By Samantha Marcus and Susan K. Livio | NJ Advance Media for NJ.com
on February 17, 2016 at 8:21 AM, updated February 17, 2016 at 11:10 AM
TRENTON — Here is a look at three key issues from Gov. Chris Christie’s Tuesday budget speech that could have a big impact on New Jersey residents.
1. PENSIONS
The problem: The public pension system is underfunded by about $54 billion, and the state is responsible for about $40 billion of that.
Christie proposes to make a $1.9 billion contribution to government worker pensionsGov. Chris Christie urges the chamber to put aside partisan politics and proposes to contribute $1.86 billion to government worker pensions during the 2017 Budget Address from the Statehouse in Trenton. 02/16/2016 (Courtesy of NJTV)
Since 1996, governors from both parties have contributed less than what actuaries recommended, and the state skipped payments altogether from 2001 to 2004. And while the state was taking a pension holiday, it increased benefits for employees. In 2011, Christie struck a historic pension reform deal with Democrats, in which public workers and employers were required to pay more into the system. Christie slashed payments after two years, however, to balance the budget.
What Christie is proposing: A $1.86 billion contribution in the fiscal year beginning July 1, about $550 million more than the state is expected to contribute this year.
Chances at passing: Very good.
“This budget provides a pension payment that is the largest in our state’s history more than my administration ever before, contrary to the hyperbole from special interest groups,” Christie said.
A constitutional amendment to mandate quarterly payments to the pension system could have “potentially cataclysmic consequences” on the quality of life in New Jersey, according to a new report, requiring more than $3 billion in tax increases by 2022. Salvador Rizzo, The Record Read more
Why mandatory pension payment would be worst idea ever for N.J.
Through a ballot question in November, voters are expected to decide whether New Jersey’s constitution should require the state to make regular payments to its $80 billion public pension debt. Paul Brubaker, NJ.com Read more
By Samantha Marcus | NJ Advance Media for NJ.com
on January 07, 2016 at 7:31 PM, updated January 08, 2016 at 8:19 AM
TRENTON — State Senate President Stephen Sweeney and labor leaders on Thursday defended his proposal to constitutionally enforce payments into the public pension system against arguments it’s a gift to special interests that will shackle New Jersey’s finances.
The scrap between Sweeney (D-Gloucester) and labor leaders vs. Senate Minority Leader Tom Kean Jr. (R-Union) and business lobbyists centered on what would be worse: a mandated pension contribution that would eat up so much money the state couldn’t respond to fiscal emergencies, or a pension system that continues hurtling toward insolvency.
Sweeney, the Democrat leading the charge on the amendment, told the Senate state government committee it’s in everyone’s interest to pay the bill now. Should a pension fund run out of money, the state would have to pay retirees’ pension benefits out of pocket, he said.
“If we don’t do this, by 2026 or 2027, when the pensions go broke, it’s nine or ten billion dollars. And that’s coming out of the budget. Directly out of the budget,” Sweeney said. “That’s armageddon.”
DECEMBER 27, 2015, 10:29 PM LAST UPDATED: MONDAY, DECEMBER 28, 2015, 7:23 AM
BY SALVADOR RIZZO
STATE HOUSE BUREAU |
THE RECORD
As Governor Christie heads into a crucial stretch in his campaign for the White House, back home, another pension dispute with multibillion-dollar consequences has reached a critical stage at the state Supreme Court.
A loss could spark another major budget crisis for Christie, potentially in the middle of a presidential campaign in which he often promotes his experience as a tested leader who can reform the United States’ fiscal problems and rein in $19 trillion in debt.
A group of retired prosecutors and public-worker unions is challenging a law Christie signed in 2011 that suspended yearly cost-of-living adjustments for retirees. When Christie tells voters in the rest of the country about having “fixed” New Jersey’s notoriously underfunded pension system and saved more than $100 billion over 30 years, he is referring largely to this cost-saving measure.
