Under Funded Pension VS. Over Funded Welfare

   

Recently, the National Association of State Retirement Administrators recognized New Jersey as having the most underfunded pension system of all 50 states.  They said that the NJ pension fund could be out of money by 2027 http://www.nj.com/politics/index.ssf/2015/03/nj_pension_system_most_underfunded_of_all_50_state.html#incart_river.

This isn't too much of a surprise, since New Jersey skipped pension payments completely from 2001 until 2004, and have generally put in less than the required payments since the mid 1990's. This resulted in billions less being put into the pension accounts, while at the same time, benefits increased.  Keep in mind that during this time, all of the union workers kept making payments without skipping a beat, and were forced to increase their pension payments to keep the pension funded.  In addition to an increase in payments, the retirement age was increased, and the cost of living adjustment was eliminated.  It hasn't worked out so well, and currently the state faces an $83 billion unfunded pension liability.  This is by no fault of the union workers, but the blame lies squarely in the laps of our current Governor and his predecessors.

     Governor Christie has touted the pension reform from day one, even after promising the unions not to touch their pensions.  It has been the mainstay of his soap box, and continues to this day.  It's a shame that the hard working union members, who have made pension payments from day one of their employment, have to be the scapegoats for the failures of the Governor.

     What I find upsetting, is how the Governor has been basically mum about reducing the benefits (handouts) that are given to a slew of residents, both legal and illegal, that have been on the receiving end of our tax dollars.  These are the same tax dollars that the Governor says is lacking to the point of an almost broke TTF (transportation trust fund).  Just as an example, according the a study by the Center of Immigration Studies, in 2009 (based on data collected in 2010), 57 percent of households headed by an immigrant (legal and illegal) with children (under 18) used at least one welfare program.  You saw that correctly.  Fifty-seven percent.  Over half are receiving welfare benefits.  Nationwide, Newark, NJ ranked No. 1 on a list ranking the cities across the country with the highest percentage of households on welfare.  That' right: NUMBER ONE in the country.   Where is the outrage and public condemnation?  (Insert sound of crickets here).  Welcome to the welfare state.

     While there have been some minimal reductions in welfare, the funding doesn't seem to be in the spotlight like it was years ago when "work-fare" instead of "welfare" was a hot topic.  Currently, the attention seems to be aimed directly at those that helped fund the welfare bottomless pits: the taxpayers.  Don't get me wrong; there are very legitimate uses for welfare.  It should be a temporary crutch to get a person or family back on their feet.  One of the problems is that many have come to rely on this crutch as an income with no end.  Fraud is rampant in welfare.  Additionally, what incentive does someone have to work when welfare pays more?

     The Governor is all about "reform", specifically PENSION REFORM.  It's about time that the Governor change directions and take a good hard look at WELFARE REFORM instead.  Welfare is supposed to be temporary, while a pension is for life.  One of the huge differences is the welfare recipients are receiving money put there by others, while the pensioner is receiving money put there by him/her, employer contributions, and the pension fund investments.  The number of people taking some type of welfare or handout from the state vastly outnumbers those receiving pensions.  This may be why the Governor doesn't want to piss of those voters...I mean constituents.

     While there are some attempts to reform welfare into a form of "work-fare", surprisingly enough, the ACLU is objecting to it for a variety of reasons, including calling it a form of discrimination by making someone work for their benefits.   How dare the government make someone work for their benefits! I don't recall the ACLU supporting me in my twenty-five years of working in order to get my benefits (which I paid dearly for).

     According to US Government Spending.com, in 2015 New Jersey will spend $9.7 billion in the pension systems (all of them), while at the same time, spent $9.1 billion in welfare.  Where will this money come from?  The pension money comes from the union members, employer contributions, and investments.  The welfare money comes from taxes.  Your taxes.  My taxes.  Reducing the rampant welfare fraud, and requiring welfare recipients to work for their handouts should be just the start.

     This is where the Governor should be focusing, not on the already beaten down union members who have worked their entire lives and put more money into the system than anyone else.  We've given enough.

     If history is any indication of how he will do as a Presidential candidate, he will embarrass New Jersey.

     Just my opinion.

Note: Ok, so the headline may be a bit deceiving.  Do I honestly think welfare is "over funded"?  No, not really, but I do want it reduced substantially through various means.  Welfare (workfare) has its place, but not to the extent it is being used now for "entitlements" or handouts.

Governor Christie's Pension Task force is a waste of time & resources. Here is why.

