NJ Abyss

According to a Bloomberg article:

The 2019 budget brings New Jersey “one step back from the abyss,” said [Governor Phil] Murphy, a retired Goldman Sachs Group Inc. senior director and former ambassador to Germany, who took office in January. “This is a major step, but it’s one step,” the Democrat said as he sipped iced tea at a Red Bank restaurant near his riverfront mansion, in his first media interview since signing a $37.4 billion spending plan for the fiscal year that began July 1. Dressed in jeans, his trademark Allbirds woolen sneakers and a taco-patterned shirt in recognition of Mexico’s World Cup match with Brazil, the 60-year-old governor gave a glimpse of weeklong negotiations with Democratic legislative leaders.

Like a lot of the coverage of this budget-setting charade, we learn far more about Murphy’s history and tastes then we do about the numbers. According to a Sobel & Co email these are the taxes that are supposed to raise $1.5 billion:

  • Millionaires Tax: The so-called ‘millionaires tax’, which will impact 1760 NJ taxpayers, will start at $5 million instead of $1 million but will now be 10.75%, up from the previous rate of 8.97%
  • Airbnb Tax: The state will now apply a higher tax, including sales tax and local hotel surcharges, for Airbnb and other short term stay facilities.
  • Uber/Lyft Tax: Uber and Lyft will be making changes as well. These ride sharing services will include a 50 cent surcharge for single passenger trips and a 25 cent additional charge for shared rides.
  • E-cigarettes Tax: Liquid nicotine will be taxed under the new budget at 10 cents per milliliters but details are still being finalized.
  • Corporate Tax: A 2.5% corporate tax surcharge will also be in place this year and next but will be lowered to 1.5% for the next two years following that.
  • Shopping Bag Tax: Even paper and plastic shopping bags are on the hit list. If you do not want to spend five cents each, start bringing your own reusable bags when shopping at your favorite retailer!

Though presumably that “one step back from the abyss” comment referred to the $3.2 billion pension payment (60% of the ARC) line item still in the budget (until such time as these new taxes do not bring in what the back-of-the-envelope estimates predicted) and now the focus turns to pensions and benefits. But here the Democrats again are on divergent paths. Murphy:

Christie had alienated the government workforce by failing to make promised pension payments after they agreed to pay more toward retirement and health benefits — and then calling for more concessions. Murphy said he intended to keep employees in his corner, even as he examines how to reduce their costs to taxpayers. “I’m committed to earning that trust back,” he said. “It isn’t just to have a nice relationship. It’s the right thing to do, to again be a state that people say, ‘You know, I trust this place.’ Rating agencies, God willing, will trust us again.”

Senate President Stephen Sweeney according to philly.com:

Sweeney, a veteran lawmaker from Gloucester County and leader of an ironworkers union local, identified a different crisis he says the state faces: affordability. He’s been sounding the alarm about people leaving the state. Going forward, Sweeney said Friday, he wouldn’t “bargain any further without a commitment” from Murphy to fix the underfunded retirement system. “All we’ve done this year is talk about spending,” he told reporters Friday after another round of unsuccessful budget talks. “The 800-pound gorilla in this room is the pension and health-care plans.”

……………………….

“There’s no question that Murphy does see himself as somebody who’s going to block” a pension and health-benefit overhaul, said Patrick Murray, political analyst at Monmouth University. “That plays into his whole persona of being this progressive stalwart.” He added: “The question is: How hard will Sweeney push this?”

 

27 responses to this post.

  1. Posted by Tough Love on July 3, 2018 at 10:54 am

    NJ might have had a 2018 ARC of zero …………. i.e., the Plans might have been OVER-FUNDED ………………. had the generosity of these Plans always been EQUAL TO but no greater than the FAR FAR FAR less generous pensions typically granted Private Sector workers.

    The “ROOT CAUSE” of NJ’s pension mess is the ludicrously excessive pension (AND benefit) “promises”.

    Reply

    • Posted by Stephen Douglas on July 3, 2018 at 3:59 pm

      Also, bushwah, rubbish, nonsense, baloney, bull.

      According to your source, there are about twenty two states where total compensation is “roughly equal”, i.e. “market value” (plus/minus five percent.) There is no solid correlation between compensation generosity and funding status.

      The “ROOT CAUSE” of NJ’s pension mess is like most other states; lax governance, asset losses, and revenue losses in the Great Recession. In New Jersey and several other states it was lax governance on steroids.