And the Supreme Court is being asked to strike it down as an unfair violation of workers’ rights.
Attorneys for all sides have now filed hundreds of pages of legal briefs. The court is expected to hear oral arguments next year and could issue its ruling just as Christie is competing in key primary states, or during the general-election season.
If they win, thousands of retirees — but perhaps not all of them — could begin to see bigger pension checks every year there is an increase in inflation as measured by the Consumer Price Index.
All of the changes contained in the 2011 law that haven’t already taken effect will be fully implemented in just over 1 year. This law wasn’t designed to show a substantial immediate savings. It was designed to implement changes over a period of years and once ALL of those gradual changes were completed the impact of those changes going forward would have a positive effect on the states financial condition. Immediate solutions for long term problems, are just not reasonable or possible.
The full story on the Chapter 78, P.L. 2011 pension reforms… the problems are unfortunately still very much with us. Here are the facts: cost-of-living adjustments (COLAs) were suspended for current and future retirees and beneficiaries from July 2011, but there’s been no inflation in NJ since 2008, so this is not an issue. The increases in employee contribution rates towards their own pensions are only gradual: from 5.5% to 6.5% plus an additional 1% phased-in over 7 years through 2019 for TPAF and PERS; from 3% to 12% for JRS phased-in over seven years; from 8.5% to 10% for PFRS members; and, from 7.5% to 9% for SPRS members. Given the “special” retirement option available only to PFRS members, who can retire after 20-25 years and earn more from their defined benefit pensions for life in retirement then they earned in compensation while serving, they should be contributing more than 10%. As for the increased health benefit contributions, employees subject to any collective negotiations agreement in effect on the effective date of the law in July 2011, i.e. CBAs, that had an expiration date on or after the expiration of the health care contribution provisions of the law, haven’t been subject to the new higher contribution rates yet. In Ridgewood, only Fire is now paying a higher contribution amount, while the PBA and the REA haven’t yet agreed to new CBAs that would trigger higher health benefit contribution rates… so Ridgewood taxpayers have yet to see much, if any benefit from the pension reforms of 2011.
With an election for New Jersey Assembly two weeks away, the numbers don’t look good for the fiscal reform urgently needed in Trenton.
The staggering $194 billion liability for public employee pension and health benefits is seldom debated in campaigns for the 80 Assembly seats up for grabs on Nov. 3.
The status quo is a 47-32 advantage for Democrats over Republicans with one seat vacant – a balance not likely to change much. The incumbents have outspent challengers $10 million to $2.2 million, according to a report by a New Jersey election commission.
Even more lopsided, incumbents enjoyed a 10-to-1 cash-on-hand advantage – $5.2 million to $496,000 – over their opponents, as of Oct. 2.
That big edge in campaign finances helps them run for re-election while running away from their failure to solve New Jersey’s fiscal dilemma. The Assembly has been in recess since June – a spell approaching four months.
“The situation is not only getting worse, but is fast approaching a point at which it will be beyond remedy,” warned Gov. Chris Christie’s bipartisan, blue-ribbon Pension and Health Benefit Study Commission in a report released in February.
Keeping benefits at their current level would require a 29 percent hike in state income taxes or increasing the sales tax to 10 percent, the study estimated.
“The already narrow window for a reasonable solution is closing fast. Only decisive action now can preserve a solid foundation of public employee benefits before the ever-growing hole the state has dug itself into becomes too deep for the state to dig itself out of without crushing tax increases and deep cuts to employee benefits and public services,” the commission stated.
That was eight months ago. Since then, Christie and lawmakers have failed to realign New Jersey’s costly benefits to a level comparable to what private-sector employers offer their workers.
