this letter was also published NorthJersey 7:03 a.m. ET Dec. 15, 2017
In regard to the federal tax reform debate, it’s amazing to read the many letters to the editor justifying the deduction of local taxes because New Jersey gets so little back from the U.S. government in comparison to other states. New Jersey’s disgraceful local taxes have nothing to do with the federal government or with the actions of other states and everything to do with the reckless fiscal mismanagement brought about by elected officials of both parties.
We have a pension system that will never be solvent unless it undergoes major reform. We have a public educational system supported by billions of dollars in spending — much of which is siphoned off before it ever gets to the classroom, and thus resulting in a failure of education in our major cities. We have more than 500 municipalities with a duplication of services that’s unique to New Jersey. And we have government workers making salaries and benefits together with retirement packages that are out of control and continue to escalate.
Rather than looking to the federal government for a handout so New Jersey can continue its profligate spending, we should be demanding sound solutions to our fiscal mess from our elected leaders.
Doing something “swift and broad” will be far harder in light of the coming mass exodus of big dollar taxpayers caused by the double whammy of Herr Trump’s corporate tax hand outs (paid for by blue state property tax payers) combined with Murph’s soak-the-successful tax plan. The iceberg has been spotted, NJ is closing in on it fast and they are running out of other people’s money.
Ridgewood NJ, Gov. Chris Christie’s special commission on public pensions and health benefits released its final report on Wednesday: only swift and broad reforms stand a chance of rescuing a system in crisis.
New Jersey’s benefits for state government workers are now on track to consume a quarter of the state’s annual operating budget in 2023, and “the cupboard of relatively easy reforms is now bare,” the report said.
As it was for Christie, the pension system will be one of Gov.-elect Phil Murphy’s most pressing and imposing tests.
Christie earned national acclaim for working with Democrats to revamp benefits for government workers by increasing the retirement age, freezing cost-of-living adjustments and forcing workers and state government to contribute more to the system., but the Christie’s administration didn’t live up to its own ambitious payment plan, making deep cuts to the pension contributions, and he eventually set the state on a slower, more modest ramp up to the full payment recommended by actuaries.
Governor elect Phil Murphy has said he’d like to meet or beat the Christie schedule, But according to the commission “something more is needed, and quickly,” The commission report went on “Neither the 2010-11 reforms, nor the limited initiatives taken since then, will do anything to stop benefits from consuming 26 percent of the budget five years from now.”
Christie could barely scrape money together to get through the first half of a 10-part ramp up to full pension funding with a $2.5 billion payment this year , but the state will need more than $6 billion in yearly payments .
Murphy has already promised to raise roughly $1.3 billion in new taxes , but measured under national accounting standards, the state is $134 billion short of what it needs to pay for current and future retirement benefits. Combined with local government employers, the total system has racked up $168 billion in unfunded liabilities and has assets to cover just 31 percent of its debts.
Updated on September 3, 2017 at 8:02 AM Posted on September 3, 2017 at 6:30 AM
With an election coming up, we’re hearing a lot about consolidating towns and school districts as a means of solving our property-tax problem.
Before this goes any further, let me warn all involved about the nature of such transactions.
Consolidations are like weddings. There are two types: weddings of attraction, into which both partners enter willingly; and shotgun weddings, in which one party takes part only because of compulsion.
The latter describes one Monmouth County town that I covered in the waning days of the Corzine administration, Loch Arbour.
The elected officials of this charming little town by the sea entered into a mutually beneficial pact with nearby Ocean Township when they set up a shared-services agreement. They would send their kids to Ocean schools in return for a per-pupil payment of about $15,000 per year.
Erica JedynakPublished 11:28 a.m. ET Aug. 22, 2017 | Updated 1:54 p.m. ET Aug. 22, 2017
New Jersey’s pension system is failing, and it is going to take a lot of good people down with it.
That sad fact adds a touch of poignancy – along with a dash of frustration – to the latest bad news on the state’s finances. The Mercatus Center, a think tank based at George Mason University, recently rated New Jersey’s state finances as the worst in the country.
While some of the data might seem obscure to non-accountants, the problems are all too straightforward – over-promising and underfunding. Successive administrations and legislative majorities of both parties have made overgenerous commitments, then failed to fund them, leaving a tab that the state’s future taxpayers cannot possibly cover.
New Jersey’s public pension crisis is a stark case in point. With more than $235 billion in unfunded liabilities – $26,000 for every man, woman and child – the state’s retirement system is among the worst in the nation. And while you’re reading this, the problem – decades in the making – is getting worse.
