New Jersey’s Inconvenient Truth
I have to genuinely wonder if this legislature will go down as the most taxing legislature in the history of the state of New Jersey surpassing the legislative actions undertaken under both Jim Florio and Jon Corzine.
During a special session of the legislature that Governor Christie called for his first budget address, he mentioned several items. Among them, he called for pension reform and he indicated that several bills which were pre-filed were a good start but that they needed to go farther.
While we sincerely hope that he succeeds, the reality of one of those bills is something else. That is because of what may be the most historic undercover move ever attempted by any legislature under any administration, a constitutional requirement of full state pension funding payments forever. Even school funding does not have this protection.
SCR-1 was pre-filed for the new legislative session, with Senate President Steve Sweeney and Republican Minority Leader, Tom Kean Jr. as co Prime sponsors,
SCR1 states: “Commencing July 1, 2011 and thereafter, the contribution required, by law, to be made by the State to any defined benefit retirement system or fund administered by the State for public officers and employees in the State shall be made in full each year to each system or fund in the manner and at the time provided by law.”
If as has been reported in the press, the state’s pension has a liability in excess of $35 Billion, the question is simple: Where is the money coming from? There can only be one ultimate answer, higher taxes.
This is typical of the fiscal mismanagement that we have seen under past Democrat controlled legislatures because no attention is being paid to the real fiscal impact of such a proposal. And what makes matters worse, is the number of Republican co-sponsors.
Regardless as to what this concurrent resolution states, most municipalities have not been making their own necessary payments into the pension system for one reason or another. To put it bluntly, municipalities are broke and in worse shape than the state because they have fewer methods to make up revenue shortfalls.
If municipalities are also required to make payments in full, the only way they have to do it is to reduce salaries in already awarded contracts, engage in substantial layoffs or raise whatever taxes they have access to which in most cases is the property tax.
The Governor has several tools at his disposal and one of them is a strong spine. However, the lack of a spinal column seems to be a qualification for most municipal officials. When faced with options, they do not want the confrontation that will occur if they try to encumber existing contracts. And given both the frustration over property taxes from residents and new found resolve by the likes of the Tea Party groups, this proposal is likely to encounter a wide band of opposition before it ever attempts to get off the ground.
One thing the Governor alluded to, but did not say, is that NJ is facing a fiscal emergency. However, he did not declare, I repeat, he did not declare a fiscal state of emergency.
Had he done so, perhaps municipalities might have a tool to fight the fiscal canyon that they must traverse. However, without such a tool and some really critical clarification of SCR 1, SCR 1 could result in the greatest increase in taxes in the history of the state of New Jersey.
While Governor Christie clearly has a fiscal plan in mind, whoever dreamed up this proposal is not even close to reading from the same playbook as the governor. This particular proposal needs some significant due diligence done on it. And Assembly staffers, at the highest levels, need to stop badgering members who have come to the realization that this is very bad legislation.
Most proposals of this nature usually have what is called a fiscal note attached to it done by the Office of Legislative Services (OLS). To date no such document has been produced which would be needed in order to shed some significant insight into just how bad this proposal may be.
As a prosecutor, the Governor knows the danger when “the jury is out.” However, our hope is that when the jury is in, that the Governor will use his considerable clout and move to scrap what is clearly an inherently bad idea.
As stated earlier, what is perhaps the most surprising and perplexing part of this proposal is the number of republican senators that are co-sponsoring the resolution.
While “pay as you go” might sound good, New Jersey doesn’t have the money to go anyplace right now unless there is a significant change in pension contributions made by the beneficiaries. Without that huge change, this is a bad idea and can only cause more fiscal problems that New Jersey simply just cannot afford. And those who support this, need to know that their political careers will be over if they continue to back such taxpayer hostile legislation.
The following link will take you to the full SCR. It is only 4 pages long. But once you read it, you will shudder. http://www.njleg.state.nj.us/2010/Bills/SCR/1_I1.PDF
SCR1 – SWEENEY, T. KEAN
Here are some excerpts:
“Commencing July 1, 2011 and thereafter, the contribution required, by law, to be made by the State to any defined benefit retirement system or fund administered by the State for public officers and employees in the State shall be made in full each year to each system or fund in the manner and at the time provided by law.”
CONSTITUTIONAL AMENDMENT TO REQUIRE THE STATE TO PAY IN FULL ITS ANNUAL CONTRIBUTION TO PENSION PLANS FOR PUBLIC EMPLOYEES
Shall the amendment to Article VIII, Section II of the New Jersey Constitution, agreed to by the Legislature, requiring the State to pay each year, beginning July 1, 2011, the full amount of the contribution it is required to pay, as calculated by actuaries, to any pension plan operated by the State for public employees, and requiring the contribution to be computed by actuaries based on an annual valuation of the assets and liabilities of each plan, except that the State could comply with this requirement by making a payment of at least 1/7th of the full contribution in the first year and increasing its payment by at least an additional 1/7th in each of the six years thereafter, be approved?
YES NO
INTERPRETIVE STATEMENT
This constitutional amendment requires the State to pay each year, beginning on July 1, 2011, the full amount of the contribution that it is required by law to pay to any pension plan operated by the State for public employees. The amendment requires the amount of the contribution to be determined by actuaries for each plan based on an annual report, prepared by the actuaries, that calculates the assets and liabilities of the plan. The amendment permits the State to comply with this requirement by making a payment of at least 1/7th of the contribution in the first year and increasing its payment by at least an additional 1/7th in each of the following six years in order to permit the State to gradually adjust the annual appropriations act to accommodate these payments.
STATEMENT
This concurrent resolution proposes a constitutional amendment to require the State to pay each year the full amount of the contribution it is required to make to any defined benefit pension plan operated by the State for public employees. This requirement would commence July 1, 2011. The amendment requires the amount of the contribution to be determined by actuaries for each plan based on an annual report, prepared by the actuaries pursuant to consistent and generally accepted actuarial standards that set forth the assets and liabilities of the plan. This amendment permits the State, for the first seven years, to phase in this requirement, for the payments it is required to make, by paying at least 1/7th of the contribution in the first year with payments increasing by at least an additional 1/7th in each year thereafter in order to permit the State to gradually adjust the annual appropriations act to accommodate these payments.
SCR1 is Co-Sponsored by:
Sweeney, Stephen M. as Primary Sponsor Kean, Thomas H., Jr. as Primary Sponsor
Van Drew, Jeff as Co-Sponsor Vitale, Joseph F. as Co-Sponsor
Lesniak, Raymond J. as Co-Sponsor Oroho, Steven V. as Co-Sponsor
Codey, Richard J. as Co-Sponsor Cunningham, Sandra B. as Co-Sponsor
Beach, James as Co-Sponsor Gordon, Robert M. as Co-Sponsor
Bateman, Christopher as Co-Sponsor O’Toole, Kevin J. as Co-Sponsor
Bucco, Anthony R. as Co-Sponsor Cardinale, Gerald as Co-Sponsor
Baroni, Bill as Co-Sponsor Stack, Brian P. as Co-Sponsor
Scutari, Nicholas P. as Co-Sponsor Madden, Fred H., Jr. as Co-Sponsor Buono, Barbara as Co-Sponsor Ruiz, M. Teresa as Co-Sponsor Sarlo, Paul A. as Co-Sponsor Gill, Nia H., Esq. as Co-Sponsor Pennacchio, Joseph as Co-Sponsor
[...] February 22, 2010 BYLINE: By richardlarossa, The Public Needs to Know [...]