Falsely Accusing Courts

In an nj.com op-ed former State Treasurer Clifford Goldman lays out the problem with public pensions in New Jersey:

In a few years, when the pension funds are completely depleted, including the money contributed by employees, the government system as we know it will collapse. In 2013, the pension funds paid out $4.9 billion. The required annual payment will be much higher when the pension funds run out of money. In a recent Official Statement for a State bond issue, the state projected that the first pension fund will be out of money in 2021, the others a few years afterwards.

Surely, executives, legislators and journalists know this. Still, it is business as usual in Trenton. The legislature discusses such things as eliminating the estate tax, raising billions for a rail tunnel, or funneling future tax revenues to private companies. They enact bond issues as if the money will be there to pay them off.

Fingers a culprit:

Now, the legislature is considering a proposal to amend the New Jersey Constitution to require that pension appropriations be made each year. In all likelihood, such a referendum question will fail and will further confuse and delay the issue. The courts have been the cause of the confusion. They have permitted the state to borrow money to balance its budget in plain disregard of the state Constitution. They have permitted the state to pass unbalanced budgets for many years, accumulating unmanageable debt, in plain disregard of the constitution which prevents such debt from accumulating.

And offers a solution:

Someone should petition the court to enforce the balanced budget requirement of the constitution and therefore to appropriate each year the required state pension contribution. In making its decision, the court should return to its role of interpreting the constitution, rather than playing the role of a political enabler, as it has been doing for many years. Then, the governor and legislature will be forced to make whatever compromises are needed to pass a constitutional budget.

There are some problems with this analysis:

  1. The actual payouts from the pension system are around $10 billion annually.
  2. Judges are appointed by the governor with the approval of the legislature so, on the important rulings anyway, they devolve into rubber stamps for what those politicians really want, which is not always what they put in their laws.
  3. You cannot legislate or adjudicate money into existence especially in the highest taxed state in the nation.
  4. You can cut spending in other areas but when those cuts endanger the incomes of people who provide $2,700 checks each election cycle, that politicians really want, the obvious solutions never make it to the table.

34 responses to this post.

  1. Posted by Tough Love on December 31, 2015 at 1:32 pm

    I don’t see former State Treasurer Clifford Goldman on the DataUniverse of NJ retirees (or current NJ workers) so I don’t know if his suggestions are colored by self-interest in protecting his own pensions, but to say:

    “Someone should petition the court to enforce the balanced budget requirement of the constitution and therefore to appropriate each year the required state pension contribution. In making its decision, the court should return to its role of interpreting the constitution, rather than playing the role of a political enabler, as it has been doing for many years. Then, the governor and legislature will be forced to make whatever compromises are needed to pass a constitutional budget.”

    specifically calling for ….. “to appropriate each year the required state pension contribution” ……. WITHOUT further commentary calling for the FUTURE Service DB pensions to be FROZEN (with zero future growth) as proposed by the NJ Pension Commission, is lacking in thought and disingenuous in the extreme.

    Reply

    • Posted by Anonymous on January 1, 2016 at 10:51 am

      So, TL you have a problem with legislative accountability, there is now and has been for decades, language in the NJ constitution that support enforcing a balanced budget and paying the state’s obligations, that is definitely the purpose of government and the law. So in this republic, when the elected representatives of the people sidestep the Constitution, then the courts should step in to interpret the intent of the law, but if the judges are hamstrung by personal indebtedness and party loyalty we get the twisted mess we are now experiencing. It’s simply that whole “checks and balances” thing that has gone well in the “Soprano State”, run in absentia by Don Christie.

      Reply

      • Posted by Tough Love on January 2, 2016 at 1:20 am

        Quoting …. “So, TL you have a problem with legislative accountability…”

        No, but calling for full funding of grossly excessive pension promises (so fraudulently obtained) is wrong.

        Yes we SHOULD fully fund a FAIR pension …. which would be 1/5 to 1/3 the “value” of current promises.

