected they could go bankrupt as early as 2027 if we don’t act quickly. That’s unthinkable: If that happens, future taxpayers will be on the hook for $9 billion to $11 billion in annual benefit payments out of the state budget.

And if Moody’s is assured that this legislature DOES act quickly they may move that bankruptcy date up a few years.

We can’t let that happen. This constitutional amendment will save taxpayers billions of dollars. We can wait no longer to restore fiscal sanity to New Jersey.

By this point he’s over the edge.  It certainly won’t be taxpayers who have to come up with billions of dollars in pension contributions or millionaires who will be saving anything.

Sen. Stephen Sweeney (D-Gloucester) is president of the New Jersey Senate.

31 responses to this post.

  1. Posted by Tough Love on December 17, 2015 at 12:22 pm

    John, Nice analysis and perhaps (coming from you, rather than I) the always-in-denial Public Sector workers who comment here will take notice.

    By the way, the best take-away is your 3-rd “bullet” ……………..

    We can continue to pretend this will all work out during my (Sweeney’s) administration.

    Reply

  2. Posted by skip3house on December 17, 2015 at 12:34 pm

    Just decent understanding of 8th grade arithmetic makes one wonder.
    Sure would be better to drop Defined Benefits, and their built in abuses, in favor of Defined Contributions controlled by total values on every pay stub.
    This forces NJ to pay every payday!
    Dropping medical for our, universal for most of us, Medicare system will save, too.

    Reply

    • Posted by Tough Love on December 17, 2015 at 12:45 pm

      Quoting …. “This forces NJ to pay every payday!”

      Yes, but also to “promise” to pay only what is BOTH affordable and appropriate (i.e, a DC Plan contribution EQUAL TO but NOT more than what Private Sector workers typically get from THEIR employers).

      Reply

      • Posted by dentss dunnigan on December 17, 2015 at 1:53 pm

        “Just decent understanding of 8th grade arithmetic” well that left Sweeney out

        Reply

      • Posted by Anonymous on December 17, 2015 at 5:41 pm

        Silly you TL, the State and local contributions are negotiated and enforced by statues for defined benefits and defined contribution plans. Free market, contract law, not tomfoolery from the likes of you.

        Reply

  3. Posted by Anonymous on December 17, 2015 at 2:27 pm

    I nor should other public’s think nothing will change. Unfortunately it’ll take until NJ’s next administration to implement P&B Commission type recommendations. The only significant variation will be a choice to maintain the current DBP at a 40-50 % benefit accrual reduction. The constitutional amendment should depolticize budgeting for and making future ARCs.

    Health care coverage will be downgraded and all retiree’s will have significant premium share going forward. Similar to current active’s premium share for the retiree only and 100% premium share for eligible spouse and dependents.

    Reply

    • Posted by The Resident Nutcase on December 17, 2015 at 2:56 pm

      40-50% benefit reduction?? Lol
      Yeah….. Good luck with that.

      Reply

      • Posted by Tough Love on December 17, 2015 at 3:33 pm

        Not enough, especially for Police/Fire pensions which ……….. when factoring in not only their VERY rich pension “formulas”, but ALSO the VERY generous “provisions” (such as retiring in their mid-early 50s WITHOUT any early retirement adjustment) …………….. are TYPICALLY 4x-6x times greater in value at retirement than those granted Private Sector workers retiring at the SAME age, with the SAME wages, and the SAME years of service.

        ——————

        And taxpayer subsidies toward employer-sponsored retiree healthcare MUST be reduced to ZERO …. because employer-subsidized retiree healthcare is now all but gone in the Private Sector ….. and PUBLIC Sector workers are NOT “special” and deserving of a better deal…. on the Taxpayers’ dime.

        Reply

        • Posted by Anonymous on December 17, 2015 at 5:45 pm

          TL are you comparing your desk job to the occupational hazards and experiences of firefighters and police? You really are delusional.

          Reply

          • Posted by Tough Love on December 17, 2015 at 7:00 pm

            Well “maybe” in parts of Camden, Newark, and Paterson, but in the other 99+% of NJ’s (mostly bedroom communities) the “risks” of Safety workers are FAR FAR below that of MANY other occupations that pay 1/3 to 1/2 what safety workers managed to STEAL from Taxpayers via their Unions’ BUYING the favorable votes (on Public Sector pay, pensions, and benefits) of our Elected Officials with Campaign contributions and election support.
            ———————————

            The 10 MOST dangerous occupations*:

            10. Construction Laborers
            9. Electrical Power-Line Installers And Repairers
            8. Farmers, Ranchers, And Other Agricultural Managers
            7. Driver/Sales Workers and Truck Drivers
            6. Mining Machine Operators
            5. Refuse And Recyclable Material Collectors
            4. Roofers
            3. Aircraft Pilots And Flight Engineers
            2. Fishers And Related Fishing Workers
            1. Logging Workers

            * Source … US Government Bureau Of Labor Statistics

          • Posted by S Moderation Douglas on December 18, 2015 at 2:21 pm

            Face it, if police paid 100% of their ARC out of their own pocket, TL would still say they are overpaid.
            Same thing for janitors.

