According to one of the litigants:
The Supreme Court of New Jersey on Tuesday agreed to hear
a major case, Berg, et. al. v. State, et. al.
concerning New Jersey’s ailing pension system. At issue is the constitutionality of the so-called Cost-of-Living-Allowance (COLA) freeze imposed as part of the 2011 reforms signed into law by Governor Christie. Last year, an appellate court ruled
that the indefinite suspension of COLAs violated the contractual rights of all retired public workers and remanded the case back to the trial court. The case will likely be argued this fall.
New Jersey Senate President Steve Sweeney proposed what he said was not a bailout for public pensions in this country. Rather the federal government will give to those other states who have deliberately underfunded their defined benefit plans $1 trillion so they can consider that money as an asset in determining what is euphemistically called their ‘Annual Required Contribution’ (ARC).
Among the warped thinking that would germinate such an absurd plan, by far the most dangerous is:
As if a federal bailout were a given for anyone feckless enough to need one.
Other disturbing aspects:
On Friday lawyers for the three largest New Jersey Pension funds (PERS, TPAF, and PFRS) filed a motion for leave to file a second amended complaint on August 21, 2015 in Burgos v. Christie which included a copy of the amended complaint they intend to file.
I will have something to say about this filing (which included some significant misstatements of fact) in the next blog but, for now, some notable excerpts:
Mary Williams Walsh just reported that:
A judge in Chicago ruled on Friday that a plan to change city workers’ pensions was unconstitutional in a case being closely watched for its effect on the city’s uncertain finances.
The ruling, by Judge Rita M. Novak of the Cook County Circuit Court, is viewed as a setback to Mayor Rahm Emanuel’s efforts to rein in costs and rescue the city’s credit rating. Officials in the mayor’s office said the city would appeal.
“While we are disappointed by the trial court’s ruling, we have always recognized that this matter will ultimately be resolved by the Illinois Supreme Court,” said Chicago’s corporation counsel, Stephen Patton, in a statement. “We now look forward to having our arguments heard there.”
Last year, the city negotiated labor agreements to strengthen two of its pension plans, those for laborers and general municipal workers. The agreements called for reducing the cost-of-living increases that retirees receive each year, increasing workers’ mandatory contributions to the funds and strengthening the city’s pledge to step up its own contributions. In the past, the state Legislature has told Chicago what to contribute, and it has set the required amounts well below the actual cost of the pensions, putting the system into serious jeopardy.
Of the 31 unions whose members were to be affected by the changes, 28 had approved it. But the others sued.
How similar is this to the situation in New Jersey where we have seen:
Charles Wowkanech, president of the New Jersey State AFL-CIO, had an op-ed this morning where he offers what he sees as a “realistic path toward meeting N.J.’s pension obligation” with a four-pronged approach that he thinks would raise $1.6 billion annually as follows:
- $600 million from not paying fees for alternative investments
- $87 million from making the pension payment 11 months earlier
- $600 million from higher taxes on people making over $1 million a year
- $300 million in unanticipated revenue
He is dangerously wrong on all counts and, if his suggestions were implemented, the likely result would be:
- Continue reading
The Pew Charitable Trusts (Pew) released their 2013 update* on the funding gap of 238 selected state pension plans, pegging it at $968 billion, based on those quaint numbers they claim to have taken from official actuarial reports and CAFRs. A lot of people are going to accept Pew’s figures as fact, but are they? I looked at the reports from which New Jersey’s numbers were supposed to have been taken as well as checking over the numbers for all the states for reasonableness and found several troubling inconsistencies.