Soft Corruption: 1997 POB Traitors

  1. John Scott
  2. Dick LaRossa$48,376
  3. Joe Bubba$48,243

Soft Corruption by William E. Schluter ($14,663) has become a bible for one of my other lives as it reflects closely my experience with legalized graft in New Jersey politics. One example from the book tells of the story of the 1997 Pension Obligation Bond sale to which then-Senator Schluter had a front-row seat.  From pages 12-13:

Soft corruption entered into this major policy initiative when three recalcitrant senators were pressured on the floor of the senate to vote for the proposal, despite their very strong reservations. They finally relented and voted to approve the measure. They subsequently received substantial campaign contributions from the senate campaign fund – only to lose the ensuing election. But all was not in vain, as they were awarded lucrative patronage appointments following their electoral losses.

Here is the story (pages 65-7):


Early in 1997, Republican governor Christie Whitman came up with a novel and highly controversial plan to finance the state’s annual pension payment in order to ease the strain on the current and future state budgets. The New Jersey pension system, which the state finances with yearly contributions from the general fund, covers retirees from local and state government as well as public school teachers and administrators. The fund is structured to produce enough earnings from its investors. The fund is structured to produce enough earnings from its investments to pay all pension benefits in current and future years. however, if the state defers its annual contribution, as has often happened in tight financial times, the system will accrue actuarial deficits  – yet the mandated payments to retirees continue.

Whitman proposed to float a $2.8 billion bond issue, with the proceeds going into the pension fund to satisfy the accrued deficits, provide sufficient investment capital to ensure that future earnings at least match future pension payouts, and make the interest payments on the bonds.  the plan allowed the state to suspend its current pension fund payment of $590 million in order to balance its budget for the upcoming fiscal year. Democrats howled that the bond sale would increase state debt by one-third – to $12 billion – and complained that the bonds would be sold by a semi-autonomous state agency, thereby circumventing the state’s constitutional requirement of a public vote on any increase in state debt.

Meanwhile, the bond-rating agencies questioned the administration’s expectations of an 8.75 percent return on pension investments, and Standard & Poor’s said the bond sale would jeopardize the state’s double A-plus credit rating. Public opinion polls showed New Jersey residents were against the bond issue, as were most newspaper editorial boards in the state.

But the governor’s biggest problem was that even Republican senators were not exactly enamored of her idea. She needed a twenty-one-vote majority for passage, and all sixteen Democrats were opposed. As many as ten of the twenty-four Republican members disapproved of the plan during early discussions. As the showdown vote loomed, this number was whittled to six holdouts who were extremely unlikely to change their minds: Henry McNamara, Robert Littell, John Scott, Dick Larossa, Joe Bubba, and me. But Whitman needed three senators to do just that.

The leadership scheduled a vote for early June, right after the primary election, and pressure on all state senators was building. Newspapers speculated that one holdout, Joe Bubba, a Republican from Passaic County who had lost his primary race, had been offered a state job in return for his vote. Bubba denied the charge.

Horse-trading for votes had been going on all spring and lasted right up to the vote on June 5. That day, Republican senators streamed into the governor’s office to either seek or be offered special benefits for voting yes on the bond issue. After floor debate on the bill concluded at 9 P.M., senate president DiFrancesco called for a vote. The initial vote count on the tote board settled in at eighteen green lights and twenty one red (one Democratic senator was absent). DiFrancesco then visited the desks of the Republican holdouts, trying to convince three to change their minds. After an animated discussion, bubba caved and put up a green light. Next came Dick LaRossa, of Trenton, who also changed his vote. At this point the tally was 20-19, and the tension was extreme. DiFrancesco gave Bergen County’s John Scott, the final target, the full treatment. Thirty-six minutes after the vote was called, Scott flipped the green switch, and the bond issue passed 21-18. The assembly easily approved the measure later in the evening, and Whitman signed it into law shortly thereafter.

Among the stories regarding the pension bond vote, a Star-Ledger reporter offered an interesting perspective of one participant when he wrote: “A wistful Sen. Henry McNamara, who voted no, looked back at the power politics that whiled around him for months, and sighed, “The deals I could have cut.”

