Asking For It

S3040 passed the Assembly tonight 61-4, with 10 abstentions so, if Christie signs off, management of what will likely start off as a $20 billion pension fund for New Jersey Police and Firemen will be transferred to a panel controlled by the unions to oversee investments and benefits.

As with that quarterly contribution diversion the overwhelming support for this bill by politicians is rooted in its revenue neutrality. It is all about panels, committees, and procedures with no commitment to having to come up with any more money.  Otherwise, were the unions to go to government employers with a request for the real cost of benefits it would, with surprisingly few alterations, play out something like this:

.

17 responses to this post.

  1. Posted by George on March 24, 2017 at 7:02 am

    A very underfunded pension has 5 retirees. Total payout is $200,000 a year. One retiree receives $100k a year, and four retirees receive $25,000 a year. It is decided that payouts must be reduced 30% or $60,000 and that the retirees must endorse it.

    2 speculative possibilities:

    1) Reduce the $100,000 a year retiree to $40,000 a year. The four $25,000 a year retirees vote yes and the ‘pension reform’ passes.

    2) Seeing this coming, the $100,000 a year well connected retiree convinces the friendly and sympathetic government to separate the pension scheme into two pensions. Pension A has one retiree getting a payout of $100,000 a year. While pension B has four retirees being paid $25,000 a year. Pension A has its payout cut 30% to $70,000 and its retirees vote in favor. Pension B has its payout reduced to $17,500 and its retirees vote who cares. After a few years, the friendly and sympathetic government restores the Pension A payout to $85,000 for a temporary period of forever, while Pension B retirees have their payout of whatever it was increased to who cares for a temporary period of whatever the government feels like.

    Reply

    • Posted by Anonymous on March 24, 2017 at 7:12 am

      Like JB and Eric have clearly (or cynically) stated this law changes nothing re: c.78 BUT as you’ve cited in your example it’s laying the groundwork for preferential treatment. Next up JRS and SPRS!

      On another note; with no laws or rules governing how State employer pension contributions are allocated to the various State sponsored pension funds there will be inequitable allocations coming as JRS and SPRS approach zero.

      Lastly, put some lipstick on this governor of course he’ll sign it because the mantra here and in Trenton is it changes nothing. Now we should just sit down, shut up, and behave like good little citizens!

      Reply

      • Posted by boscoe on March 24, 2017 at 10:37 am

        I think we’ve been through this before. S-3040 doesn’t so much change c.78, as it does bypass c.78 with regard to one pension system (PFRS). Most important, it allows the reconstituted PFRS Board of Trustees, by a simple majority vote, to reinstate member COLAs without regard to the 80% funded level (whatever that means) that is required of the other systems. It allows the Board to change benefit and member and employer contribution rates with a vote of 8 of the 12 members of the Board.

        There are rules and laws governing how the State pays the employer share of contributions to the various systems. But they are “get around-able.” The actuary for each of the systems tells the state what it is supposed to appropriate based one the actuarial valuation. That’s in the law. But clearly that is not binding on the Governor or the Legislature, as we have seen over the past 20 years or so. You raise an interesting point about whether the State will perform “triage” in its pension contributions should one or more of the systems approach insolvency. That seems a possibility. The only thing I can say is that both the JRS and the SPRS are expensive but relatively small systems. On the other hand, I can’t see either of these systems being allowed to go broke given who the members are: judges and state troopers. Talk about outsized influence!

        Reply

        • Posted by NY on March 24, 2017 at 10:42 am

          @boscoe: In my comment at the bottom of this thread, I point out that (I think) the new Board will be able to set COLA rates at whatever level it pleases. Do you think my reading of the bill is mistaken?

          Reply

  2. Posted by Anonymous on March 24, 2017 at 8:26 am

    Link to FINAL version passed ?

    Reply

  3. Posted by NY on March 24, 2017 at 9:59 am

    Please humor me: I think the bill allows the new Board complete discretion to set COLA rates. So, what’s stopping the Board from setting COLA rates of, say, 15% annually, and then sending the state a bill each quarter, and then ultimately when the new system goes bust some retiree (or class of retirees) sues the state for breach-of-contract and wins the right to their base pension plus the arbitrarily-inflated COLA’d factor?

    It seems to me that the new bill has no mechanism to prevent this scenario.

    Am I misunderstanding?

    Reply

    • Posted by boscoe on March 24, 2017 at 10:46 am

      There is really nothing stopping them, other than the requirement to get a majority vote of the union-dominated Board of Trustees and to withstand the publicity scrutiny and heat. Assuming the new PFRS managed fund was not paying the increased COLAs out of a Warren Buffett-like investment performance, the bulk of the billing would go to municipalities and counties that employ most of the members. Therefore paid through higher property taxes, outside the 2% cap.

      Reply

  4. Posted by Anonymous on March 24, 2017 at 12:35 pm

    Sounds to me like a back door scheme to restore COLAs to a specific group and to force the state into making payment contribution amounts it otherwise may not have

    However. I am still not getting where the money is coming from ……..and how the state and individual localities responsibility for contributions play out

    Can someone explain???

    Reply

  5. Posted by Anonymous on March 24, 2017 at 1:43 pm

    The REAL problem with this bill as highlighted in a recent article:

    “The problem is that the bill also gives unions more control over determining benefit levels and member contributions, without any of the responsibility to assure affordability. Christie’s commission certainly didn’t recommend that. Taxpayers would be stuck paying whatever pension-related bill police and fire unions want to give them. If those trustee-inspired investments bomb, taxpayers will have to cover the losses.

    Imagine giving unions the freedom to line their own members’ pockets without any risk?”

    ————————————-

    Think about it. The Private Sector analogy would be a Corporation allowing a committee of rank and file employees to determine their own level of pension benefits with the Corporation on the hook to pay for it. Would NEVER happen.

    Those who vote for this are either incompetent (they didn’t know what they were voting for), or are in bed with the Unions.

    Hopefully, Gov. Christie will veto this bill and get the word out ASPA as to the GIGANTIC risks it places on the backs of NJ’s Local Property Tax payers.

    Reply

  6. Posted by Eric on March 25, 2017 at 10:50 am

    Anonymous:
    Christie will sign the bill.
    Eric

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: