NJ Pensions Are Stingy, Not Generous: Editorial
New Jersey taxpayers are understandably frustrated when they see cops retiring with $200,000 in unused sick pay, or politicians taking three government jobs. Given the state’s crushing tax burden, it is enough to drive a person mad.
But be careful. Because when it comes to pensions for public workers, a much larger expense for taxpayers, New Jersey is among the stingiest states in the nation.
The reason the funds are running dry is that the state has skipped so many payments. So put the blame on politicians for this one, not on public employees.
Of the 100 largest public pension plans in the country, we rank 95th, according to a careful study by New Jersey Policy Perspective, a liberal think-tank with the motto “Facts Matter.”
The study found that the average pension benefit for public workers is $26,000. The formula used to calculate those benefits is among the stingiest in the nation.
Keep in mind, too, that the bipartisan 2011 pension reform signed by Gov. Chris Christie eliminated cost-of-living adjustments, even for current retirees. So in each year of retirement, public workers see their real pension income drop.
And for this, public workers in New Jersey pay more. They contribute 6.93 percent of their income, and that is scheduled to rise to 7.5 percent within the next four years. Workers in two-thirds of the states pay less.
This report underscores how reckless it was for Christie to break the central promise behind the reform he signed in 2011 by skipping $2.4 billion in pension payments. After promising to face this problem squarely, he has turned out to be even worse than his predecessors.
In the last decade, New Jersey has paid a smaller share of its pension bills than any state in the nation. If you want to understand why this state has the nation’s second-lowest bond rating, that’s a good place to start.
This report comes just as a blue-ribbon panel appointed by Christie is preparing to release a report on pension and health benefits. The political impact is easy to predict: Democrats will use this report to fortify their opposition to further cuts.
Keep in mind, though, that pensions are the second worst problem. Health care spending is even more out of control. According to a preliminary report from the governor’s panel, pension obligations amount to about $12,000 per household. Retiree health benefits amount to $18,000.
The NJPP study did not rank health benefits, where New Jersey’s public workers would likely rank much higher. Christie has charged that some of the state plans would be classified as “Cadillac” plans under Obamacare. Privately, even union officials concede that those benefits could be trimmed.
Still, NJPP’s finding is significant. It shows that most of the savings will have to come from health care, given that the pension benefits are already low. That makes it even more imperative that tax increases will have to be part of the final package, if it has any chance of winning bipartisan approval.
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