      “I’ll give it away at the beginning: they’re in trouble because they’re not making the “required” contributions to the pensions.”
      ————————————————–
      1) Take the underpayments of ARC and show what they would have earned if invested in the plan .
      2) Use the returns of the median public fund and compare NJ investment performance to their policy and to their peers.
      3) analyze the impact of overpaying for mediocre returns ( consulting and manager fees ) .
      4) then let’s talk about benefit reductions / modifications .

      Show your work.

      Reply

      • Posted by Tough Love on July 3, 2018 at 6:29 pm

        I’ve provided MANY “demonstrations” and data sources ………….. usually in response to your incredible bias and taxpayer-be-damned arrogance (as a CA Public Sector retiree benefiting from these ludicrously excessive Public Sector pensions & benefits).

        Want to find a few ? Try Googling “Tough Love” with “light bulb changer”.

        Reply

      • Posted by Stephen Douglas on July 3, 2018 at 9:59 pm

        After all these years, you haven’t learned the difference between math and logic. Your “demonstrations” are worse than useless.

        The Biggs study that you constantly misrepresent does, in fact confirm that public workers as a rule receive a larger portion of their compensation in the form of pensions and benefits. That is a given.

        What does not follow is that, because the pension is larger, it is excessive. There are thousands of private sector workers who have no pension other than SS. There are thousands of public workers who have “typical” pensions. The private pensions in this case are “FAR FAR FAR less generous”.

        Actual Nationwide data in the Biggs study clearly gives examples of private workers with little or no pensions who nonetheless have much higher total compensation than equivalent public workers. Those public pensions are __not__ excessive.

        The same study gives examples of thousands (generally Bachelors and Masters level workers) who earn “roughly equal” compensation, even though their pensions and benefits are much higher… The higher pensions are a balance to the lower wages. Biggs documents this quite clearly.

        Somehow you have misconstrued the concept of “It is invalid to compare pensions outside the concept of total compensation.” Forget about your $150,000 cops. They are a special case, like it or not.

        1) $150,000 cops are outliers. Not average. Not typical. Useful mainly for sensationalism.

        2) Cops retire earlier. Not just in New Jersey, but in almost all states, and most foreign countries. As a result their pension costs will be higher. If you don’t approve, show cause why it should not be so. (I suggest you back up your opinion with _really_ good data… and logic.)

        3) If you want to compare police/fire compensation with “equivalent” private workers, good luck. Because a policeman has less “risk” or equivalent education to a roofer does _not_ mean they should be paid equally.

        Logic, Brother Love. Even if your math is correct, your logic is flawed.

        Still, after all these years. ignoratio elenchi.

        Reply

        • Posted by Tough Love on July 3, 2018 at 10:16 pm

          Wow Stephen (aka Earth), you sure can twist those Biggs study results.

          Total Compensation includes compensation form ALL sources …… wages, pensions, and benefits.

          And does that Biggs study NOT conclude that in BOTH our home states of CA and NJ that PUBLIC Sector workers (ALL of them, taken together as one group …. which is what financially impacts Taxpayers) have a 23%-of-pay advantage over their Private Sector counterparts, rising to 33% if the much greater Public Sector job security is properly factored in?

          Don’t lie now ………..

          Reply

        • Posted by Stephen Douglas on July 3, 2018 at 11:33 pm

          “Total Compensation includes compensation form [sic] ALL sources …… wages, pensions, and benefits.”

          True.
          ————–
          “And does that Biggs study NOT conclude that in BOTH our home states of CA and NJ that PUBLIC Sector workers… …have a 23%-of-pay advantage over their Private Sector counterparts, rising to 33% if the much greater Public Sector job security is properly factored in?

          True.
          —————
          “(ALL of them, taken together as one group …. which is what financially impacts Taxpayers)”

          Gibberish
          —————–
          The two most important conclusions from the study…

          1) “When benefits are added, total compensation for less-educated state government employees lies around 20
          percent above private sector levels. Total compensation for bachelor’s degree holders is about even with
          private sector levels. Professional degree holders such as doctors or lawyers and individuals with doctoral
          degrees appear to receive total compensation roughly 18 percent below private-sector levels, although
          certain unmeasured factors may compensate.” (page 11)

          2) Comparison of relative (average) compensation of public and private sector workers off different states.*

          *Six to ten years ago. When the unemployment rate returns to 9.7 percent and the Dow is at 6,400, tell me about it.

          ——————–
          Your logic is still flawed and your “demonstrations” are specious, still.

          Reply

        • Posted by Stephen Douglas on July 3, 2018 at 11:42 pm

          Posted by PatB on April 17, 2016 at 11:50 pm

          Of the actuaries and accountants who must read this blog, I can remember no one defending your math. Maybe this is the time for them to come to your rescue, for the sake of truth, which there seems to be so little of in public pensions.

