This was the headline, with one word and a colon excised, of an opinion piece on nj.com today written by a couple of people who I happen to have met in real life* and who, on balance, are lying more than Christie on this issue.
Gov. Chris Christie often says he wants public-sector benefits to mirror what’s offered to employees in the private sector. However, the governor won’t dare mention that shorting pension funds in the private sector is illegal. Only in government can Christie get away with flouting his pension obligation without legal ramifications.
Multiemployer (union) plans seem to have flouted alright, primarily by gaining the ability to write their own rules including for benefit cuts.
For all Christie’s bluster about “exhorbitant” benefits plans, the truth is that New Jersey’s average yearly pension benefit of $26,000 is among the nation’s least generous — 95th in benefit generosity out of America’s 100 largest pension funds.
A bogus figure from a bogus study conducted by New Jersey Policy Perspective (NJPP) with what was undoubtedly union encouragement, both spiritual and monetary, that was debunked here.
The governor flat out isn’t being factual when he claims a typical government employee pays $126,000 toward pension and health benefits and receives $2.4 million in return. The average state worker earns about $65,000 a year and pays $7,600 for family health insurance and $4,875 toward retirement, for a total of $12,475 a year. The employee’s pension contribution, plus the amount the state is supposed to match, have 30 years to generate interest.
How the $4,875 for health benefit is generating any interest is anyone’s guess since it is being used to pay for insurance premiums and there is no OPEB fund while on the pension side there would be far more generated in interest if the benefits were honestly funded for. As it is, actuarial math presumes that full past contributions have been deposited and that future interest is generated on them. In the case of NJ that is simply not true as there is far less money in the plan than there should be and so there will be far less interest generated.
By the time the employee retires at age 65, he or she will have paid $374,250 for pension and health benefits. Earning a pension of $35,000 a year and receiving individual medical coverage worth $6,200 a year in today’s market, the worker would have to live 58 years after retiring to reach $2.4 million in benefits. Christie’s calculations would have workers living well into an age when they’d be able to see their own grandchildren become grandparents.
Who pays $6,200 annually for health insurance without Medicare being involved?
The New Jersey Supreme Court last year ruled that pensions are deferred compensation and must be paid. In other words, employees in the state pension system are pushing off a portion of their earnings until retirement. If New Jersey keeps skipping payments, or making partial payments (as Christie has proposed again next year), we will pay more later. Taxpayers will be on the hook for $3 for each $1 Christie is skipping now.
Another innumerate rant. If that’s $3 for $1 is set in stone without any mention of time then why not keep skipping those $1 payments and have taxpayers in the year 2525 pick up the $3?
The only way to ensure future governors make required payments is to make it illegal not to, just as it is in the private sector Christie so desperately wants to emulate. We can do so without raising taxes on the middle class.
The current deficit in pension funding alone is honestly at about $166 billion. Only someone ignorant of that fact can assert that the middle class, however that may be defined, will be spared if all public employees are to be made whole.
The elephant in the room is how to pay for pensions without cutting everything else. Christie’s crew will have you believe taxes will soar and the sky will fall if the state is required to meet its pension obligation. That’s simply not true.
That ‘elephant in the room’ or some variation of ‘weighty’ seems to pop up in more than half of pieces on Christie. And, to anyone who grasps the real situation, that simply IS true.
And if New Jersey began making its yearly pension payment quarterly instead of waiting until the last day of the fiscal year — legislation Christie vetoed — we’d reduce the liability by another $13.1 billion.
If the state had the money to make quarterly contributions they could just as easily make earnings on that money outside the plan and put it in later as within it assuming they do not pay taxes on earnings.
* The authors are listed as Charles Wowkanech who is president of the New Jersey State AFL-CIO and Hetty Rosenstein who is area director of Communications Workers of America New Jersey. I know Charles Wowkanech from having worked on the NJ AFL-CIOs own pension plan (though I knew his predecessor Charles Marciante better) and from his occasional appearances at Union County freeholder meetings. I met Hetty Rosenstein decades ago when an ex-partner and his now ex-wife were on a night out in Kenilworth and they decided to stop by the house with Hetty who was a friend of the ex-wife’s at the time. There is as a story behind that whole interaction and future events but I’ll save it for when I know you people better.