Now the unfunded liabilities have reached a staggering $194.5 billion, according to aNew Jersey Watchdog analysis of State Treasury records. Here’s a breakdown of that debt:
New Jersey’s public pensions are underfunded by $113.1 billion. The state bears $80.5 billion of that burden. Local governments are responsible for the remaining $32.6 billion. State and local governments are also on the hook for $81.4 billion in unfunded health benefits for retired and active workers. The state owes $65 billion; the local share is $16.4 billion. The total shortfall is nearly six times higher than New Jersey’s total annual budget, currently $33.8 billion. To wipe the liability clean, each household in the state would need to write a check for more than $60,000 per household.
At the present pace, the shortfall for public employee pensions and health benefits will exceed $210 billion next year.
“That, in brief, is New Jersey’s future without meaningful public employee benefits reform – a future that is bleak, burdensome and unacceptable to everyone,” the commission concluded.
None of the New Jersey Senate’s 40 seats are on the Nov. 3 ballot. The next statewide election will be in 2017, when Christie’s second and final term expires.
Pay attention, government workers — and taxpayers — in New York and New Jersey.
Last week, letters informed these Teamsters they’re facing cuts in benefits of up to 60 percent. Why? Because their pension fund is going broke.
The Central States Pension Fund covers workers from more than 1,500 trucking, construction and other companies in 37 states. Thanks to trucking deregulation, declining union rolls, aging workers and weak stock-market returns, the fund is now paying out $3.46 in benefits for every $1 it takes in. That’s $2 billion a year in red ink.
At that rate, doom arrives in 2026, sinking Central States and maybe even the federal fund that’s supposed to insure such private-sector pensions. Retirees would get even lower benefits — or maybe nothing at all.
Which is why Congress and President Obama last year gave “multi-employer” funds like Central States the green light to restructure if necessary — and slice benefits.
What would you say if you found out New Jersey taxes just went up $540 million? Surprise! They have. And they will grow by a half-billion dollars each year because of the state’s highest-in-the-nation property tax — even with the 2 percent cap. State and local leaders have run away from cutting this burden on homeowners. Why? Who profits from your tax misery? Why is this tax driving people out of state? Paul D’Ambrosio, Asbury Park Press Read more
Two things are clear. One, the state’s worst problem, by far, is a growing budget shortfall that leaves it unable to fund the outsized pension promises made by politicians. Two, elected leaders won’t even start trying to address that problem until residents make them do so by demanding proposals, voicing their preferences and voting for those taking action. The Press of Atlantic City Read more
SEPTEMBER 23, 2015, 7:20 PM LAST UPDATED: WEDNESDAY, SEPTEMBER 23, 2015, 9:37 PM
BY DUSTIN RACIOPPI
STATE HOUSE BUREAU |
THE RECORD
The investments made by New Jersey’s pension funds fell short of targets and well below the double-digit gains of recent years, but it still outperformed benchmarks, state officials said Wednesday.
And amid sustained criticism from unions and some legislators over increased spending on alternative investments – like hedge funds and private equity funds – the state’s investment returns were driven largely by those non-traditional accounts, officials said.
But the returns into the public employee pension fund aren’t enough to keep up with the flow of cash out every year to pay retirees, underscoring the need for greater contributions from the state, those officials said. Governor Christie has cut the state’s contributions the last three budgets amid declining revenues to the state, but his reduced payments compounded years of partial contributions to the fund by prior administrations, creating an unfunded liability today of between $40 billion and $80 billion, depending on the accounting source.
By Samantha Marcus | NJ Advance Media for NJ.com
Email the author | Follow on Twitter
on August 29, 2015 at 8:30 AM, updated August 29, 2015 at 9:34 AM
TRENTON — New Jersey’s faltering public-sector retirement system would be swamped by new pension liabilities if the state Supreme Court strikes down cuts to retirees’ pension benefits, the state Senate president said this week.
Those cuts were a critical piece of a 2011 overhaul of government worker benefits expected to save tens of billions of dollars over the coming decades. A group of retired state workers brought a lawsuit against the state challenging a freeze on cost-of-living adjustments in their pension payouts.