   

Governor Christie said "it's time to think out of the box" when he recently appointed nine people to serve on the bipartisan commission that will evaluate how New Jersey "can create an affordable and sustainable retirement and health benefits system" for taxpayers, current employees, and retirees.  He is sounding like an visionary; someone who is thinking of new and untested methods to conduct a "study" that has already taken place.  Let's be clear about one thing.  He is not thinking out of the box.  In fact, he is doing what many politicians have done in the past. Copy & paste.  He is NOT reinventing the wheel.  He is simply making it SEEM like he is.

     In 2005, Acting Governor Richard Codey created the "benefits review task force" that had ten members.  Actually, it was probably nine, like the current one, since the tenth member was a "Counselor to the Governor," who was there as an "Advisor to the Benefits Review Task Force".  So let's go with nine; the same as the current one.  These members weren't just anyone.  They were people who were professionals in a multitude of fields ranging from a retired Phillip D. Murphy, a Wall St. executive, David Alai, a Vice President Corporate Human Resources, Thomas A. Meyers, Senior Vice President & Chief Financial Officer from NJM Insurance Group, Richard D. Quinn Managing Director – Human Resources,
Public Service Enterprise Group, William M. Rodgers, III Professor and Chief Economist, John J. Heldrich Center for Workforce Development, Edward J. Bloustein School of Planning and Public Policy,
Rutgers University, and Paula B. Voos Professor of Labor Studies and Employment Relations, School of Management and Labor Relations, Rutgers University.  The task force also included Thomas D. Carver Commissioner, Department of Labor and Workforce Development, John E. McCormac State Treasurer, and A. J. Sabath Commissioner, Department of Labor and Workforce Development.  These were powerhouse people to have on this task force; People who were respected in their fields.

   The task force was charged with the following:

• Examining the current laws, regulations, procedures and agreements governing the provision of employee benefits to State and local government workers; 
• analyzing the current and future costs of the benefits; 
• comparing the level of benefits provided to government employees in this State to the benefits provided to other workers; 
• recommending changes to the laws, regulations, procedures,  and agreements designed to control the costs of such benefits to the State's taxpayers, while ensuring the State's public employees a fair and equitable benefit system.

This task force was Chaired by Phillip Murphy, and so the report was known by many as the Murphy Report.

     Without getting into all the boring details, they gave a final report.  Let's look at a few of their recommendations.  This is a quote from the report:

     "Government Must Meet Its Obligation
No More Pension Holidays — State and local government must meet their full obligation to make
annual payments to the pension plans.
No More Actuarial and Valuation Gimmicks — State government must use consistent and generally
accepted actuarial standards.
No more pension bonding.
The $12.1 billion unfunded deficiency must be immediately addressed." (remember, this was 2005)

     Sound familiar?  This was from 2005!  Nine years ago.  These recommendations were given to the State Government almost a decade ago, and we're still going round and round as if the Murphy Report never happened.  The report clearly states "Government must meets its obligation" (they didn't listen to this one), "no more pension holidays" (we know they didn't listen to this one either).

After making their recommendations, the Task Force went into a detailed review of the "history of pension and healthcare benefits". In this review, they talk about how "sound funding principles over the years allowed New Jersey’s plans to grow into one of the largest and well-funded pension plans in the country", and then goes on to say "this growth and stability has attracted administrations to use the Pension Fund Systems as a tool to balance the State budget. The funds were used to offset tax reductions and some were to maintain or expand current programs".  

     In 1999 and 2000, the pension funds rate of return was an +14%.  From 2001 through 2005 (the year of this study), it averaged negative 9.1%.  The report claimed that "the combination of enhancements, reduced contributions and lower rates of return have resulted in a $12.1 billion unfunded accrued liability that must be addressed."  It wasn't addressed.

     If anyone is interested in reading the complete Murphy Report, feel free to click here.  It's long and boring, but it contains some very current gripes, problems, complaints, issues, etc.  I can GUARANTEE you that the "Pension Task Force" will come up with the exact same problems, and the exact same recommendations.  This is nothing more than smoke and mirrors designed to make the general public think he is doing something about a problem that was already addressed by his predecessor.  Governor Christie, if you want your study, here it is.  Maybe you should read it.

Fix it or forget it - the NJ pension issues

I'm not a fan of the Trentonian newspaper.  I think its better served as a blotter at the bottom of my bird cage than anything else.  Except for an occasional page 6 girl, there's not much worth reading in what many have called the "Trashtonian".  There are two columnists that are regular's for the Trentonian, L.A. Parker and Jeff Edelstein.  I've read their columns in the past, and I'm not really fans of either one of them.