          Who can really understand the opaque rules and numbers that make up these pensions? Obviously not the pols, since they have not made a sound pension decision since before 1990. Not the unions, since they don’t want to be bothered at who will pay for the promises. And certainly not the members, who only understand what is promised, and believe in “the full faith and credit” of government to deliver.

          So if anyone supports your math, speak now. If they agree but find fault in it, they should say so, maybe we can all learn something. And if its mostly BS, I hope you can handle the truth.

          Reply

          • Posted by Tough Love on July 4, 2018 at 7:30 am

            Darn,

            Stephen Hawking nor anyone from NASA has ever defended my math either !

            I guess that must make it wrong …………. lol

          • Posted by Stephen Douglas on July 4, 2018 at 11:13 am

            Cop out.

            You cannot be that obtuse. It’s not good for your health.

            If I could convince (finally) SurfPuppy that a change from 2%@50 to 3%@50 is __not__ a fifty percent increase, there may still be hope for you.

            May.

          • Posted by Tough Love on July 4, 2018 at 12:52 pm

            Stephen Douglas (aka EARTH),

            You’re an idiot ……………. something isn’t “dis-proven” because nobody steps forward to agree with it.

          • It ain’t “proven” either.

            Your “demonstrations” are not proof.

          • Posted by Tough Love on July 4, 2018 at 2:24 pm

            Stephen Douglas (aka EARTH),

            If I said the “sky is Blue”, you’d say “prove it”.

            What YOU think isn’t important to me.

            Most of this Blog’s readers come with an open mind, not the bias (and obvious self-interest) that you bring.

          • Posted by Stephen Douglas on July 4, 2018 at 5:06 pm

            One

            More

            Time

            You have “demonstrated” that typical public sector pensions are multiples higher than typical private sector pensions.

            Kudos.

            Congratulations.

            The sky _is_ blue. (For now, anyway.)

            Butt…

            We already knew that.

            The logic question is, are those multiple higher pensions and benefits offset by the lower salaries of public workers. The empirical answer, according to Biggs, is, in many (or most) cases… yes. Even with what you characterize as exorbitant or LUDICROUS pensions, many public workers earn total compensation less than, or equal to, equivalent private workers. For those workers, their pensions, even though multiples higher, are __not__ excessive.

            Logic.

            You asked several true/false questions. I answered. I have some for you.

            1) Did Biggs not say “However, more generous benefits compensate for lower average wages. …
            Total compensation for bachelor’s degree holders is about even with private sector levels.”?

            2) Did Biggs not say “Professional degree holders such as doctors or lawyers and individuals with doctoral degrees appear to receive total compensation roughly 18 percent below private-sector levels, although certain unmeasured factors may compensate.”? (Page 11)

            Those statements and his included calculations show that, nationwide, 60 percent of state workers are either __underpaid__ or “market level”. They are __not__ overpaid, Even though their pensions are multiples higher.

            Logic

            ——————
            There are some cases where pensions and benefits actually do result in higher compensation for state workers… Biggs:

            “However, more generous benefits compensate for lower average wages. When benefits are added, total compensation for less-educated state government employees lies around 20 percent above private sector levels.”

            What color is the sky in your world?

          • Posted by Tough Love on July 4, 2018 at 7:37 pm

            Quoting Stephen Douglas (aka EARTH)……………..

            “You have “demonstrated” that typical public sector pensions are multiples higher than typical private sector pensions. ”

            Yes I have, and THAT’s what I advocate to change, because there aren’t many occupations where the greater Private Sector “wages” offsets the HUGE Public Sector pension (AND benefit) advantage.

          • You can hash that out with Mr. Biggs, because that is exactly what he was saying. See questions 1), 2) above.

            “Total compensation for bachelor’s degree holders is about even with private sector levels.”

            “Professional degree holders such as doctors or lawyers and individuals with doctoral degrees appear to receive total compensation roughly 18 percent below private-sector levels,”

            As a wise man once said, it’s a matter of data… and… logic.

          • Posted by Tough Love on July 4, 2018 at 8:12 pm

            Stephen Douglas (aka EARTH),

            But isn’t what FINANCIALLY IMPACTS the Taxpayers the totality of Public/Private sector Total Compensation differences (+ or -) for ALL workers taken together ?

            And (per Biggs), doesn’t there exist (in BOTH our home states of CA and NJ) a Public Sector Total Compensation ADVANTAGE equal to 23% of pay (rising to 33% when the value of the much greater Public Sector job security is factored in ….also per the Biggs Study) when all workers are taken together ?