        Reply

        • Posted by Anonymous on January 2, 2016 at 8:51 am

          TL, in NJ as opposed to your mind, salaries and benefits are negotiated through collective bargaining, from these negotiations an agreement is formed, the members vote, when accepted by the members of the bargaining unit this agreement governs and protects the members of the units represented, therefore, you will never reach your “fair”, but you are entertaining in a twisted sorta way. Your proposal to reform the NJ pensions system are a disaster that would undermine the spirit and intent of collective bargaining.

          Reply

          • Posted by Tough Love on January 2, 2016 at 9:53 pm

            What a load of BS ………….

            Under HONEST arms-length “negotiations” each “side” is trying to get the best terms for THEIR side.

            Those “negotiating” with the workers are SUPPOSED to be advocating for the best deal for the TAXPAYERS …. but ALSO being public Sector workers (at the management level) they know that whatever they grant YOU (be it in pay, pensions, or benefits), THEY will always get AT LEAST as much and most often much more. As such, THEY have ZERO incentive to HONESTLY fight for the best deal for the Taxpayers …… and have never done so.

            It’s a complete farce, with the Taxpayers being the “sucker” upon whom an unnecessarily large bill is foisted.
            ———————–

            Quoting ……..”Your proposal to reform the NJ pensions system are a disaster that would undermine the spirit and intent of collective bargaining.”

            Disaster for whom …… the currently VERY over-pensioned/over-benefitted Public Sector workers? That’s EXACTLY what is needed. And we “need” to do far more than …”undermine the spirit and intent of collective bargaining”.

            Collective Bargaining in the Public Sector should END …….. period.

  2. Posted by Anonymous on December 31, 2015 at 2:05 pm

    hollow words as usual

    Reply

  3. I agree that the NJ courts have been a major source of irresponsibility in NJ’s fiscal history, this is most clearly the case with the Abbott decisions.

    In the Abbott II decision Chief Justice Robert Wilentz of the NJ Supreme Court discovered the “Parity Plus Doctrine” in the NJ Constitution, which required the state to fund the ~30 Abbott districts ABOVE the level of the most affluent suburban districts in NJ.

    Although the court was made up mostly of Byrne and Kean appointees and Jim Florio was the governor, the “Parity Plus Doctrine” went farther than those governors had intended. Although Kean had appointed and (out of a fetish about judicial independence) reappointed the ultraliberal Robert Wilentz to the NJ Supreme Court, Kean’s administration had consistently opposed the Abbott case as it winded its way through the courts in the 1980s.

    Jim Florio had released a state aid increase/reform plan a month before the Abbott II decision came out, but his proposal (the Quality Education Act) had only proposed to fund the poorest districts at the 60th percentile in spending and made no special consideration for the districts that were part of the Abbott lawsuit versus equally poor non-Abbott districts that didn’t participate in the Abbott lawsuit.

    The Abbott decision and “Parity Plus Doctrine” were supposed to be paid for by three pillars.
    1. Huge cuts in aid to 220 “affluent” districts. (affluent is in quotes because the list of districts to lose aid included places like Belleville and Hackensack.)
    2. Complete state abandonment of pension responsibility for 150 of those districts and partial abandonment of another 70 districts.
    3. Large tax increases.

    All of the pillars of support were quickly undone and the state immediately began to underfund pensions, starting with 1992’s “Pension Reevaluation Act.”

    Although governors of both parties have wanted to increase K-12 education spending and the Democrats wanted to focus that money on urban districts, I have a hard time seeing how the shape of the Abbott II decision was something any governor wanted.

    Anyway, the NJ Supreme Court in the Abbott V decision ordered the state to pay 100% of construction costs in the Abbott districts. The state borrowed billions for Abbott construction WITHOUT getting voter approval.

    The NJ Supreme Court in the Lonegin cases decided this was constitutional, unilaterally deciding that their “Parity Plus” interpretation of the Education Clause in the Constitution overrode the Constitution’s other language about voter approval of bonding.

    The biggest state aid increases for the ABbott districts came in the early 2000s. Those were the worst years for pension contributions, a fact that I don’t think is a coincidence.