Dustin Racioppi, State House Bureau, @dracioppiPublished 3:29 p.m. ET Aug. 15, 2017 | Updated 5:32 p.m. ET Aug. 15, 2017
Gov. Chris Christie’s new law shifting lottery revenue from education and social-service programs to the troubled public employee pension funds is being viewed as a “slightly positive” move by a Wall Street ratings agency, but not one that will fully relieve the pressure on the state to meet its obligations to workers.
The report by Moody’s Investors Service is the latest analysis by one of the three major ratings agencies that have collectively downgraded New Jersey’s credit under Christie a record 11 times. They often cited the state’s heavily underfunded pension system as the main driver of the downgrades.
One day before the June 30 budget deadline, when all eyes were focused on the controversial Horizon Blue Cross Blue Shield of New Jersey bill, state lawmakers pulled off a remarkable sleight of hand.
Quickly and quietly, with little to no outside analysis, the Legislature approved Gov. Chris Christie’s unprecedented plan to transfer the New Jersey Lottery’s assets and revenue stream to the beleaguered state pension system, which has the largest unfunded liability in the nation.
A report by Municipal Market Analytics called the governor’s plan “magic” and said it was “an accounting scheme (and gamble) for optics and budgetary relief.”
Just like that, the pension system could claim an additional value of $13.535 billion — the value the bill put on the lottery — and book a corresponding reduction in its unfunded liability.
Just like that, the pension system was promised approximately $1 billion a year in revenue from the lottery.
Trenton NJ, An effort by Senator Jennifer Beck (R-Monmouth) to force a vote on legislation she sponsors to forfeit the pensions of corrupt public officials (S-1557) was immediately blocked by Senate Democrats at today’s session of the New Jersey Senate.
A third attempt by Sen. Jennifer Beck to force a vote on legislation she sponsors to forfeit the pensions of corrupt public officials was immediately blocked by Senate Democrats today. (SenateNJ.com)
This marks the third time Democrats have voted to block the consideration of the pension forfeiture legislation. Previous motions by Beck to move the bill were immediately tabled by the majority on February 6 and February 13.
“Time and again, Senate Democrats have voted to protect the pensions of corrupt public officials,” said Beck. “It’s inexplicable that they would continue to choose convicted officials over the taxpayers they represent.”
An investigation by the Asbury Park Press last year found at least 40 convicted criminals collecting state pension checks of up to $83,000 per year.
“The APP found a million dollars of taxpayer money going to corrupt public employees, including some found guilty on federal corruption charges,” added Beck. “Those are just the people they found, there are probably dozens more. If you violate the public trust, you don’t deserve a cushy retirement at taxpayer expense. Why is that so hard for Democrats to understand?”
…this has been a problem for almost 4 decades. I wish there was a magic solution. Sen Moynihan was trying to figure this out and commented how convoluted and arcane the process was. I would think holding our washington reps accountable and stop re-electing them unless they work to divert more money home would be a start. Our current congressman mentioned this in his campaign and is working to get some more money home…. the other part is home rule, which is our problem to fix. No one wants to regionalize so we have 500 plus municipalities of overlapping services. Yes the pension system needs to be fixed but people have to make our reps accountable, which except in rare instances like our district, is not happening today.
Unlike the city of Detroit, the state of New Jersey cannot declare bankruptcy. Federal bankruptcy laws don’t allow it.
“It’s not provided in the federal bankruptcy laws. There is a provision for municipalities and any other kind of organization in the state to go bankrupt, but not the state itself,” said Professor J. Fred Giertz, an economist who is director of the University of Illinois’ Institute of Government and public Affairs.
And although there has been some talk of changing federal law to permit states to reorganize their financial obligations through bankruptcy, it hasn’t gone far.
“In the United States we have a federal system where the states have powers that are protected from the national government, so there’s a real question about supremacy and whether the federal government can impose bankruptcy rules on the state, which is supposed to have powers that are protected from the federal government,” Giertz said. “I don’t think there’s any likelihood it’s going to be approved by Congress anytime soon.”
• The state itself cannot file for bankruptcy under the U.S. Bankruptcy Code.
• Municipalities cannot file for bankruptcy under the U.S. Bankruptcy Code without approval of the state (See N.J.S.A. 52:27-40).
• The state has in the past made it clear that they would not approve such a filing by a municipality. There are red flags under state law that identify when a municipality is experiencing financial difficulty. Such a municipality must appear before the Local Finance Board with a financial recovery plan.
