Cracks Starting to Appear in Public Pensions’ Armor

First in Detroit, then in Stockton, Calif., and now in New Jersey, judges and other top officials are challenging the widespread belief that public pensions are untouchable.

Gov. Chris Christie of New Jersey delivered the latest blow on Tuesday, when he proposed to freeze that state’s public pension plans and move workers into new ones intended not to overwhelm future budgets or impose open-ended demands on taxpayers.

The first crack came in Detroit, where a judge ruled that public pensions could, in fact, be reduced, at least in bankruptcy. Then, just a few weeks ago, an opinion by the bankruptcy judge for Stockton, which emerged from Chapter 9 on Wednesday, called California’s mighty public pension system, Calpers, a bully for insisting in court that pension cuts were wholly out of the question.

Such dogma “encourages dysfunctional strategies,” wrote the judge, Christopher Klein, chief judge of the United States Bankruptcy Court for the Eastern District of California. He said Calpers’s legal arguments were invalid, and he concluded that it lacked standing to dominate the courtroom discussion the way it had. Stockton did not even seek permission to freeze its pension plans, but the judge nevertheless wrote that it was entitled to do so and went on to cite steps that struggling cities in general should take to trim their pension costs legally. . .

Actually Jersey’s public pension system is not “open-ended” - it is funded at set levels of payback as in effect delayed compensation through contributions made by state-workers and supposedly by the state - up until about twenty years ago the system was one hundred percent funded by these set levels until Governor Christie Todd Whitman - a Republican - “borrowed” a billion or so dollars from the fund to cover shortfalls in other areas of government, especially her pet environmental projects - governors since then have not only continued to “borrow’ funding, but have failed in many cases to make the state’s payments into the fund as required by law - a couple of issues probably not addressed in the article (I didn;t read the whole thing) are that Christie’s proposal is to turn the pension system over to the unions to run (and we all know how trustworthy unions have been with pension money in other venues) and his proposal will require the public to approve by vote a constitutional amendment allowing the move because as of now the Jersey constitution requires the state to provide the pension - the Jersey pension system is on shaky ground, but more so because politicians have been siphoning money out of the fund and refusing to pay into it as required by law (although a judge only a few days ago ordered Christie to pay 1.5 billion dollars which he was refusing to do) than because of the rapaciousness of the state workers......

An acquaintance just retired at 46 as a cop in NJ; the public-sector “workers” are to blame for this problem in NJ. This guy will most likely spend more time collecting his pension than he ever spent working.

What really has brought this to a head is that a lot of teachers in NJ would stay on the job well past retirement age because they didn’t have to do any work and raked in incredible salaries (due to union rules, based on years of service); within the last couple of years those teachers were offered great packages if they retired or risked a lot if they stayed on - so they retired. Those costs, coupled with the costs of their replacements, are crippling the state.

Christie has maintained he will not raise taxes; he knows that is just speeding up the death spiral here by forcing more and more companies and Americans to flee (shrinking the tax base further). Nobody is foolish enough to open a business or buy a house here as long as it means buying a share in a huge IOU to people who retired decades ago; one can expect no return at all on current taxes paid to the state/municipalities while we pay off those commitments to former “workers”.

State and local police in Jersey and a lot of other states around the country - and the US military - receive favorable retirement benefits in return for the presumed dangerousness of their jobs - since most begin their careers in their twenties, a twenty year period of required service before they can draw a pension means that most can retire in their forties - of course there are those who don't live even that long...

There's no doubt that there is a lot of dead wood amonst state workers - we could probably do quite well with about twenty-five percent fewer high-paid "administrators", "analysts", and "assistant deputy assistant commissioners" - in fact since many of them are political cronies and payoffs who get their jobs by who and not what they know, they often get in the way of those qualified people working to keep the state operating, so things might run more smoothly if they simply disappeared - on the other had, they do pay a percentage of their salaries into the pension fund along with all other state employees while working the twenty-five years until they can retire - if they last that long....

There's also no doubt that the state's in trouble financially, with businesses as well as people moving out - but to blame this solely or even mainly on the state employees pension system is to ignore the massive amounts of waste throughout state government. The Department of Environmental Protection or whatever it's called is a perfect example, with its draconian and often absurd regulations that can make life expensive and exasperating. I have in my front yard a small depression of about ten square feet which occasionally gets an inch or two of water in it temporarily after a heavy rain. When my house was built the ground had to be inspected by the DEP, and I have somewhere an official letter from that Department calling that portion of my yard a designated wetlands preserve on which I can build or even place nothing more permanent than a layer of crushed stone if I decide to put a driveway in. Then there is the Department of Education with its senseless and at times destructive policies, like the new statewide standardized testing program. Niece who is a teacher in the state calls this multimillion dollar effort a disaster in so many ways - for instance it is administered to kids starting in the third grade via laptop computer, but involves multiple pages of text and answer sheets requiring the child to jump back and force in giving his responses, so it will not be clear how much of the results are measures of the kids' knowledge and how much is a reflection of their ability to use the computer. And then let's not forget the voters themselves, who keep approving hundred million dollar referendums on using taxpayer money to buy and preserve "greenspaces" - that's empty land (probably from some politically-connected land owner) which will never be built on or become tax ratable. And it was only a year or so ago that the people of the state approved raising the minimum wage for workers in Jersey - wonder how much that's playing into the state's being 49th in new job creation......

In the end, people in NJ love “services” but don’t want to pay for them. While capping property tax rates prevents many of us from losing our homes to tax liens, it also means these services can’t be maintained at their current levels, but nobody wants to cut anything. We’ve kicked the can so far down the road that little is left of current revenues to fund current services; they are being used to pay people who retired long ago - and many subsequently fled the high-tax state they created that now feeds them.

Most NJ policemen are not in dangerous environments, and those that are “stood down” long ago due to racial politics. That is why despite the density of our population and large minority communities we rarely have police-involved shootings (per capita); the people of NJ have been left to fend for themselves.

Who would “create jobs” in such an environment?

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