          • Posted by Tough Love on December 18, 2015 at 2:38 pm

            Quoting S Moderation Douglas ……….”Face it, if police paid 100% of their ARC out of their own pocket, TL would still say they are overpaid.”

            In all the towns where I live in NJ, Police with just 5-7 years of service are making …in BASE pay …. north of $125,000 and have “platinum+” healthcare coverage which (if for “family”coverage) costs the town another $25,000+ annually.

            I understand the “risks” of police work, AND how VERY minor that risk is in the vast majority of NJ. So even if they received NOTHING towards a pension (equivalent to them paying for 100% of their own), YES …… they are overpaid.
            —————————————————————————–
            Give it some thought readers …… at what point in YOUR career (in TODAY”s money, not 15 or 20 years from now) would it take for YOU to have a compensation package of over $150K annually. Did you get there in just 5-7 years, in 10 years, in 20 years, ever ?

          • Posted by S Moderation Douglas on December 18, 2015 at 4:09 pm

            In other words, yes. Police are overpaid. Even if they pay all the retirement costs themselves.

            What about the janitors? If they pay the entire ARC themselves, no taxpayer contribution, are they still overpaid?

          • Posted by S Moderation Douglas on December 18, 2015 at 4:12 pm

            And the accountant/CPA? Pat is retiring soon (if you hain’t talked him out of it yet.)

            Overpaid?

          • Posted by Tough Love on December 18, 2015 at 4:52 pm

            SMD, Lets try again …….

            A NJ Police office with 5-7 years of service earning $125K in base pay plus $25K in healthcare benefit IS overpaid even with ZERO taxpayer contribution towards a pension.

            If he/she CHOOSES to elect a SELF-FUNDED pension as ludicrously generous as they get RIGHT NOW (costing a level annual 40%-50% of pay), it would be THEIR CHOICE to defer a MUCH larger than typical share of current income into the future. That has ZERO bearing on whether the $150K total annual compensation is excessive ….. and I believe it is.
            ——————————————–
            If a Private Sector janitor makes $30K annually plus 3%=$900 annually into a 401K Plan, and the PUBLIC Sector janitor makes $35K plus a pension (likely with a level annual current taxpayer contribution requirement of $8K-$9K) then YES …. then janitor “deserves” no pension contribution.

            P.S. ……. no matter how many time you bring this (“Janitor thing”) up, you will get the SAME answer … there is no reason for Taxpayers to pay Public Sector workers more in total compensation than their Private Sector counterparts. Justifiable needs (food, healthcare, etc.) not met via income should be provided EQUALLY to both Public and Private Sector workers via Social Services ………… NOT by artificially inflating Public Sector compensation.

            I will quote the above paragraph in the future as I’m quite sure you are not done bringing this up …… perhaps with a running count to remind you that Public Sector workers are NOT “special” and deserving of a better deal than their Private Sector counterparts.
            —————————————————

            I have know Idea if Public Sector accountant/CPA “Pat” is over or under compensated relative to a Private Sector accountant/CPA with the same quantity/quality of productive output. There is no reason for their Total Compensation (pay, pensions, and benefits) to be other than immaterially different.

            FWIW, I specifically chose the words …… “same quantity/quality of productive output” ……….. because THAT is what matters. Most accountant/CPAs I know work 50-60 hour weeks, even in Corporate (not just Private Consulting Firm) environments. That is a significant contributor to their high pay. A PUBLIC Sector accountant/CPA working 40hrs/week doesn’t deserve equal compensation ….. unless they are a superstar and can produce in the 40 hours the ….. “same quantity/quality of productive output”.

          • Posted by S Moderation Douglas on December 18, 2015 at 11:33 pm

            Pfft!

            That’s why I keep saying you will never get EQUAL. It’s a fantasy.

            Average pay for an accountant (2013) $72,500, median pay $65,080, top ten percent $113,740, lowest $40,730. (U.S. News)

            So how much is EQUAL? How much are bonuses/stock options/profit sharing in the private sector? How much does it vary according to industry, company size, location, years of experience and level of education.  Who gets to decide?

            For that matter, how much is a policeman worth? I shan’t ask about the janitor. Apparently that’s a touchy subject.