• It is unclear, at best, whether the major costs affecting municipalities for unionized contractual obligations can effectively be terminated, changed or even renegotiated by virtue of Chapter 9 of the U.S. Bankruptcy Code. These obligations seem to be the driving force behind bankruptcy filings by local governments in other states, but they do not appear to have been successful in creating leverage in such contractual negotiations. The lack of ability to reorganize or dissolve that enables private corporations to bring their creditors to the table for serious negotiations as leverage may not exist under Chapter 9.
State legislators worried about New Jersey’s deep pension debt are contemplating turning over administration of one of the largest retirement funds to workers and retirees. The idea behind the move sounds simple: Workers and retirees, who are beneficiaries of the system, can be relied on to run it well.
The only problem is that this has already been tried around the country and has helped create some of the nation’s biggest pension fiascos, as workers and unions have managed pensions for their benefit, leaving taxpayers on the hook for huge losses. This is not the kind of reform that Jersey residents facing tens of billions of dollars in pension debt need.
The Legislature has already passed a bill, now awaiting Gov. Christie’s signature, that turns over management of the Police and Firemen’s Retirement System (PFRS), run by the Treasury Department, to a 12-member board of trustees dominated by beneficiaries. One justification for the bill is anger that the State Investment Council, which directs pension fund investing, has been paying Wall Street firms big fees, but returns haven’t lived up to expectations.
Lowering rate of return on fund investments will help, but some experts argue full actuarial payments — not called for in Christie budget address — remain critical
New actuarial calculations for New Jersey’s beleaguered public-employee pension system show an unfunded liability of near $50 billion, a staggering number for a retirement plan that’s been set up to cover roughly 780,000 current and retired government workers.
But many financial experts believe the pension system’s funding problem is potentially much worse, because the state has for decades been using optimistic assumptions when it comes to projecting annual investment returns.
The $72 billion pension system’s assumed rate of return, or discount rate, for the past few years has been 7.9 percent, which is higher than the average returns of just over 7 percent that the pension system has realized over the past 20 years. Gov. Chris Christie, a Republican who has stressed pension reform during his two terms in office, announced last week that the rate will be lowered to a more realistic 7.65 percent.
While the difference seems subtle, pension experts say the downward adjustment is good for the retirement system’s overall long-term health because it will generate a more realistic assessment of the unfunded liability, and that in turn will require the state to make more robust annual contributions in the ongoing effort to maintain the fund’s solvency.
Christie’s efforts — the reduction is just the latest to occur during his tenure — also line up with calls for more realistic accounting that have come from Senate President Stephen Sweeney (D-Gloucester), the Legislature’s leading Democrat on issues related to pension funding and employee benefits
N.J. pension crisis explained with popsicle sticks
Samantha Marcus | NJ Advance Media for NJ.comBy Samantha Marcus | NJ Advance Media for NJ.com
on February 28, 2017 at 7:30 AM, updated February 28, 2017 at 8:37 AM
TRENTON — New Jersey’s government worker pension funds lost a lot of ground last year, as the state’s pension debt rose from $43.8 billion to 49.1 billion, newly released actuarial reports reviewed by NJ Advance Media show.
Even as Gov. Chris Christie made a record-high contribution to the pension system, the state’s unfunded liabilities climbed ever higher, making the outlook for the weakest public pension system in the country appear worse still.
The pension fund lost nearly 1 percent on its investments last year, and the state still contributed far less than what’s recommended. And notably, the state winds up owing more because the treasurer reduced the funds’ long-term assumed rate of return on its investments.
The state’s unfunded liability is a portion of the overall debt. The local side of the system is in much better shape but still $17.1 billion short of what it would cost to pay for future retirement benefits. The combined unfunded liability rose from $59 billion in the 2015 fiscal year to $66.2 billion in the fiscal year that ended in June.
Ridgewood Nj, Jersey Born and Bred Gubernatorial candidate Joseph R. Rullo has put together a few ideas to solve the state’s massive pension crisis. Most of the ideas are relatively painless for employees and taxpayers and unlike other grand schemes easily doable .
Rullo starts with investing basics by looking to eliminate $700 million in pension fees to NYC politically connected brokerage houses and replace with licensed brokers in the state investors division to pay savings towards pension payment. The pension fees went from 125M to 700M per year in the last 7 years.
Let’s face it according to the all the town hall protesters New Jersey loves Obamacare so Rullo says :
*Open up state employee health insurance bids across America to create competition to lower premiums and get better coverage for employees.
Rullo get creative with the next one;
* Dedicate a portion of recreational marijuana revenues to pay towards pension payment.
