NJ Pension Death Spiral

Senate President Stephen Sweeney, joined by Assembly Speaker Lou Greenwald and Rutgers professor Marc Pfeiffer, painted a bleak picture of the state’s financial future if it fails to enact difficult fiscal reforms during the first in a series of town hall meetings he plans to hold statewide to discuss the fast-approaching financial crisis and his proposed solutions, warning that inaction would doom the state to a “financial death spiral” that would force huge tax increases, service cuts and a mass exodus of residents.

The smartest thing reported to have been said:

Gov. Corzine in two years made more pension payments than the previous 17 years combined. Gov. Christie did more than Gov. Corzine, and Gov. Murphy has done the single largest pension payment in the history of the state with the help of the Legislature, and we’re losing ground,” Greenwald said. “And none of that has lowered property taxes. None of it.”

The dumbest thing:

“I’m happy to have a conversation around revenues, but you can’t continue to pour revenues into a broken system and expect a different result,” Greenwald again.

Yes you can. That IS the solution assuming no change in the current benefit structure. If the state were to contribute $30 billion annually (last budget had $3.2 billion) there would be no crisis. Along with what the localities and the employees are contributing the shortfall of approximately $200 billion would be made up in about 10 years and the benefits currently being accrued would be fully funded.

It would be as if New Jersey were to fall out of a plane and someone thought it ridiculous to think a parachute would not help. It would. The issue is that New Jersey can’t afford its parachute.

17 responses to this post.

  1. Posted by Tough Love on January 28, 2019 at 11:26 am

    Quoting …………..

    “The dumbest thing:

    “I’m happy to have a conversation around revenues, but you can’t continue to pour revenues into a broken system and expect a different result,” Greenwald again.

    Yes you can. That IS the solution assuming no change in the current benefit structure.”

    ——————————-

    Maybe we WILL one-day have another (and FAIRER) option ………. State Bankruptcy ………. with the legal ability to materially reduced these ludicrously excessive (as well as unaffordable) UNION-BOUGHT-from Elected-Officials pension & benefit “promises”.

    Reply

    • Posted by NJ2AZ on January 28, 2019 at 11:52 am

      the only benefit of formal bankruptcy is perhaps some order brought to the chaos, right?

      As sovereigns, ultimately if the states can’t pay they can say “we can’t pay” and that’s all there is to it right?

      Reply

      • Posted by Tough Love on January 28, 2019 at 2:31 pm

        I’d guess that when the 1-st State actually reaches the point where it simply CANNOT pay current retirees, Bankruptcy at the State level will BECOME a legal option.

        Reply

      • As sovereigns, ultimately if the states can’t pay they can say “we can’t pay” and that’s all there is to it right?
        ==
        Bingo 🙂

        Reply

    • Posted by geo8rge on January 28, 2019 at 7:46 pm

      “Maybe we WILL one-day have another (and FAIRER) option ………. State Bankruptcy ”

      Forbes: Current law doesn’t let states go bankrupt… yet

      If the law should change and a state actually tried to file for bankruptcy, creditors would immediately file constitutional objections under the contracts clause and the 10th Amendment.

      https://www.forbes.com/sites/johnmauldin/2016/07/28/dont-be-so-sure-that-states-cant-go-bankrupt/#6bfd865f2f2d

      But is the contract clause really an impediment? I was listening to a podcast about the building of the Civil War vessel monitor. The architect of the project, John Ericsson, was owed money by the Federal Government for an earlier project. A court agreed that Ericsson had a valid contract. The Congress simply refused to appropriate money to pay him.

      @23:10 the discuss Ericsson’s contract and intentional nonpayment by Congress.

      The Battle of the Ironclads, Part 3: Inventing the Monitor

      What is the enforcement mechanism for the situation where the state refuses to appropriate money to satisfy a contract? And especially a contract agreed upon by a much earlier legislature for which nonperformance (underfunding) became common over a prolonged period of time.

      Reply

      • Posted by NJ2AZ on January 28, 2019 at 7:55 pm

        this is what i was eluding to earlier. At the state level, even if the NJ Supreme Court rules pensions much me paid in full, they have no way of making the legislature appropriate the funds

        i don’t imagine the federal government has any interest in getting involved between an arrangement between State X and its citizens

        Reply

      • What is the enforcement mechanism for the situation where the state refuses to appropriate money to satisfy a contract?
        ==
        There is no mechanism except for what the state allows, which the state can cancel or repudiate at will.

        Reply

      • If the law should change and a state actually tried to file for bankruptcy, creditors would immediately file constitutional objections under the contracts clause and the 10th Amendment.
        ==
        With just WHOM would these “constitutional objections” be filed with>>?

        Reply

    • Maybe we WILL one-day have another (and FAIRER) option ………. State Bankruptcy

      States do NOT NEED Bankruptcy, they can repudiate their debts with impunity because they cannot be sued, in state court or federal court, by state residents or foreign resident- per the 11th Amendment 🙂

      Reply

  2. Posted by boscoe on January 28, 2019 at 12:15 pm

    I think our moderator is being facetiously perverse. Perhaps a better analogy would be you can’t fill a container with water if there’s a large hole in the bottom. The other thing that is facetious is listening to Lou “Empty Suit” Greenwald attempting to erase his past.

    Reply

  3. Posted by PS Drone on January 28, 2019 at 2:04 pm

    I presume that the drones feel that once the pension plan asset well runs dry benefits will continue to be paid at an un-reduced rate out of General Fund revenues. In other words, pension benefits will quickly become spending priority numbers 1 through 4. Everything else be damned. I realize that such a thought process flies in the face of reality and logic, but remember they already think the existing plan benefit schedules are appropriate and well deserved. Everyone should be able to retire at age 55 and continue to get paid something close to their non-overtime compensation at taxpayer expense!

    Reply

    • Posted by Tough Love on January 28, 2019 at 2:34 pm

      Yes, but those “drones” assuredly will demand the FULL (not a reduced) amount….. the-taxpayers-be-damned !

      Reply

    • Posted by Coco on January 28, 2019 at 8:27 pm

      When are the big changes supposed to happen ? How will it affect me with 25 years in ? I’m very worried.

      Reply

      • Posted by Tough Love on January 29, 2019 at 9:09 am

        lol ……………

        “worried” that he/she won’t get all of the ludicrously excessive promised pension (AND retiree healthcare benefits), NONE of which were ever necessary, just, fair to Taxpayers, or affordable.

        Do I hear any SYMPATHY for Coco ?

        Reply

        • Posted by Coco on January 29, 2019 at 12:36 pm

          Obviously you don’t get sarcasm. I was a Marine TL. You honestly don’t think I’m prepared for my retirement. I’m prepared for everything in life. Good grief.

          Reply

          • Posted by Tough Love on January 29, 2019 at 5:24 pm

            Congrats on being a Marine ………..

            If your pension Plans runs out of assets, as many WILL, perhaps the Marines will come to your financial rescue.

            Reply

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