          • Posted by Tough Love on December 19, 2015 at 12:52 am

            SMD,

            Of course we can’t get EXACTLY equal EQUAL or likely even VERY NEAR equal. My point …. which I’m quite certain you understand, but for some reason pretend to ignore …. is that the SYSTEMATIC overcompensation of Public Sector workers must END …. fully.

          • Posted by S Moderation Douglas on December 19, 2015 at 2:10 am

            Eye ronically…..

            “Study: Soaring Marin pension bill fueled largely by top tier”

            Marin Independent Journal, Nov. 5, 2011

            ” Rice’s group of Marin pension watchdogs, Citizens for Sustainable Pension Plans, promptly issued a statement saying the local program unfairly benefits top administrators at the expense of blue collar workers. “The county retirement system currently pays a staggering 43 percent of its benefits to only 16 percent of its recipients,” the panel noted. “This system serves a small segment of its members very well while serving the majority of them poorly.”
            …………………………..

            ” Therefore, reforms could be structured so that they have a smaller impact on plan members at lower income and lower benefit levels. One of the principal purposes of a public retirement system is to sustain public workers during their retirement years. Reforms that provide protection to sustenance level benefits must be part of any reform.”
            ……………………..
            Irony. Most people, thanks to Unionwatch, California Policy Center, Brietbart, Transparent California, et al., think the “$100,000 club” is the problem. Doctors, attorneys, City managers, (CPAs?) attorneys, etc., and other attorneys, with the $100,000 plus pensions, still earn less than their peers in the private sector. While the rank and file (rank janitor and file clerk) have meager pay and “sustenance level benefits”.

            Even EdRing, of Unionwatch (and others) believe:
            “they should also be willing to apply to pension formulas the tools built into Social Security – including its progressive formulas whereby highly compensated workers receive proportionally less in retirement than low income workers.”

            Seems like a lot of “pension reformers” are proposing all the wrong things …….for all the wrong reasons.

            That’s why I asked Ed

            “Isn’t that income redistribution? Why would you want to do that?”

            Sarchasm. Many of the higher paid are already undercompensated.

            “P.S. ……. no matter how many time you bring this (“Janitor thing”) up,”
            Moderation has no problem with lower level public employees receiving a subsistence level pension, with healthcare.

            If it makes you feel better, did you know that there are many lower level public employees who already receive public assistance of various types? I can’t find stats, but I have personally known several through the years. Rental subsidies, food stamps, childcare assistance, earned income credit, etc. Everything but MedicAID.

            For the most part, all those highly paid (non safety) workers that people love to hate make less than their peers in the private sector, still. And those who are barely getting by make more than their peers. It’s a world gone mad. Then there are those of us (yours truly included) who are somewhere in the middle : roughly equal.

            And, of course, your old friends the overpaid (in your opinion) police. Give’m hell. Let us know how that works out.

            Maybe you could just refuse to pay? You might start a new trend.

          • Posted by Tough Love on December 19, 2015 at 4:29 am

            Quoting SMD ….

            “” Rice’s group of Marin pension watchdogs, Citizens for Sustainable Pension Plans, promptly issued a statement saying the local program unfairly benefits top administrators at the expense of blue collar workers. “The county retirement system currently pays a staggering 43 percent of its benefits to only 16 percent of its recipients,” the panel noted. “This system serves a small segment of its members very well while serving the majority of them poorly.”
            …………………………..”

            What I “see” are (supposedly) UNDER-PENSIONED lower-paid PUBLIC Sector workers vs the pensions of higher-paid PUBLIC Sector workers.

            OK, but WHERE IS the comparison of those (supposedly) …”UNDER-PENSIONED lower-paid PUBLIC Sector workers” ….. to the pensions typically granted identical PRIVATE Sector workers ? Isn’t THAT the MORE relevant comparison … because PRIVATE Sector Taxpayers are called upon to pay for almost all of the cost ?

            Wanna bet that those (supposedly) “UNDER-PENSIONED lower-paid Public Sector workers” get pensions 3x-4x greater in value at retirement than THEIR Private Sector counterparts ?

