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 Falls, Detroit , 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.