State Senate President Stephen Sweeney (D-Gloucester) told The Star-Ledger’s editorial board Thursday that a victory for the retirees and the restoration of COLAs would bankrupt the pension system, but he predicts the state will prevail.
“I don’t think they win it, to be honest with you. And I think it would cause the bankruptcy of the pension system,” he said.
AUGUST 27, 2015, 11:55 AM LAST UPDATED: THURSDAY, AUGUST 27, 2015, 2:23 PM
ASSOCIATED PRESS
NEW BRUNSWICK, N.J. (AP) — An elementary school teacher has been allowed to keep his job even though he was late for work 111 times over a two-year period.
In a decision filed Aug. 19, an arbitrator rejected an attempt by the Roosevelt Elementary School to fire 15-year veteran Arnold Anderson from his $90,000-a-year job, saying he was entitled to progressive discipline.
Anderson was late 46 times in the most recent school year through March 20 and 65 times in the previous school year, the arbitrator said. But the arbitrator criticized Anderson’s claim that the quality of his teaching outweighed his tardiness.
He relied on “micro-quibbles of a few unpersuasive explanations, with a macro-default position that even when he is late he nevertheless delivers a superb educational experience to his grateful students,” the arbitrator wrote.
By Samantha Marcus | NJ Advance Media for NJ.com
on July 26, 2015 at 6:00 PM, updated July 27, 2015 at 8:24 AM
TRENTON — In the latest salvo in the battle between New Jersey and its public workers, the heads of the state’s largest pension funds are accusing the state of breaching its contract by underfunding government workers’ pensions.
The pension heads are seeking billions of dollars in damages.
The pension fund trustees’ newly amended complaint opens a new front in the fight for pension funding in which Gov. Chris Christie had already declared victory following a state Supreme Court ruling last month that the state couldn’t be forced to make the payments into the retirement system promised under a 2011 pension law.
That ruling has so far spared the state from having to scrape together billions of additional dollars in pension contributions.
JULY 22, 2015, 5:49 PM LAST UPDATED: WEDNESDAY, JULY 22, 2015, 10:53 PM
BY SALVADOR RIZZO
STATE HOUSE BUREAU |
THE RECORD
New Jersey’s pension investments are still making money, but the gains appear to be in sharp decline this year, state officials said Wednesday.
Governor Christie’s administration has helped delay a looming crisis in the pension system by playing the global markets over the last five years, drumming up more than $35 billion just by picking winning investments.
But the solid pace of growth for the pension system’s $79 billion portfolio will taper off in coming years, state officials said, opening a new problem for the retirement funds at a time when they already face a series of funding troubles and a political logjam.
“We can’t plan on double-digit returns forever to keep the fund afloat,” Thomas Byrne, chairman of the State Investment Council, said at a meeting Wednesday. “We can’t control market conditions.”
After years of neglect from politicians in both parties, the state pension system is facing $40 billion in unfunded liabilities — making it one of the worst-funded in the country — and it needs every dollar it can find to avoid a bankruptcy expected within the next decade.
At stake is the income security of more than 773,000 public workers and retirees enrolled in the system.
Since Christie took office, the investment portfolio’s performance had been one of the bright spots for the troubled pension system, producing healthy gains above 10 percent in four of the last five years — in other words, more than $35 billion from 2010 to 2014.
But the heyday may be ending. New Jersey is not likely to hit its target rate of 7.9 percent investment gains for the 2015 fiscal year, which ended last month, Byrne said.
Pension investments had posted gains of only 4.58 percent through May, a month before the end of the fiscal year, Byrne said. A final report for the entire year will be released in September, officials said.
The state is on track for a much lower rate of growth compared with the previous fiscal year. In May 2014, for example, returns of 14.3 percent had come in by that point in the fiscal year — far above the 4.58 percent seen this year. In May 2013, growth was at 13.3 percent.
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