FAST FACTS on NJ state worker pensions. Over a span of 15 years, and under both Democrats and Republicans, the state had skipped tens of billions of dollars of pension payments, putting the system on the brink. Public employees have never missed a pension payment, as money comes straight out of their paychecks. Faced with an $800 million hole in the FY2014 budget, the Governor decided to cut a scheduled pension payment by $900 million and reduced the FY 2015 pension payment by $1.5 billion, violating the law he signed in 2011 and reneging on his promise to fully fund pensions. By blowing up his pension reform, the state is likely to experience future credit downgrades, making it harder to grow the economy. New Jersey has already had its bond rating downgraded six times on Christie’s watch, driving up the interest payments on state debt. Every dollar the state skips on necessary pension payments grows over time. Under the 2011 pension/benefit overhaul, public employees continue to contribute more and more. By 2018, police and fire personnel will be paying 10% of their salaries into the system, state police 9%, teachers and other public employees 7.5%. Current retirees have had Cost-of-Living Adjustments eliminated. Despite the fact that public employees are paying more and receiving less in benefits, the Governor is touring the state to argue for a plan that imposes even higher costs and deeper cuts for public employees. By reneging on his pension reforms once, there is little reason to believe that the Governor would keep his word this time. ISSUE SUMMARY In 2011, the state enacted a series of reforms to the public employee pension systems to close a roughly $50 billion dollar unfunded liability caused by years of missed payments and neglect by previous administrations and legislatures. Those reforms require current workers to put more of their paychecks into the pension system, eliminated cost-of-living increases for current retirees, and put the state on a 7-year path to making its full pension obligations. Over 30 years, the reforms would put all plans on a path to being at least 80% of full funding, the amount which experts agree would be make them healthy for meeting the long-term needs of retirees. After spending two years claiming he saved the pension systems from collapse, Governor Christie abruptly changed his tune. Faced with an $800 million hole in the FY2014 budget, the Governor decided to cut a scheduled pension payment by $900 million and reduced the FY 2015 pension payment by $1.5 billion, violating the law he signed in 2011 and reneging on his promise to fully fund pensions. The Governor blames his budget shortfalls on the requirement that the state actually pay its pension obligations. The State Senate and Assembly passed a budget for FY2015 that provided a full pension payment in accordance with the law, but the Governor was quick to veto the measure and has begun touring the state to call for more unspecified reforms and employee give-backs. It took years of state neglect for this crisis to unfold, and the state has a responsibility to pay its share, as public workers have.
Posted on: Mon, 11 Aug 2014 18:20:45 +0000
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