            I see that you are back to misleading the readers …. AGAIN.
            ————————————————————–

            Quoting SMD …. “One of the principal purposes of a public retirement system is to sustain public workers during their retirement years. ”

            That desirable goal must NOT come at UNJUST/UNFAIR expense to Private Sector taxpayers, and achieving that goal by paying Public Sector workers greater than “market-rate” “Total Compensation” (pay + pensions + benefits) …. i.e., greater than their Private Sector counterparts, is EXACTLY that …. UNJUST & UNFAIR.
            —————————————————————

            Quoting SMD ….. “If it makes you feel better, did you know that there are many lower level public employees who already receive public assistance of various types? I can’t find stats, but I have personally known several through the years. Rental subsidies, food stamps, childcare assistance, earned income credit, etc. Everything but MedicAID. ”

            That’s fine and the way it should be (just as it now IS for low-paid Private Sector workers), via a Social Services support system …. and NOT by unjustly inflating the wages of PUBLIC Sector workers.
            ——————————————–
            Quoting SMD ….. “For the most part, all those highly paid (non safety) workers that people love to hate make less than their peers in the private sector, still. ”

            I know that some studies suggest that certain high level Professionals (Doctors, CPAs, etc.) are lower-compensated than their Private Sector counterparts, and I’m sure “SOME” do, but I’m a skeptic. As I noted in an earlier comment, the compensation of a 40-hour-week PUBLIC Sector CPA SHOULD BE lower than that of the PRIVATE Sector CPA typically working a 50-60 hour week.
            ——————————————-

            And YES, without question, Safety workers are the MOST overcompensated …. egregiously so. Their cash pay ALONE is often greater than that in Private Sector jobs with comparable risks and requiring comparable education, experience, knowledge, and skills. And layered on top of that, is a pension (80-90% Taxpayer-funded) that is TYPICALLY 4x-6x greater in value upon retirement than that of Private Sector workers retiring at the SAME age, with the SAME pay, and the SAME years of service.

            This is patently absurd, as well as unnecessary, unaffordable, and grossly unfair to Taxpayers.

          • Posted by S Moderation Douglas on December 19, 2015 at 1:51 pm

            Quoting SMD …. “One of the principal purposes of a public retirement system is to sustain public workers during their retirement years. ”

            No, Love, that is not a Moderation quote. That is a quote from the so-called pension reformers. Also implied from Ed Ring, who proposes a progressive benefit formula so those who earn the most will get a proportionally smaller pension.

            My point is, these people don’t seem to be using logic in their reform proposals, they are using emotion based on, largely their own rhetoric about the egregiously high pensions.

            They do make one good point, though. If the purpose of a pension is to “sustain” the worker in old age, there is no need for the $150,000 to $300,000 pensions for sustenance. California capped pensionable income at the same as the SS cap. Pensions in the future for the very high earners will be much more reasonable. Also like SS, these workers, once they reach the limit each year, will no longer have ten percent deducted from their salaries for pensions. They can fatten their own IRAs or 457s.
            …………………………………….
            Quoting TL:

            “I see that you are back to misleading the readers …. AGAIN.”

            Three words: LIAR, LIAR, LIAR !!!

            How many times have I said that, with pensions and benefits, lower skilled public workers make much more than those in the private sector? Literally countless times.

            You either cain’t handle the truth, or you have an apparent comprehension problem. Or both.

            Still “pensions 3x-4x greater in value at retirement” is just irrelevant, illogical, inflammatory rhetoric. Half of Americans have no value at all. Particularly the lower half.

          • Posted by Tough Love on December 19, 2015 at 9:22 pm

            Quoting SMD ….. “My point is, these people don’t seem to be using logic in their reform proposals, they are using emotion based on, largely their own rhetoric about the egregiously high pensions. ”

            “Rhetoric” my Ars !

            Anyone who believes that Public Sector pensions are NOT “egregiously high” is a charlatan or a brain-dead swallower of their Union’s BS.

          • Posted by Tough Love on December 19, 2015 at 9:33 pm

            Quoting SMD …… “California capped pensionable income at the same as the SS cap. Pensions in the future for the very high earners will be much more reasonable. ”

            Seems like ….. as you very often do … you omitted some VERY material facts.

            That “cap” doesn’t apply to ALL ….. “in the future for the very high earners” …. but ONLY to NEW workers, if/when they reach that cap.

            SMD, You can always be counted only to try to deceive the readers,

          • Posted by S Moderation Douglas on December 19, 2015 at 10:03 pm

            Say goodnight Grace.

            Your shtick is getting old.

          • Posted by Tough Love on December 19, 2015 at 11:38 pm

            SMD, and YOUR distortions, omission of material facts, lies, and greed …is quite sickening.

  4. Posted by Anonymous on December 17, 2015 at 5:30 pm

    And so the standoff continued – Happy Holidays to all!

    Reply

  5. Posted by Anonymous on December 17, 2015 at 8:42 pm

    I w as a driver to how. Much do you w ant lower my pension, moron

    Reply

  6. […] constitutional amendment on public pensions with the same series of fallacious arguments debunked here previously though he added one […]

    Reply

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