    Reply

  4. The most important quote to me was that the governor and legislature will be FORCED to make whatever compromises are necessary to produce a balanced budget. I interpret that to mean cuts, reforms, lay offs, consolidations, etc. publics doing way more than their 35 hours per week and paying into the system way more than current

    Reply

  5. Posted by Anonymous on January 1, 2016 at 9:02 am

    I can stop laughing at what you said MJ. We are not in Kansas anymore.

    Reply

  6. The discussion remains bifurcated and most comments redundant because no one is willing to listen to alternative views. Employees want the pensions to continue unchanged. “Taxpayers/ Republicans” want to terminate the pension system. Resolution starts with accepting that defined benefit pension systems are fundamentally flawed in design and in the transfer of investment risk to taxpayers. Political resolution means a transition to 401ks which is fair to current employees and pays the accrued liabilities in full. There is no painless way to accomplish this.

    Mr. Goldman rightly points out that the pension issue is confused. It would have helped if the Court had provided real guidance rather than political expedience. However, the failure to act responsibly is jointly owned as well by politicians of all stripes, unions and even the pension commission. The State Supreme Court’s decision enabled the Governor to delay politically inconvenient payments, increasing the liability – and costs of resolution – for his successors and the State’s taxpayers. The Court should have plainly stated (rather than just implied) that the State must pay the accrued liabilities. The pension commission should have laid out a realistic remedy involving austerity, tax reform and long term funding rather than just an employee health care giveback. The politicians and Unions should press for restoration of a capped COLA in exchange for the transition to a uniform professionally managed 401k pension system.

    Reply

    • Posted by Anonymous on January 1, 2016 at 11:00 am

      Presently 401k’s are being studied, they are miserable alternatives to defined benefit pensions. They were originally designed as a supplemental retirement account. They fail on many fronts to provide security in retirement, especially for low-moderate wage earners. Why would any public employee support a rollover to a system that has failed private sector employees and been a bonanza for private annuities.

      Reply

      • Posted by The Resident Nutcase on January 1, 2016 at 11:36 am

        Because the majority of the people on this blog fall into the same category as the current governor. Fat whinny jealous bastards!!
        There is no easy way to fix the pension system. And a 401k is just one alternative that is available.
        But a start could be to make the friggin payments. Use the local plans as a model and allow ch78 to do its intended job.
        Then, after getting the funds to 100% funded….. Give the pensions over to the local or state unions to manage themselves. Take the corrupt state politicians out of the equation.
        This way, when/if there’s another pension problem….. It falls on the unions to fix.
        The state should have made the payments over decades…. They did not. The state could have done a better job managing those funds instead of allowing those involved to make millions upon millions every year while the funds lost.
        The state could have invested the funds more wisely.
        The state has many options available to expedite the fixing of the systems.
        Taxes will go up. Too bad.
        A few things could start to take effect..
        Stop all double dippers.
        Stop all part timers.
        Have acceptable caps in place…. Like the local municipal employees already have.
        Increase the pension percentage to 10% across the board for all employees just like the local municipal employees pay. And ensure that money goes directly into the funds. Not like recently.
        Ensure municipal government is in fact using the 35% health benefit contribution for property tax reduction.
        Etc…….

        Reply

        • Posted by JS on January 1, 2016 at 3:29 pm

          Why doesn’t the legislator give the pensions to the unions when it is 80 percent funded, which is considered “healthy” in most supporter talking points.

          I am absolutely sure the state would issue 5 billion in bonds to get the local pfrs system to 80 percent then wash it’s hands as the absurd assumptions fail.

          Reply

          • Posted by Anonymous on January 1, 2016 at 7:57 pm

            No thank-you, the unions do not need to be directly involved with public employee pensions.

          • Posted by Tough Love on January 2, 2016 at 1:46 am

            Your “math” is pretty lousy ….

            From Mr. Bury’s recent Post here:

            https://burypensions.wordpress.com/2015/12/23/gasb68-vs-politicians-pension-numbers-in-nj/#more-8004

            In the Top Block of figures (the GASB68 figures), Plan Assets total $83,479,143,450 and Plan Liabilities total $196,602,944,249, giving an overall funding ratio of 42.46%.

