Wanted: Superhero to save N.J. pension system
For decades, public employees served with the promise of a pension they could count on in their retirement. Unfortunately, the state's pension plan is a fiscal disaster.
There's an old saying that applies to New Jersey's broken pension program: The night is darkest before the dawn, but the dawn will come.
The current pension system has left taxpayers and public employee unions in the dark of a long night. While I'm optimistic that the dawn will come and a hero will emerge, Superman — or any other caped crusader — is nowhere to be found today in Trenton.
For decades, public employees in New Jersey served the residents with a promise of a pension that they could count on in their retirement years. Unfortunately, that promise is becoming harder and harder to keep.
While each year lawmakers are obligated to balance the budget, for far too long the state has done so by deciding not to fully pay the pension contributions needed to keep its promises to employees — even after explicitly promising to do so.
New Jersey teachers have been hit the hardest, according to a March report for the National Association of State Retirement Administrators (NASRA), with just 16.3 percent of the required pension contributions being made on their behalf between 2001 and 2013, despite the budget increasing more than 50 percent during that period. Meanwhile police officers and firefighters have seen nearly 80 percent of the state-funded portion of their pension contributions diverted to other areas of the budget, the NASRA report revealed.
One would think that this intentional underfunding would be considered as criminal as a plot by Lex Luthor — yet the New Jersey Supreme Court recently sanctioned these shortsighted budget actions.
As a result, the state's pension plan is a fiscal disaster. Much like a credit card, failing to make the minimum payment on pensions has serious consequences, with debt quickly ballooning to unfathomable heights. Currently, the state has only 51 percent of the money needed to pay for the promised pensions already earned by public employees. The shortfall has grown to $82 billion — $9,174 for every man, woman, and child in New Jersey. Without a hero, the pension system will endure a Krypton-like end.
As pension costs continue to rise, how will the state be able to provide core services to residents in the future?
With a projected budget hole of $6 billion to $7 billion in coming years, there is little hope for significant change unless the state develops a sustainable pension-reform plan. Regardless, the pension-funding problem will not simply fade away. In fact, without decisive action it can only get worse.
Somebody — a hero of sorts — has to stand up for public employees and the hard-working, taxpaying families of New Jersey.
Big problems need big solutions. Heroic action is needed now to create a new, sustainable, and affordable benefits system for all new employees. Embracing a defined contribution system for new workers (like the federal government implemented) would provide immediate savings that can be used to pay down the unfunded debt, while relieving the strain on future budgets. A new pension plan would also provide retirement security for new employees, instead of enrolling them into a broken system and hoping that one day they will get the pension they've been promised.
In a recent opinion piece, state Assemblyman Declan O'Scanlon (R., Monmouth) stated, "Our children and grandchildren will talk about this moment in one of two ways — either how their parents came together to rise above politics and seized this opportunity to fix New Jersey, or how we abdicated our responsibility and blew the last chance to save the state economy. If necessary, I am willing to expend the last breath of my political career fighting for the former."
O'Scanlon is correct. Our children and grandchildren need a hero to fight for change, rather than pass down an insurmountable debt that will soon be north of $200 billion.
The question residents should ask, Who will be our hero?
Pete Constant is a senior fellow at Reason Foundation. pete.constant@reason.org
Erica Jedynak is state director of Americans for Prosperity Foundation. ejedynak@afphq.org
