new jersey pension reform

Union Leaders React to Christie Reform Proposals

Last week, New Jersey Gov. Chris Christie unveiled a series of pension proposals that include freezing the current pension system for active employees and shifting them into a hybrid cash balance plan.

Throughout the week, union leaders publicly expressed their thoughts on the proposals.

Public safety unions weighed in, from NJ.com:

Patrick Colligan, president of the New Jersey State Policemen’s Benevolent Association, noted that as his union is funded by municipalities, it is in far better financial shape than those funds that have been shorted by the state through the years and his members should not face higher costs and lower benefits.

“To propose solutions to further reduce employee benefits essentially ignores the math of (Police and Firemen’s Retirement System),” Colligan said, adding that the plan “punishes nearly 40,000 law enforcement officers and firefighters who have no part to play in the state’s underfunded pension plans.

His derision was echoed by Edward Donnelly, president of the New Jersey Firefighters Mutual Benevolent Association.

“We have seen the results of Christie’s previous ‘reforms’, increased obligations to our members, while New Jersey taxpayer’s burden continues to be even greater,” said Donnelly. “Instead of more deceptive back-room deals, now is the time for us to stand together to bring about meaningful changes that save our pension system without further burdening taxpayers.”

Other unions officials spoke out, as well:

NJEA president Wendell Steinhauer claimed the teacher’s union was “deeply disappointed” that Christie “overstated the nature of the understanding” reached with the governor’s commission after months of talks.

“The pension plan’s long-term problem has always been the state refusing to put the money in,” said Hetty Rosenstein, New Jersey state director of the Communication Workers of America, “Now, here we go again.” The New Jersey chapter of the CWA represents some 40,000 state workers, as well as 15,000 county and municipal workers.

Read more about Christie’s pension proposals here.

New Jersey Pension Commission Release Report; Proposal Would Bring Savings to State, Cuts to Workers

New Jersey Gov. Chris Christie unveiled a series of pension reform proposals at his budget address yesterday.

But he’s taking his cues from a just-released report from his pension commission, which he set up in the summer of 2014.

Christie acknowledged in mid-2014 that future pension changes would likely mean benefit cuts for workers. Now, we are getting more details about the specifics of the reforms Christie and his panel have in mind.

The five key pillars of the pension reform proposal, summarized by NJ.com:

1. Frozen Plan

The current pension plan would be frozen. Retirees would continue to receive their benefits, though without cost of living adjustments. Active employees would no longer accrue benefits under that plan.

2. “Cash balance” plan

The state would create a new “cash balance” plan, which is considered a hybrid between defined-contribution and defined-pension plans. Workers’ benefits are shown as a cash balance, funded by employee and employer contributions and investment returns, but they can take their payout as a lifetime annuity.

3. Health care premium change

Employees would pick up a larger share of their health care premiums, and health care coverage would be less generous overall. On average, employees pay 18 percent of their health care premiums. Under the proposal, that would increase to 25 percent, though higher-paid employees pay more. State and local governments pay, on average, 95 percent of the total cost of health care coverage, but the proposal calls for new health care plans that reduce the employer cost to 80 percent.

4. School plans

Local school districts would take on local education employee retirement benefits, which are currently paid for by the state, and the cost of the new cash balance plan. The commission estimates the savings from the health care cuts would more than cover those new responsibilities.

5. Constitutional amendment

Lawmakers would be asked to pass a proposed constitutional amendment that would appear on the November ballot and guarantee public employees adequate pension contributions from the state.

The commission’s report can be read here.

Cover photo credit: Walter Burns [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

New Jersey Lawmakers Warn of “Devastating” Budget Cuts in Wake of Court Pension Decision

A New Jersey Superior Court judge ruled this week that the state acted illegally when it cut its contribution to the state pension system in 2014.

If the state’s appeal of the ruling fails, it will have to come up with an additional $1.57 billion in 2015 in order to make its full payment to the pension system.

That money isn’t yet budgeted for – which means lawmakers will soon need to rearrange some items in the general budget to make space.

Lawmakers reacted this week to that steep price tag, warning of cuts that would come as a result. From NJ.com:

“The impact on programs at the end of the year would be devastating,” state Assembly Majority Leader Lou Greenwald (D-Camden) said. “The reality is we have to either make draconian cuts and make the payment…”

[…]

Assemblyman John Wisniewski (D-Middlesex) said Christie created the problem with his “duplicitous assessment of how to handle our pension obligations,” which included touting his 2011 overhaul of the pension system and telling workers that it saved their pensions, and then arguing in court that his own law was unconstitutional.

“He has an obligation to come up with a solution, since he is the one who came up with a solution that put us in this predicament in the first place,” said Wisniewski,

Assembly Minority Leader Jon Bramnick (R-Union), however, said it’s up to the Legislature to figure out what to cut now.

“All budgets are prepared by the Legislature,” he said. “So the court is saying to the Legislature you have to put this much money in the pension fund. So I’m assuming the governor will ask the legislature to come up with the program cuts that would be needed to find $1.6 billion.”

While the Legislature must pass budgets, it’s Christie who first proposes them.

Assemblyman Jay Webber (R-Morris), a member of the budget committee, said the payment Judge Jacobson ordered is about 5 percent of the budget.

“We have to be able to find it. And I think the other thing it emphasizes is we need a new round of reforms to our pension system,” Webber said. “We need to change those promises for new employees and employees who are far enough out from retirement that they can plan their retirements accordingly.”

