Union Lawyers Pension Fantasyland

Robert D. Klausner is an attorney who represents New Jersey public employee unions in their pension battles, most recently losing another one.  This morning he has an op-ed in njspotlight warning:

Deeper Debt Waiting for Taxpayers Due to Pension Irresponsibility

It is a propaganda-scare piece supporting the constitutional amendment to have New Jersey make some payments (that they get to define) into the pension system and it is delusional, impractical, and basically wrong.  For example….

After Christie is long gone from the State House, taxpayers will have to pay $3 for every $1 he skipped in pension payments.

….

To put this in perspective, Gov. Christie has failed to make $17.5 billion in required pension payments since taking office in 2010, including payments mandated by the pension-reform law he himself championed — then subsequently walked away from. After Christie’s second term expires and he is long gone from the State House, taxpayers will have to pay $3 for every $1 he skipped. The current tab for this fiscal irresponsibility: $52.5 billion.

Calculators cost about $10 these days.  Had Mr. Klausner availed himself of one he would have found that it would take 14.5 years of interest at 7.9% to triple a value.

In the 2015 case Burgos v. State of New Jersey, the Supreme Court ruled that the state’s current pension obligations must be paid. There is no getting around the bill; it must be paid. Pensions are deferred compensation that has been earned, and no amount of political spin will erase the bill. The justices also ruled that employees have a contractual right to receive their pensions. The reason the Christie administration hailed the decision as a victory is because the court ruled that the constitution’s debt-limitations clause limited the court’s ability to extract full payments immediately. This got Christie off the hook, but not the state. The fact remains that in the long run the debt must be paid.

Secondly, states cannot go bankrupt. Federal law allows municipalities like Detroit to declare bankruptcy, as well as corporations like General Motors, which are governed by private-sector law. The State of New Jersey, however, is a public entity. Comparing our state to a local government or private corporation is disingenuous, which Christie knows.

Knowing these two facts — that the state must pay the bills it has accrued and that the state cannot go bankrupt — the logical question remains: If the pension funds run out of money, then what?

The reality is that the state is on the hook. The state Legislature and governor will be forced by the courts to make the payments from the general fund on a yearly pay-as-you-go basis.

It is true that states cannot go bankrupt but there is something else they can do.  I don’t know what the legal term would be but let’s call it: NOT PAYING!!!. Ask retirees who were anticipating cost-of-living-adjustments on their pensions or getting their full base pensions in Prichard, Central FallsDetroit , and soon San Bernardino, about it. And when that $15 billion pay-go bill comes due it will not be the first but the ONLY option for New Jersey.

62 responses to this post.

  1. Posted by Anonymous on January 11, 2016 at 11:59 am

    TL now wondering if it was all a good dream.

    Reply

    • Posted by Rex the WOnder Dog! on January 12, 2016 at 4:02 pm

      It is true that states cannot go bankrupt but there is something else they can do. I don’t know what the legal term would be but let’s call it: NOT PAYING!!!.
      States do NOT have to declare BK, they can simply REPUDIATE their debts b/c they have sovereign immunity under the 11th Amendment, meaning NO ONE can sue a state to force them to pay up, not in state court, not in federal court. States can simply not pay. States repudiate their debt at any time. Will they do THIS? It is a political football and politicians will do everything they can NOT to do this and help their constituents, who are the ones putting $$$$ into their back pockets, NOT the taxpayers, the poor or the middle class.

      Reply

  2. Posted by Jesse on January 11, 2016 at 12:17 pm

    So where is the money supposed to come from when the promises made are quite simply, impossible to keep? Do they start putting liens on everything the residents own, do they cause most of the taxpayers to go into foreclosure, do they raise taxes to the point where I is just unaffordable and people give up and leave the state or do they provide a quick fix in a “pay as you go” scheme which is a Ponzi?

    Why does it cost so much to live in NJ and we all know the answer to that. but when will the issues be addressed that is causing the state to remain on the brink of bankruptcy, without having the ability to claim bankruptcy? Why is the state allowed to operate status quo as we get deeper in debt and there is no constitutional way out, no laws, nothing that is on the side of the people who have to pay for all this?

    Reply

  3. Posted by Tough Love on January 11, 2016 at 12:27 pm

    Puerto Rico, had no better legal options to NOT PAY it financial obligations, but when it didn’t have the money to do so(just a week ago), that’s what it did ….. NOT PAY.

    Reply

    • Posted by The Resident Nutcase on January 11, 2016 at 1:30 pm

      So…..I can’t wait for the day the state does… NOT PAY over 800,000 nj cops, fireman and teachers!!! Lol. Such stupidity.
      You think things are bad now?? Wait until your “NOT PAY” theory becomes reality. Talk about a problem!! Let’s see just how safe you are when there are no cops or firefighters on the streets! Let’s see teachers stop teaching. Lol!!! Stupidity. The state will literally implode!!!!
      The answer lies in paying these people their pensions. Bottom line

      Reply

      • Posted by Tough Love on January 11, 2016 at 1:43 pm

        Once upon a time America’s Air traffic controllers also thought there were irreplaceable…….. President Regan showed them otherwise.