Was first reported by The Star-Ledger’s Editorial Page Editor Tom Moran in a Sunday column arguing passionately for legalization. Joseph Rudy Rullo, a declared Republican candidate for New Jersey governor in 2017, also supports marijuana legalization.
And finally something that long over do in the state of New Jersey . We can start with the pensions and work our way through every state agency .
* Open up a formal investigation and audit the pension fund for the last several decades to hold politicians in both parties accountable for their actions.
Notwithstanding the 10th Amendment, the federal government has repeatedly stepped in when the states’ political systems failed to bring about necessary action
Andrew Sidamon-Eristoff
Prediction: Sometime in the foreseeable future, the federal government will step in to address the self-inflicted crisis in state and local government pension and health-benefits funding. The only real question for us in New Jersey is whether it will happen soon enough to save us from ourselves.
How and why? Let’s review where we are:
First, state and local governments in the U.S. face a multi-trillion-dollar shortfall in public sector pension and health benefits funding. This is a genuine and growing financial crisis that clearly threatens our nation’s long-term economic prosperity.
Second, although some Democratic states with powerful public-sector unions like New Jersey and Illinois are comparatively worse off, few if any states can afford to relax and ignore the problem, especially if the analysis considers local government liabilities, rising healthcare costs, and unfunded post-retirement health benefits alongside pension liabilities.
Finally, the existing political environment, in which public employees are by far the most active and powerful constituency in state and local government, means that most blue states and many red states lack the political capacity or will to “solve” their benefits funding crisis on their own.
Unfortunately, New Jersey provides a convenient case study. By some calculations, New Jersey’s unfunded liability for state and local pensions and state health benefits combined tops $178 billion, among the worst in the nation. Further, 2017 is a gubernatorial election year. The Democratic frontrunner (and thus likely next governor) has secured the support of the state’s public-sector unions in part by rejecting a bipartisan commission’s well-regarded reform recommendations. Those reforms include a proposal to use savings from aligning public employees’ health benefits with Obamacare “Gold” level benefits to help fund the state’s annual pension contribution. Instead, the frontrunner would fully fund pensions along with an ambitious spending agenda by increasing taxes on “millionaires” and closing corporate tax “loopholes.” Trouble is, as even the multimillionaire frontrunner might admit in private, New Jersey’s economy and voters do not have an infinite tolerance for higher taxes, even on corporations and the rich. The likely result will be half measures to keep the ship afloat a while longer and continued deferral of comprehensive reform.
Cue federal intervention. Notwithstanding the 10th Amendment, over the course of history the federal government has repeatedly stepped in when the states’ political systems failed to bring about necessary action. An early example is the Compromise of 1790, whereby the federal government assumed the former colonies’ Revolutionary War debts. A more recent example is federal civil rights legislation made necessary by many states’ demonstrated political incapacity (refusal) to extend the rights of citizenship to all their citizens.
Today, New Jersey and many other states have political systems that are failing to address the escalating benefits-funding crisis. As the crisis begins to restrict and ultimately bar some cities’ and states’ access to the capital markets, exposing the national economy to widespread risk, the federal government will be forced to intervene. Although I cannot predict precisely when or how this will happen, I’ll throw out some ideas to stimulate thinking.
What form will federal relief take? There are many possibilities, but it’s safe to say that rescuing pension systems will be the first priority because rating agencies and current government counting rules place a greater emphasis on unfunded pension liabilities, often protected by state constitutions, than on unfunded retirement health benefit obligations. (Look for that to change soon, but one thing at a time!)
One option would be to extend the federal Pension Benefit Guarantee Corp.’s pension-insurance programs for private employers to public employers. However, the PBGC’s insurance only supports a statutorily defined maximum guaranteed benefit, which in practice results in substantial reductions to middle- and-higher income retirees’ benefits. Moreover, the PBGC is already functionally bankrupt and the model of providing insurance to pay pension benefits on behalf of terminated private employer plans may not be readily transferable, or appropriate, for state and local public employers.
In the absence of a new federal insurance scheme, the most likely option is federal assistance that helps state and local government pension systems refinance their unfunded accrued liability (UAL). For instance, the federal government might lend the states the money on favorable terms, or it could provide a debt-service guarantee in support of state and local pension-refinancing bonds. Either approach would be tantamount to nationalizing state and local pension liabilities, and as such would be controversial. Not impossible, but highly unlikely.
A more limited, and perhaps more politically palatable, approach would be to provide a federal interest subsidy for pension-refinancing bonds. There is precedent. The federal Build America Bond program, part of the 2009 American Recovery and Reinvestment Act, subsidized 35 percent of the interest on state and local bonds issued for capital expenditures.
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