This page has been archived and commenting is disabled.
An Irrevocable Right to Benefits?
Lisa Fleisher of the WSJ reports, New Jersey Pension Gap Grows:
New
Jersey's pension gap grew to $53.9 billion in the last fiscal year, up
from $45.8 billion, thanks to market losses and a lack of state
funding, according to figures released Thursday by the state.
The
looming pension burden, largely ignored by the state for the past
decade, has ballooned into a nearly unmanageable problem that will push
state and local finances into a corner in coming years, dropping large
bills in the laps of already strained taxpayers.
Gov. Chris
Christie's administration said the gap, which reflected the state's
investment positions as of June 30, highlighted the need for proposed
cuts to current public workers' pensions.
The new calculations
mean the state has 62% of the money it needs to pay retirement benefits
promised to roughly 720,000 state and local workers over the next
decade, down from 66% a year earlier. But the state is using an annual
8.25% rate of return, which critics say masks the problem by being
overly optimistic
"As all states,
they're getting it wrong," said Eileen Norcross, a George Mason
University researcher who has studied New Jersey's budget and pensions.
Using a 3.5% rate of return, she had estimated the previous liability
at $173 billion.
For most of the past decade, New Jersey
politicians from both parties have skipped required payments to the
pension fund while giving increases in benefits to workers. Faced with a
tight budget, Mr. Christie skipped a $3.1 billion payment this year,
which experts said all but guaranteed a higher gap next year.
Mr.
Christie, a Republican, wants to reverse a 9% pension bump workers
received in 2001 under a Republican administration. A spokesman for
Senate President Stephen Sweeney said he would work on changes that
would "ensure workers who have been promised a pension get one," adding
the governor needed to fund the pensions.
Unions
argue their members have an irrevocable right to benefits they have
earned, and the governor has said he will meet the unions in court.
Public workers pay into their pensions at various rates—8.5% of salary
for police officers and firefighters; 5.5% for teachers, state and
municipal workers; and 3% for most judges.
"Once again, the
Christie administration wants to make middle-class retirees pay the
price for the disastrous consequences of reckless speculation and
financial malfeasance on Wall Street, and for the legislature's
continuing failure to fund the pension," said Bob Master, political
director for the New York-area Communications Workers of America.
Mr.
Christie in March signed a slew of pension and benefits changes pushed
by Democrats but said they didn't go far enough. In September, Mr.
Christie unveiled further proposals targeting current workers,
including raising the retirement age to 65, requiring all workers to
contribute 8.5% of their salaries to pensions, and eliminating
cost-of-living increases.
In a statement, state Treasurer Andrew
Sidamon-Eristoff said Thursday, "Unchecked, the cost of this
impossible burden will fall not just on the taxpayers of today, but on
future generations of New Jerseyans."
Average annual pensions
for new retirees as of July 2009 were roughly $39,500 for state
workers, $46,400 for teachers, $73,500 for police officers and
firefighters, and $105,600 for judges.
So who
is right, unions or the Christie administration? At this point, it
doesn't matter. Yes, Wall Street's elite made off like bandits,
squeezing the middle class once again. But Governor Christie, who spoke
with 60 Minutes this past Sunday,
is right when he says public sector workers and retirees will get
little sympathy from private sector workers who saw their 401K plans
implode in 2008. Moreover, with state budgets deep in the red, there is
no money left to pay for public works projects, let alone generous
public pension benefits. All stakeholders need to make concessions or
risk deeper cuts down the road.
If I were the unions, I would
use this as an opportunity to push for better governance at the large state public plans. And by better governance, I mean make sure that
alignment of interests are there. As for state governments, they have
little choice but to raise the retirement age, cut benefits, and
partially or fully remove inflation protection on public sector
pensions. They should also revise their rosy investment assumptions for
state plans.
This may seem unfair and unreasonable to public
sector workers, but to quote a strategist who I spoke with yesterday,
"deleveraging sucks". You can't have pensions apartheid between the
private and public sector. And there are no "irrevocable rights to
benefits". Just look at the mess Greece and Ireland are in right now.
When the money runs out, cuts are guaranteed.
That's one of the reasons why I was disappointed with the meetings at Kananaskis.
A lot of people are looking at politicians with gold plated pensions
asking themselves why couldn't they expand CPP and provide Canadians
with a more secure retirement? I know, the critics will holler:
"it's just another payroll tax". They're wrong and shortsighted and
I'm embarrassed to say this is the best Canada could come up with --
another giveaway to banks and insurance companies. And who's going to
end up bailing out PRPPs when they flop? Who else but Canadian
taxpayers!
There was a time when Canada led the way in terms
of health, education and social economic policy. Our leaders need to
rethink expanding CPP. If you do it right, you'll bolster the private
and public sector. But if you do it wrong, or introduce half-baked
measures, you're better off not doing anything at all. I'm serious, I'd
rather see no change than reforms that are doomed to fail.
»
- advertisements -
Cash out time Bitchez!
Exactly Hulk. People will have to take what they can get while they can get it.
Spot on, spot on. The Unions and the people with pensions are thinking that a contract will force whatever that should happen and that is a fallaci. If a state doesn't have the money for the pensions it won't pay the pensions (look at Prichard Alabama). They are bitching about a slippery slope issue when one cut comes another one will also etc. etc.. But I blame them also, they didn't complain when the states didn't pay into the pension like it should have. They didn't think about he new union workers of public employees that where getting screwed, all they thought about was themselves. As long as the check keeps coming in everything is okay.
They think that piece of paper will force the govt. to pay when they can't, they are out of their minds. I feel for the unions, I really do but the problem is they where getting benefits that where extremely richer than what the private employees got. When a court decides, it too can only go so far in what it can and can't make a state do. And I do agree that much of the outstanding debt to the pensions is alot more than they are letting on and/or know about.
It's actually worse than that...
They aided & abetted the meglomaniacs on Fraud St. and the District of Criminals through their silence and their complete & total compliance with the destruction of the Rule of Law in the USofA.
They were on the front lines and they accepted bribes and promises of future bribes to look the other way...
They are no different than the Stassi, Nazi Death Kamp Korps, or any other groups of thugs for hire.
They don't even deserve pity, as their dis-service was conscience and FULLY for-hire.
They are nothing short of traitors to the US Constitution and the Bill Of Rights.