        Reply

      • Posted by Tough Love on January 11, 2016 at 1:50 pm

        Quoting the Nutcase ….. “The answer lies in paying these people their pensions.”

        No, the answer lies in paying (and funding) ONLY that share of current promises that would likely have been granted in the ABSENCE of the collusion between the Public Sector Unions and our self-interested, contribution-soliciting, vote-selling, taxpayer-betraying Elected Officials.

        And that “share” is certainly 50% LESS (75% LESS for Safety workers*) than current promises.
        ——————

        * 75% LESS when factoring in BOTH the excessive pension formula AND the HUGE incremental cost of being able to retire (with a full/unreduced pension) 10-15 years younger than Private Sector workers.

        Reply

      • It won’t be the cops, firemen, and teachers who are doing the jobs at the moment of ultimate plan collapse who wont’ be paid. It will be the 300,000 who are not doing the job at the moment (ie retired) who will not be paid. It has started slowly already (no COLAs) but when trust assets are depleted there will be more benefit cuts for retirees (and here is the twist) so that those 500,000 who are working at the time do get paid.

        The alternative is to pay those 300,000 retirees fully and reduce the compensation (either salaries, health benefits or DC pensions) of those actually doing the work at the time.

        The underfunding numbers and the current tax burden in NJ are too massive to allow for any other alternatives.

        Reply

        • Posted by Tough Love on January 11, 2016 at 2:50 pm

          What WILL be interesting is the reaction of the older, longer-service actives who realize that their pension (at least a large share of it) won’t be there for them.

          Reply

          • Posted by Anonymous on January 11, 2016 at 7:36 pm

            Stop yourself TL trying to scare seniors, the collapse is in your delusions, wakeup!!!

          • Posted by Anonymous on January 11, 2016 at 10:27 pm

            TL, what you are advocating would amount to elder abuse.

          • Posted by Tough Love on January 11, 2016 at 11:02 pm

            Why Anon, are Senior PUBLIC Sector retirees MORE deserving than PRIVATE Sector retirees ….. and on the Private Sector Taxpayers’ dime no less ?

        • Posted by Anonymous on January 11, 2016 at 7:29 pm

          What is the legal implication when the Governor intentionally does harm for political. If it wasn’t evident at the beginning of his “reign”, it is very clear now, CC targeted public workers to head the Republican Governors Association and to build a conservative national following for his presidential bid. He used his veto pen to destroy the pension reform and the same pen eliminated pension payments. He misused the power of his office to intentionallydo short-term and long-term harm to people who work and participate as unionized labor under “good faith agreements”. So now CC supports North Jersey casinos because he has to find a financial answer to past bad decisions. He is a disaster.

          Reply

        • Posted by Anonymous on January 11, 2016 at 10:42 pm

          Or the state could simply bond the debt over 30 years like they do every other debt.

          Reply

          • Posted by Tough Love on January 12, 2016 at 2:59 pm

            Paying off a bond is no different than paying for these (grossly excessive) pensions directly, and NEITHER is justified.

      • Relax Nutcase, every homeowner pulls a 2 hour shift and all bases will be covered. Self importance is a dangerous thing.

        Reply

  4. Posted by Second Opinion on January 11, 2016 at 12:57 pm

    The taxpayers have benefited from the services provided by the Governor and Legislature with the money diverted from the pension payments, so it is likely it is the taxpayers that will eventually pay the tab for such irresponsible public policy. One of the things the San Bernardino bankruptcy court judge has asked is what the city can do to raise revenue, including boosting taxes. New Jersey and Illinois could be next

    Reply

    • Posted by Tough Love on January 11, 2016 at 1:17 pm

      Quoting Second Opinion ………..

      “The taxpayers have benefited from the services provided by the Governor and Legislature with the money diverted from the pension payments”

      That logic only makes sense IF the promised pensions were not so grossly excessive and fraudulently obtained …. via the Public Sector Unions’ BUYING of the favorable votes of NJ’s elected officials with Campaign contributions and election support.

      Bottom line …… the contributions that you claim were never MADE, were never JUSTIFIED .

      And NJ’s Taxpayers would be fools to make them now or ever.

      Reply

      • Posted by Anonymous on January 11, 2016 at 1:28 pm

        Wrong as usual, the payments are a part of a legally negotiated and ratified agreement, therefore justified. Silly you TL, only in your mind are legal agreements nonexistent.