            —————————–

            Don’t lie now ……………

          • Posted by Stephen Douglas on July 4, 2018 at 10:16 pm

            Asked and answered…

            “What FINANCIALLY IMPACTS the Taxpayers the totality of Public/Private sector Total Compensation differences (+ or -) for ALL workers taken together ?”

            Gibberish…

            Where do you come up with this crap? You have hundreds of thousands of state workers who are already equal (got a problem with EQUAL?) And thousands more who are underpaid. That “FINANCIALLY IMPACTS the Taxpayers” in a good way. It’s a solution in search of a problem.

            If you have thousands of less educated state workers who have clearly been shown to be overcompensated vis-à-vis private sector compensation (you do), wouldn’t that be the logical place to “advocate to change”?
            ————————–
            Question: “doesn’t there exist (in BOTH our home states of CA and NJ) a Public Sector Total Compensation ADVANTAGE equal to 23% of pay…”

            Maybe. There were conflicting studies at the time, and there have been a lot of changes since then in employment, wages, and pension formulas. I must say I have never known anyone so obsessively married to one “statistic” out of an 82 page ten year old study and so dismissive of the rest of the data. It’s eerie.

          • Posted by Tough Love on July 4, 2018 at 10:22 pm

            Hogwash Stephen Douglas (aka EARTH),

            We BOTH know that …………..”“What FINANCIALLY IMPACTS the Taxpayers the totality of Public/Private sector Total Compensation differences (+ or -) for ALL workers taken together “.

            The split by income group is irrelevant from the standpoint of the net financial impact upon taxpayers.

            That’s why in both CA and NJ PUBLIC Sector workers have (as a NET of those who make more and those who make less) a 23% of pay ADVANTAGE.
            ———————————–

            An ADVANTAGE that must be eliminated.

          • Posted by Earth on July 4, 2018 at 11:07 pm

            Earth to Brother Love:

            “………. but it such touch upon you as a person.”

            What do that even mean?
            —————————————–
            Seriously, Bro, you should listen to Mr. Douglas. They don’t call him S Moderation Douglas for nothing (check the IP address). He is an excellent source of unbiased information and unique insights into the causes of the pension crises.

            You really need to keep an open mind, and chill.

        • Posted by Earth on July 4, 2018 at 5:31 pm

          Earth to Brother Love:

          You really should care about what Mr. Douglas thinks. He is only trying to help.

          I believe he is also known as the eponymous S Moderation Douglas. (Check the IP address.)

          Moderation is not just a name. It’s a way of life. No bias, no self interest. Just a man fighting for truth, justice, and the American Way.

          And whirled peas.

          Reply

          • Posted by Tough Love on July 4, 2018 at 7:41 pm

            Stephen Douglas,

            My challenge to you from about 1 week ago remains.

            Ask Mr. Bury to respond to a request from YOU to answer the question: Do commentators Stephen Douglas and EARTH post comments originating from the same IP address.

          • Well, you can kiss that one good-bye.

            I can’t think of anything less relevant to the discussion

          • Posted by Tough Love on July 4, 2018 at 8:15 pm

            Stephen Douglas,

            Perhaps knowing if you and EARTH are one and the same is of little relevance to our back & forth discussion of Public Sector pensions………. but it such touch upon you as a person.

  2. Posted by dentss dunigan .... on July 3, 2018 at 10:57 am

    He forgot to mention now the top 2% are paying 50% of all taxes ,but he continues to insist they pay their “fair share’ …..

    Reply

  3. Posted by skip3house on July 3, 2018 at 11:00 am

    Near as I can tell, Sweeney wants pension costs for NJ taxpayers reduced to ‘affordable’, while ‘Murph’ needs to keep us ‘stringing along with same old political unfunded promises that got us here ~20 years ago.
    How do they get around our the Constitutional balanced Budget requirement?
    And, no mention of the cruel regressive way half our total school costs are raised by residential property taxes……..?

    Reply

    • Posted by PS Drone on July 3, 2018 at 11:25 am

      Except in Abbott districts where the State pays about 80% to 90%. The taxpayer gets to pay for half (or more) of their school costs and most of the Abbott districts as well. The epitome of fairness.

      Reply

  4. Posted by Anonymous on July 4, 2018 at 6:00 pm

    Does this remind you of anyone?

    Maybe of an irresistible force and an immovable object?

    Or maybe just two VERY persistent Burypension posters?

    https://m.facebook.com/story.php?story_fbid=2509483919102209&id=491750840875537

    Reply

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