            For the overall funding ratio to reach 80%, we would need to add NOT $5 Billion in Assets, but $73,803,211,949 in assets.
            ————————

            Perhaps NOW you have a better understanding of WHY these Plans are “toast”.

          • Posted by Tough Love on January 2, 2016 at 2:22 am

            Ooophs, you DID say “Local PFRS”, not all of the pension Systems.

            Well, redoing the GASB68 #s Jjust for the LOCAL PFRS would require an additional $6,520,388,896 vs your $5 Billion figure.

            But a question ……… If the Taxpayers were STUPID ENOUGH to do so vs letting it go broke if you won’t very materially reduce FUTURE Service accruals for all CURRENT workers ….. what makes you think that all of the OTHER NJ Plans wouldn’t demand the same treatment ?

            Getting us back up Bonding the $73,803,211,949 ?

        • Posted by Tough Love on January 2, 2016 at 1:48 am

          The Resident Nutcase,

          There goes my hope for more rational commentary from you in 2016.

          Reply

          • Posted by The Resident Nutcase on January 2, 2016 at 8:02 am

            To me, this is an anti-union. Anti-public worker, anti-pension blog….. So when I post against the common theme…. Do you really think I expect anyone to have my side TL!?
            You’ll say it’s not…… But when you make comments about “letting plans go broke”…it’s all right there.

          • Posted by Tough Love on January 2, 2016 at 1:00 pm

            Nutcase, What I meant was that you’re still in the SAME mode Sean identified in an earlier comment:

            “Nutcase seems to have the same formula for all of his responses:

            1. Start with a hateful attack on the person’s comments, and how it was a waste of his time to read it.
            2. Then, contribute zero to the conversation.
            3. Finish with a nasty assertion that it’s all very simple: Pay him HIS damn money.

            Other than vitriol, not much to offer…”
            ————————————————-

            And when you do try go beyond that, it makes little sense ….

            Example: quoting … “Ensure municipal government is in fact using the 35% health benefit contribution for property tax reduction.”

            Earth to Nutcase, that money is going toward a share of YOUR healthcare cost. What part is available for property tax relief ?

          • Posted by The Resident Nutcase on January 2, 2016 at 5:27 pm

            Ya know….. You TL are simply part of the problem!!!!
            You just don’t have all the facts. And what you think you know is often flawed.
            According to ch78…The 2011 benefits reform law saved local boards of education millions of dollars, “which can be applied toward educational programming and controlling property taxes.
            So…… My point that the 35% contribution continue to be used for tax relief as it was made to do.
            Are you just dense?? You do know that public employees used to get free healthcare right???? Now they pay 35% of the premium while employee and into retirement?? Well, that money is supposed to be used for property tax relief!!!
            More of the public employee money going into the tax payers pocket!!!!!!!!!!

          • Posted by Tough Love on January 2, 2016 at 9:44 pm

            Nutcase, It’s not at all unusual for Private Sector workers to pay 35% (or more) of the cost of their healthcare, so it really is no big deal in (the higher paid ONLY) Public Sector workers paying the same 35%.

            The fact that you EVER paid “nothing” was outrageous, and it is certainly NOT meaningful that the increase from THAT (ridiculous level …. being ZERO) was significant.

  7. Posted by Nave on January 2, 2016 at 2:41 pm

    It is sickening. I tell off “public employees” all the time even within my own family. It is truly awful and they understand themselves how wrong it is. Party will go on until it can’t.

    Reply

    • Posted by Sean on January 2, 2016 at 6:14 pm

      You’re exactly right. When The Resident Nutcase THOUGHT that I was STILL a public school teacher, he had a brief moment of honesty, and he ripped me up and down about how teachers pay in next to nothing, yet enjoy lavish benefits beyond everyone else. He’s right, of course. Teachers, among a few other groups, are making a killing, and they know it.