After all the campaign-financing reports for 1997 were filed, it turned out that DiFrancesco’s leadership PAC gave a total of more than $480,000 to the campaigns of the three senators who cast the crucial yes votes, LaRossa, Bubba, and Scott. This amounted to more than 42 percent of what the three spent on their reelection bids. (Bubba had received the money for his primary contest.)

All three were defeated in their contests for reelection – but within two months of leaving office at the end of 1997, all landed jobs in the Whitman administration at salaries of approximately $85,000 each. After three years, their newly improved earnings would wind up tripling their monthly state pension benefits.

Postscript: the Whitman $2.8 billion bond issue did not stem the flow of red ink from the pension system, because the state subsequently missed making payments into the system, which also saw shortfalls in expected earnings. As of 2014, New Jersey’s unfunded liability for the state and local pension systems stood at more than $54 billion.


18 responses to this post.

  1. Whitman stole from the future assuming she would be the only one to do so. Without taking into account the fact that her entire generation had the same values as she did.


    • Posted by Anonymous on April 10, 2017 at 10:10 am

      Actually she borrow from the pension with the unions blessing in exchange for that “soft corruption” that it’s members enjoyed


  2. Posted by Anonymous on April 10, 2017 at 10:49 am

    In a recent Panel discussion on NJ’s pension mess, the Panel quoted from the 2016 “New Jersey Pension and Health Benefit Study Commission” Report as follows:

    “Because elected officials overpromised and underfunded for two decades, the painful reality is that the benefits currently provided to employees are beyond the State’s means.”

    The Public Sector Unions (and most of the Elected Officials desirous of more BRIBES disguised as campaign contributions and election support) go to extremes to play-UP the “under-funding” element, and play-DOWN the “over-promising” element.

    Mr Bury does that as well …. which I find very frustrating given his understanding of the issues and DRIVERS of the mess NJ now finds itself.

    Unless NJ’s Public Sector workers are demonstrably paid less in cash wages, what justifies NJ’s current Public Sector Pension/Benefit structure which provides (for workers comparable to Private Sector counterparts) MULTIPLES greater (in “value”, reflecting the formula benefit itself, the substantial incremental cost of the very young full/unreduced age at whcih it can begin being collected, and the VERY materiel incremental cost of COLA increases … with only FURTHER increases now suspended in NJ) pensions and benefits?

    And as I have stated before, pension contribution requirements to accomplish “full-funding” are directly proportional to the Plan’s “generosity”, with a very generous Plan being very costly, and hence very difficult to fully fund. The LACK OF “full finding” is not the “cause” of the pension mess, but the CONSEQUENCE of the true ROOT CAUSE, grossly excessive Plan “generosity”….. or as the above quoted Report stated, “overpromising”.


    • Posted by S Moderation Douglas on April 10, 2017 at 4:34 pm

      “grossly excessive Plan “generosity”

      HEY !!! Where’s the empathy, brother?

      Safety workers give in so many ways. It’s not just a job, it’s a way of life.

      If these first responders aren’t worth $100,000, I’ll kiss your butt on the town square and give you half an hour to gather a crowd.

      June Maxi Marshall says:

      “Delightful! What a wonderful job they’re doing and are doing! God Bless America’s’ Police and Fire Departments as well as all SAFETY AGENCIES. What an eye opener and great beginning to a day!”


      • Posted by Anonymous on April 10, 2017 at 10:25 pm

        Quoting SMD ……

        ““grossly excessive Plan “generosity”

        HEY !!! Where’s the empathy, brother?

        Safety workers give in so many ways. It’s not just a job, it’s a way of life.”

        Yes they give …… but financially, they take and take and take and take FAR MORE than is necessary, reasonable, just, fair (to Taxpayers) or affordable.


        Quoting SMD,

        “If these first responders aren’t worth $100,000…”

        $100K ? We should be so lucky !

        Using the NJ data universe, I just checked the pay of an Officer I know …… less than 15 years of service, “Patrolman” rank, BASE pay $132,000. Add in the value of current healthcare benefits, retiree healthcare benefits, and a VERY generous DB pension, and you get “Total Compensation” just about $200K … not $100K.