        Reply

        • Posted by The Resident Nutcase on January 11, 2016 at 1:33 pm

          TL envisions a state where we all make the same, look the same, live the same!! There’s no longer competition…. We are all just meat with eyes…. Some of you…air with eyes. Everyone wins. Everyone gets a trophy. Why work for it when you simply cry and complain. TL (and her minions) ARE EVERYTHING THAT IS WRONG WITH THIS COUNTRY.

          Reply

          • Posted by Tough Love on January 11, 2016 at 1:57 pm

            Quoting the Nutcase ….. “Why work for it when …”

            What’s the “it”…. your grossly excessive pension & benefit promises?

            You never “worked” for it …. your pension & benefit promises were fraudulently stolen FROM the Taxpayers by those “negotiating” FOR the Taxpayers, by betraying their obligation to honestly represent the best interests OF THE TAXPAYERS.

        • Posted by Tough Love on January 11, 2016 at 1:52 pm

          And silly you Nutcase …. who thinks NJ has a money tree.

          Reply

          • Posted by The Resident Nutcase on January 11, 2016 at 2:14 pm

            And you worked for all those homestead Tax rebates that came from the money due into the pension?? You worked for all the tax subsidies and breaks you received over the decades on the backs of public workers???? Sounds to me you failed in life… And are now so consumed with everyone else…. Instead of getting your house in order!!
            Pay these people their pensions!!!
            Make the payments Chris Christie!!
            Make them now…. Or make more later!!!

          • Posted by Tough Love on January 11, 2016 at 2:45 pm

            Yeah, Taxpayers should “pay no mind” that the current Public Sector pension & benefit “promises” are undeniably grossly excessive (by any reasonable metric) and just …………. “Pay these people their pensions!!!”.

            When Pigs fly.

    • The taxpayers would benefit if the Governor’s office and the legislature were totally shut down so it is dubious that any benefit accrued to them while they were ostensibly glomming onto pension funds.

      Reply

  5. Posted by PatB on January 11, 2016 at 4:58 pm

    The courts have repeatedly stated that the state does not have to pay into the funds as long as the pension payments are made. Since the first to go bust will be the judicial fund, the courts will get to decide what happens to their own fund, probably pay-go. The judgement will read something like “I told you so”!

    Reply

    • Posted by Anonymous on January 11, 2016 at 7:33 pm

      I guess the judges do not want to step on CC’ s tail, the laws have an answer and they will get their pensions from the budget every year.

      Reply

    • Posted by Tough Love on January 11, 2016 at 11:18 pm

      Won’t happen……..

      The Judge’s pension Plan is so small (and covers so few) that NJ’s budget can handle payments to retired judges on a pay-go basis out of annual budget revenue. Not so for ERS and PFRS. As a matter of fact, the judges might quietly be promised that THEIR pension payments WILL continue …. with the understanding that they stand aside and allow cuts to PERS and PRFS retirees.

      Thanks for the suggesting this great option.

      Judges …. are you reading this ?

      Reply

      • Posted by PatB on January 12, 2016 at 12:36 am

        True enough, the state can easily cover the judges on pay-go. And when tpaf or pers goes next, the precedent will be set for them to go pay-go. And so forth as the underfunded pension dominos fall.

        Reply

        • Posted by Tough Love on January 12, 2016 at 12:48 am

          Did precedent stop the judges from arguing (AND sucessfully suing) they THEY were not subject to the CH78 pension contribution increases ? No at all ….. although the Taxpayers financially reversed that successful Court challenge rather quickly.

          The Judges will protect THEMSELVES and throw PERS, PFRS and the Teacher’s pension system under the bus.

          Reply

          • Posted by Anonymous on January 12, 2016 at 4:49 am

            The federal and state laws governing discrimination in pensions would prevent any attempt by the judiciary of “throwing under the bus” of other NJ pension funds by the judiciary. Find a more relevant, ethical and legal argument TL, in the real world the “rule of law” prevails.

      • Posted by Anonymous on January 12, 2016 at 4:23 am

        Read the law about equality in public pension system, if the judicial pension wins paid from the budget, so then will the other pensions be paid from the same budget “nondiscrimination clause” state and federal protection. CC just vetoed and eliminated himself into a budget disaster.

        Reply

  6. Posted by Tough Love on January 12, 2016 at 12:01 am

    WONDERFUL direction the Supreme Court seems to be leaning …….

    http://www.aol.com/article/2016/01/11/conservative-us-top-court-justices-skeptical-over-union-fees/21295391/?icid=maing-grid7|main5|dl3|sec3_lnk3%26pLid%3D-1679037108

    Reply

    • Posted by Sean on January 12, 2016 at 1:27 am

      The writing is on the wall for public sector unions. Their days of calling the shots and ruling the peasants with an iron fist are coming to an end.

      Reply

      • Posted by S Moderation Anonymous on January 12, 2016 at 2:58 am

        “Powful Public Employee Union”
        Is an oxymoron. Unions are playing defense. And not very well.

        Reply

        • Posted by Tough Love on January 12, 2016 at 3:06 am

          It’s the “moron” in oxymoron that should be giving Public Sector workers/retirees pause, because ONLY a “moron” would think this Public Sector thievery perpetrated upon Private Sector Taxpayers could go on indefinitely.

          Reply

          • Posted by Anonymous on January 12, 2016 at 4:43 am

            800,000 NJ public sector employees pay millions in NJ hidden/ known ever increasing fees and taxes. The federal judges benefit from collective bargaining as well as NJ judges.

      • Posted by Anonymous on January 12, 2016 at 4:36 am

        Koch sponsored legal challenge to extend “right to work”. The union’s could collectively lose millions but non-unionized teachers would lose their voice and be subjected to the whims of boards and trustees not only financially but work rules. Union dues are tax deductible

        Reply

      • Posted by Anonymous on January 12, 2016 at 4:38 am

        Really Sean, maybe the unions rule with an iron fist in Lilliput but the reality is collective bargaining is very effective.

        Reply

    • Posted by Tough Love on January 12, 2016 at 3:44 pm

      Wow, did you read the words of the lead plaintiff (Rebecca Friedrichs) on this Supreme Court challenge of mandatory Union dues?

      “When I get a raise at the expense of my students, I have a moral problem with that. When I get this Cadillac pension plan at the expense of our economy and our community, I have a moral dilemma with that. When teachers who are no longer effective or are abusive are protected at the expense of children, there’s a huge moral dilemma for me. I hope the American people see what’s going on here. It’s time to put our country and kids above the rights of our unions.”
      —————————————

      Isn’t THIS the type of person EVERY parent wants to be teaching their children ?

      Reply

      • Yes Virginia, there really are public sector employees who think rationally about their compensation and benefits. Logic and rational conclusions converted to action are all that are needed to both allow (limited) pensions to be paid while not bankrupting every (non public sector) resident of NJ.

        Reply

      • Posted by Anonymous on January 12, 2016 at 4:45 pm

        Sounds like a Koch puppet, a political actor, wonder how much she’s being paid to make these statements. She’s a delusional lying hypocrite, if what she states are her beliefs were real she would’ve quit teaching and championed her movement.

        Reply

        • Posted by Sean on January 12, 2016 at 5:20 pm

          Wrong, Nutcase, I mean, Anonymous? There are actually people in every public sector who actually do care about their “customers” and the society that pays them. There actually are people who will say, privately, “you know, we are really getting over on this…” I think you know that, though. Deep in the pit of your heart, I think you really do know that.

          I used to joke with a few of my teacher friends, back when I taught in a public school, “You know why teachers are always complaining? Because they do not want anyone to find out how sweet a deal they have. As long as they keep whining and complaining, their neighbors will keep buying into the whole ‘underpaid, unappreciated teacher’ myth. That’s why.” To which they would reply, “You know it.”

          Reply

          • Posted by Anonymous on January 12, 2016 at 6:50 pm

            So what!!!! You and the rest of the “saints” should secure private sector employment. In a nation with many opportunities for talented educated people you act like accepting low pay grants martyrdom.

      • Posted by Sean on January 12, 2016 at 5:10 pm

        YES!

        Of course, her co”workers” will accuse her of hating the middle class, being an enemy to working class job security, and being related to the Koch brothers…

        Reply

      • Posted by S and P 500 on January 12, 2016 at 9:59 pm

        Unfortunately the standard Union garbage that teachers usually spout is “we teachers faithfully contributed our 8% and the state didn’t fulfil its obligations, blah, blah, blah. …”

        Reply

  7. “Deeper Debt Waiting for Taxpayers Due to Pension Irresponsibility.”

    That’s exactly what irresponsible taxpayers want. For the deeper debt to wait until they can sell their homes to the suckers and retire to Florida or South Carolina.

    The question is, however, how is that going to help if you are still in the United States? Because the federal government has been run the same way.

    Reply

  8. Posted by Anonymous on January 12, 2016 at 6:28 pm

    TL, CC just confirmed he will be making the reform required pension payment in 2016. As previously stated the Governor is not listening to your constant dribble against public employee pensions.

    Reply

  9. Posted by S and P 500 on January 12, 2016 at 9:50 pm

    Willie Brown of the Calif.legislature said the same thing–Calif. won’t declare BK, it will simply not send out the pension checks. BTW I assume that the public troughers won’t mind paying $15K per year tuition to send their kids to UCLA for college. UC has very big pension bill, too. Janet Napolitano is working on pension reform for the university.

    Reply

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