Sometimes they spice things up and make things interesting.  On June 11, 2014, they did just that, but in an unusual way.  They each published opposing thoughts on the New Jersey pension problems on the same page.  The headline read "Split Decision: Should New Jersey's pension program be blown up?" Parker was in favor of keeping it, blaming the problems on the government, while Edelstein didn't blame anyone but whined about why we should scrap it and start from scratch, calling it "unsustainable".

Parker and Edelstein traded spars, but in my opinion, the winner by a knockout was L.A. Parker.  Please don't take this as a show of support for him; I've read lots of garbage in his columns in the past.  Today he shined just a little.  Case in point: Parker points out that Edelstein is a staunch Christie supporter.  I agree. Read his columns and you will too.  Parker also adds the fact that the most recent problems are the result of the Governor "miscalculated or misrepresented" revenue projections.  I again agree.  Christie tried blaming Dr. Rosen, the Chief Budget Officer for the states office of legislative service for the miscalculation.  What many don't know is that this same Dr. Rosen warned Governor Christie about this impending crisis, but the Governor brushed him off.  Later, when Governor Christie was called out on this miscalculation, he said Dr. Rosen "just got it wrong".  Actually Governor, he was right, and you ignored him.  Had you listened to the man who had a reputation for being right, you may not be in this predicament right now.

Governor Christie blamed the pension problems on past Governors, ignoring the fact that he participated in the same activities as his predecessors.  He reached deep down into the pension cookie jar, removed several large handfuls, handed them out to his friends at the playground, and didn't put the cookies back as promised.  To help "fix" the problem he help create, Christie raised the retirement age to 65, burdened public workers with higher costs and payments, and eliminated the cost of living increases.  L.A. Parker points out that "our leaders need to put all potential problem solving issues on the table including hiring practices, payments made for years of unused vacation and sick time, and practices that allow a double-dipping of pensions."  Again, I agree.  Multiple fixes should be on the table for this one, not just one.

Edelstein, on the other hand, gave little in the way of facts. In fact, he even got some things wrong.  For example, he states "None of this getting the average of your three highest salaries for life.  What a crock!  Really.  Get a 401(k) like the rest of us."  Lets talk facts here.  Nobody in in the Police & Fire pension, or the teachers pensions gets the average of your three highest years averaged out for the rest of their lives.  The reality is that it is a percentage of that number based upon the number of years in the pension system.  Spend 25 years in the Police & Fire pension system and you are eligible for 65% of that, not 100% as he makes it seem.  Spend 20 years in Police & Fire, and you get 50%.  Edelstein also remarks about how unsustainable the pension is now based upon the average life expectancy compared to when it was first put into place in the 50's.  What he completely failed to mention is the reason it it is "unsustainable" is because of the BILLIONS of dollars removed by the Governors, as well as the BILLIONS in missed payments due to "payment holidays" the municipalities were given by the Governor.  Yes, the pension is funded at about 65% (or less), but fifteen years ago it was over 100% funded!  This decrease was not due to payments to retirees or from current workers not making their bi-weekly pension payments.  This decrease is because of both Republican and Democratic Governors grabbing money from the public pension trough, using it for their own pet projects, and never repaying it.   PERIOD!  Jeff, you missed this.

L.A.Parker - 1   Jeff Edelstein - 0

P.S.  I wrote this blog very slow, so just in case you are reading it Governor Christie, you'll be able to keep up.

More bad news for the pension system - and more double speak by our Governor

New Jersey can't seem to keep out of the news lately.  I guess its because we have a Governor that has his sights set on a national stage.  Governor Christie is weeks away from announcing his proposal to overhaul our states pension and retiree health benefits plan.  The rumor mill is swirling that it might be some type of "hybrid" model that would reduce the defined benefit payout, as well as something like a 401k plan.  He keeps saying that the current system can't be sustained.  The reason he believes this is because he allowed towns to skip their required pension matching payments, and he also failed to make the states full pension contribution.  Although three years ago, Governor Christie himself passed a law requiring the pension payment, he decided to ignore it in order to use the money to balance the states budget.  This is just another example of his ability to talk from both sides of his mouth.  He touted this law when it was being proposed in order to (again) gain support of the police and fire unions.  "Hey, look at me, I'm fixing your problem.  I'm your friend".  Once again he lied.  He did not fix the problem.  His own law that he pushed through was ignored. 