        You know squat about NJ’s wages or pensions, and should stick to your acquired skills ………… changing light bulbs.


      • Posted by Anonymous on April 11, 2017 at 2:21 pm


        What was that you said ……

        “Safety workers give in so many ways. It’s not just a job, it’s a way of life.”
        Yup, and way too often the bad ones do things like THIS:

        The college student in this video looks like she weighs 100 lbs. Was this necessary ? Unless she had a gun or knife threatening this officer, how is this anything by grossly unnecessary force?

        The officer should be fire and charged with aggravated assault.


  3. Posted by Seesaw Junior on April 10, 2017 at 11:37 am

    But all was not in vain, as they were awarded lucrative patronage appointments following their electoral losses.
    Some day, sometime in the future, you are going to have a US Attorney (Not Fatty Christy) with a backbone who is going to look at this type of transaction for exactly what it is, fraud, bribery and embezzlement. A violation of “honest government services”, starting with 18 U.S.C. § 1341…and that US Attorney is going to bring the hammer down.


    • Posted by Anonymous on April 10, 2017 at 12:32 pm

      Hopefully, that will happen in the NEAR future.

      And clearly, “racketeering” is another appropriate charge.


  4. Posted by MJ on April 11, 2017 at 6:25 am

    The more things change, the more they stay the same….this pension and healthcare mess will be with us for for a long, long time……..all we have been hearing for years about state after state, plan after plan going broke, …, debt, insolvency, over promising, under funding…….ten years from new we will still be reading the same news!


    • Posted by Anonymous on April 11, 2017 at 9:40 am

      You can only kick the can down the road for so long. Clearly within those 10 years we WILL see some LARGE Plans run out of Pension Plan assets.

      What happens at THAT point will be the real test (and send the very much need message to the unbending Unions/workers associated with Plans likely to find themselves in the same predicament)……..

      Will pension payouts continue on a pay-as-you-go basis (at least temporarily), in full , or on a reduced basis?

      Will the Feds assist with a bailout or loans? If they do, will the MANY MANY very rich Plans be cut back if the Feds do offer to help?

      Will we finally get to where we CLEARLY need to be (just to stop digging the financial hole we are now in even DEEPER) ….. that the pension accrual rate for the future service of all CURRENT Public Sector workers can be reduced (just as in now both legal and commonplace in Private Sector Plans)?

      Stay tuned.


  5. Posted by S Moderation Douglas on April 11, 2017 at 12:19 pm

    I don’t always agree with… Anonymous…


    “How did you go bankrupt?” Bill asked.

    “Two ways,” Mike said. “Gradually and then suddenly.”

    Ernest Hemingway’s 1926 novel, The Sun Also Rises.


    • Posted by Anonymous on April 12, 2017 at 12:37 am

      • Posted by S Moderation Douglas on April 12, 2017 at 2:08 am

        And the irony…

        “The initiative, Proposition B on the June 2012 ballot, replaced guaranteed pensions with 401(k)-style retirement plans for all newly-hired city employees…

        except police officers.”



        • Posted by Anonymous on April 12, 2017 at 11:36 am

          Oh my, we finally AGREE on something (I better check my pulse … surely this must be a dream).

          Of course the Police should have been switched to 401Ks. Besides the Union sway, and likely veiled (or perhaps overt) threats to those voting, the other reason that they weren’t is because it would have exposed just how ludicrously generous their Safety worker pensions are right now.

          For those still on the 3%@50 formula, for the full career Officer who TYPICALLY retires by age 55 (with COLA-increases thereafter), the total level annual (employer/employee) contribution into that 401K Plan needed to provide the same income as the current DB Plan would need to need OVER 50% of pay (using what the investment community believes are appropriate investment return assumptions). Yup, THAT is how ludicrously generous they are right now.

          San Diego’s Elected Officials knew that their Taxpayers would never stand for even half that %, when they typically get no more than a 3% of pay 401K contribution from their employers ……. so they caved, leaving this BIG contributor to their pension mess unaddressed.


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