      The irony is, THEY (the public sector workers) should RUN, not walk, to try to make compromises and concessions (REAL concessions, not nickel and dime stuff) in order to save their benefits, but they will not. They will do what they ALWAYS do: dig their heels in and demand that the ATM (taxpayers) keeps spitting out THEIR money that THEY earned. So, like any other Ponzi scheme, some will get ALL of their benefits, for a time, and then, the party will be over. It will all collapse, and their will be lots of pain and suffering. And no, I do not wish this upon anyone, but I will not have any sympathy, either. I am all for someone getting a decent and fair pension, including public workers, but this is way beyond the pale.

      Public sector pensions, healthcare, and higher education, all have one thing in common: They are all on an unsustainable trajectory. That which cannot go on forever…won’t.

      All bubbles implode. No exceptions. Ever.

      Reply

      • Posted by The Resident Nutcase on January 2, 2016 at 6:33 pm

        Sean-
        I can’t believe you’re this naive. Do you not know what ch78 was???? Do you not know that the employees follow that law to the T while the very entities who created that law don’t follow it themselves? If you don’t see a problem with that, regardless what side of the argument you are on…. You are lost.
        Many times the public sector tried to sit across the table with this administration. Many times they were ignored and lied to. Only after that…did the njea attempt to make some shady back door deal on their own. But of course,.. This too was foiled!!! So before you go spouting off venom….. Check your facts!!!! Get your story straight!!!’
        Say what you will. But at the end of the day…. It’s the states fault for not paying the ARC over decades!!! It’s this governors fault for first lying to the public sector then forcing “law” down their throats that was supposed to be a compromise of both sides…. Yet the stateonce again lied and cheated!!!
        In due time all the facts will surface and it will be put to a vote!!! Until then….. Continue with your goofy half truths. Everything I post is true and factual. My opinion is my own…. But the things in between are facts!!!!
        You’re not even a resident or a tax payer of the state of nj. You have your own issues in your state. Exhaust your wasted efforts there.

        Reply

        • Posted by Sean on January 2, 2016 at 6:49 pm

          Dude, chill out. Spout off all you want about ch78, and this administration, but it is NOT ENOUGH TO SAVE THESE PLANS! THAT is my point. YES, this administration is what it is, but YOU are the naive one if you think all the other admins “had your back,” or that any FUTURE admins are going to “have your back,” or that the public sector has made truly serious concessions to save the plans. WAKE UP!

          You do, however, win the Line of the Day Award for this gem:

          “Everything I post is true and factual.”

          You are unbelievable. Still my favorite, but unbelievable.

          Yes, Illinois should make you feel better, but it’s kind of like being the tallest midget in the room. This problem is going on all over the nation, and I am interested in knowing. Besides, THIS blog is, by far, the most lively and entertaining around.

          Reply

        • Posted by Tough Love on January 2, 2016 at 10:02 pm

          Nutcase, EVERYTHING in Ch78 except the COLA suspension was financially immaterial …… and everyone who understood the true magnitude of the financial hole NJ was in realized that. The fact that the workers lived up to a financially meaningless agreement is exactly that ….. meaningless.

          Reply

  8. Posted by Nave on January 2, 2016 at 7:24 pm

    There is no “fair” in this situation. I think the only logical way is to make a clean break. Anyone retired maintains benefits with no COLA or a very small fixed increase. Benefits earned up to this point are frozen. Current employees are transferred to 401k and social security at 4.2% And 4 % contribution to former plan for as long as they work in the job. All new hires are on 401K and Social Security.
    Everyone gives something up and there is an end in sight to this obvious problem. Life isn’t fair, everyone looses and gains under this.

    Reply

    • Posted by Tough Love on January 2, 2016 at 10:12 pm

      You have essentially outline what I call for …. but with Taxpayer subsidies for “active” and retiree healthcare reduced for all current workers AND retirees ALL THE WAY down to the average level of Private Sector employer subsidies towards their worker/retiree healthcare costs. …….. noting that for “retirees”, it’s typically NOTHING.

      Reply

      • Posted by Sean on January 3, 2016 at 6:45 pm

        And while everyone is hating you for saying it, they should wake up and realize that continuing to wait and hope will simply mean the end will get much worse than even this proposition. The ATM (taxpayer) is not an endless well that can solve all problems by simply asking it to spit out more money.

        Reply

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