New Jersey has already eliminated the "COLA" (Cost of Living Increases); a savings of $74 billion over 30 years according to our Governor.  He also touted another savings of $48 billion by requiring employees to pay more toward their pensions, reducing pensions for those taking early retirement, and raising the retirement age from 62 to 65.  A total savings of $112 Billion!  What's next?  Reducing all officers pay to minimum wage?  Eliminating health benefits entirely?  Health benefits is one main reason many officers joined the ranks of police and fire, or became public school teachers.

Here is a little history lesson for the uninformed. As recently as the 1980's, police officer and firefighters were relatively paid poorly compared to the private industry.  They were considered blue collar and non-professional.  In order to induce people to join the ranks of police and fire with low pay, the carrot that was dangled in front of the was good benefits.  Seemed like a fair trade off at the time.  The "problem" is that over the years, contracts regularly gave pay increases of 3-5% per year, and sometimes more.  Over time, those poor paying jobs became good paying jobs, and eventually they became very good paying jobs.  The benefits were still good, so now you have officers making good money and getting good benefits.  Along with the higher pay and benefits came the increased professionalism.  Being a police officer changed from being a "job" to being a "career".  With professionalism came better educated officers.  No longer were high school diploma's the minimum requirement.  College degrees became the norm; if not for hiring at least for promotions.  College degrees included Masters degrees and even higher over time.  It was not uncommon for a majority of officers on a department to hold college degree of one type or another.  Criminal Justice majors became more common.  Twenty-five years later, the person entering law enforcement in New Jersey was college educated who's goal it was to become a professional police officer.  Good pay and good benefits brought good candidates, who became good police officers.  Now, both the pay and benefits are good.

Unfortunately, the COST of these benefits have skyrocketed.  The insurance companies have substantially increased the cost the governments pay in order to keep the benefits as required by contracts.  Why is the government not targeting the insurance companies and asking why they have tripled the cost for the same benefits?  Good question.  I'd love to know that answer.  I can surmise that one reason is that the insurance lobby is strong.  Very strong.  Much stronger than any police and fire or teachers union in New Jersey.  They are national companies with deep pockets in Washington.  Who is an easier target?   The police, fire and teachers.  Now Governor Christie has made us look like the bad guys.  We are the reason for all this mess. "Look at those greedy public servants" he can say, and the public listens.  Governor Christie isn't stupid.  He's been voted into office twice and knows a thing or two about word play.

Word play.  Governor Christie loves this.  A perfect example was recently brought to light that makes this perfectly clear.   A perfect example of the governors double speak is when he was pushing for a tax cut in 2012.  The Governor said the state could afford the tax cut because of positive economic growth.  Dr. David Rosen, the Chief Budget officer for the States office of legislative service disagreed.  The Governor responded by lambasting Dr. Rosen and calling him "the Dr. Kevorkian of the numbers".  The Governor said the numbers were good enough for a tax cut, and said "Why would anybody with a functioning brain believe this guy?" about Dr. Rosen, who by the way has a reputation for being right more than being wrong.  Later, when questioned by our states terrible financial crisis, Christie blames Dr. Rosen, saying that he "just got it wrong".

Recap: Christie ignores his Chief Budget Officer in 2012, calling him "the Dr. Kevorkian of the numbers" and "why would anybody with a functioning brain believe this guy".  When questioned by a reporter about our states terrible financial crisis, he blames this same person that he ignored two years earlier.

Another example of his word play and talking out of both sides of his mouth.  While facing an unexpected $2.75 billion budget gap over the next 13 months, which Christie is trying to close by delaying payments to the state’s pension fund, many on his staff have received raises of 23%!  Yes, you read that right, twenty-three percent (http://nj1015.com/some-christie-staff-members-get-large-pay-raises/).

According to NorthJersey.com, the raises come as Christie is withholding more than $2.4 billion in payments to the state pension fund because of revenue shortfalls. And Christie has delayed a property-tax relief program that averages about $500 for seniors and some families.  And the raises to the governor’s staff appear to have happened around the same time Christie vetoed the minutes of the commission that oversees the Pinelands after its members voted to increase the budget for its staff by 5 percent. Christie castigated the commissioners and said the decision was a “conscious disregard of the fiscal realities".

I'm sorry, I think I went a bit off topic there, but every time I think about how the Governor screwed the people who protect and educate the public, while being a two-faced politician, I get angrier and angrier.  Bottom line?  As time goes by, the Governor is going to continue to lie and continue to blame the unions for problems created and perpetuated by our elected officials. 

Comments?  Thoughts?  Ideas?