The lawmaker reactions came before details emerged about Christie’s new pension reform proposals.

The savings realized through the proposals, if enacted, could make the cutting process easier for lawmakers.

Photo credit: “New Jersey State House” by Marion Touvel – http://en.wikipedia.org/wiki/Image:New_Jersey_State_House.jpg. Licensed under Public domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:New_Jersey_State_House.jpg#mediaviewer/File:New_Jersey_State_House.jpg

Former NJ Official: Christie Used Misdirection on Pension Payments in State of State Address

During his State of the State address last month, New Jersey Gov. Chris Christie made a few remarks defending himself against accusations of short-changing the state’s pension system.

He claimed that he had contributed more to the pension system than any governor in New Jersey history.

That’s not a false statement. But it also doesn’t tell the full story.

Edward Buttimore, formerly of the state’s Attorney General’s Office, penned a column on Tuesday explaining the misdirection.

Buttimore writes:

When Gov. Chris Christie praised himself during the State of the State address for making the largest contributions to the State pension funds of any governor in New Jersey history, that statement was true, but not accurate.

While Gov. Christie has contributed $2.9 billion (if he makes the reduced $681 million payment for FY2015), what he fails to be clear about is that he will have skipped $14.9 billion in required pension payments during the past five years as Governor, according to his own Pension & Health Benefit Study Commission’s Status Report.

Former Gov. Corzine made $2.1 billion in pension payments while skipping an additional $6.4 billion required from 2007 to 2010.

In fact, Gov. Christie’s $14.9 billion skipped pension payments eclipses the $12.8 billion combined missed payments of his five predecessors over a 15-year period from 1996 to 2010. That was a pretty important fact that he omitted from his State of the State address.

For the last three years Gov. Christie has traveled the country congratulating himself for his 2011 bipartisan pension reforms, including prominently mentioning it during his keynote address for Mitt Romney at the 2012 Republican National Convention. He then he failed to follow through on making the required payments.

Read the entire piece here.

Photo by Bob Jagendorf from Manalapan, NJ, USA (NJ Governor Chris Christie) [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Judge in New Jersey Pension Trial Calls State Pension Contributions a “False Promise”

The judge presiding over the legal battle between New Jersey and its public workers said last week that the state’s 2011 pension reform law was a “false promise”.

The law required the state to contribute a set amount of money annually to the pension system. But Christie slashed those payments last year.

The judge, Mary Jacobson, wondered why New Jersey included in the reforms the “false promise” of guaranteed pension payments if the state knew it was unconstitutional.

From App.com:

Superior Court Judge Mary Jacobson repeatedly made the point that the Legislature specifically made the pension contributions a contractual right in a law signed by Christie, though the administration’s lawyer said it’s not allowable because lawmakers decide each year what to fund.

“You’re saying that it was known at that time, should have been known at that time, that that was a false promise,” Jacobson said.

“It’s unprecedented because it’s unconstitutional if enforced,” said deputy attorney general Jean Reilly. “It’s not an accident that it’s not in there before. It’s not in there before because it’s not constitutionally permissible to do. … For all future legislatures, it’s merely an exhortation for payment.”

Lawyers for the Communications Workers of America union said Christie and lawmakers locked the obligation into law because pension payments are always the first thing to be cut if money gets tight. They said Christie was required to find the funding to pay for pensions, not skip the obligation.

“It was a political decision not to do that,” said attorney Kenneth Nowak. “Now, the governor may have some agenda as to how he feels about taxes. But he also has a constitutional obligation.”

Christie cut the state’s pension payments in 2014 and 2015 by around $2.5 billion.

Top Police Union Official Says Christie Used “Bait and Switch” on Pensions

The New Jersey Police Benevolent Association is one of the dozen unions that filed a lawsuit against the state when Chris Christie opted to cut the state’s pension contributions by over $2 billion in 2014 and 2015.

And while lawyers are arguing the case in the courtroom, NJPBA president Patrick Culligan made his case in a letter to members this week, where he accused Christie of using a “bait and switch” to feign pension reform.

From the letter:

We are expecting that the Governor will propose significant further pension and healthcare reductions. We believe that the formal report of the Governor’s Pension Commission will be released very soon to support the Governor’s expected message today.

[…]

In the 2012 State of the State, Governor Christie proudly proclaimed ‘we saved their pensions’. He added; ‘Our pension system, which was on a path to insolvency, is now on much more sound footing. With your help, we tackled the problem head on.’ It was a success he shouted on the national stage for years after. He has repeatedly called Chapter 78 his crowning bipartisan achievement.

But his reflections on Chapter 78 mask his own deliberate acts to destroy pensions as we know them. I would like to remind everybody that in 2014 the Governor declared parts of his reforms ‘illegal’ in the State’s own legal briefs responding to our pension lawsuit. The former Federal Prosecutor, the attorney, the Governor who signed that law declared his obligation to make a pension payment to be ‘illegal’ and unenforceable. He also vetoed bipartisan legislation that would have required our additional contributions required by Chapter 78 to actually go back into PFRS where they belong. He has proven time and time again that he wants our system to fail.

This unfortunately is the kind of bait and switch we have come to expect from Governor Christie’s ‘promises’.

Read the full letter here.

Photo By Walter Burns [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Judge Hears More Arguments Thursday In Fight Over New Jersey Pension Payment Cuts

A Superior Court judge on Thursday will hear the latest round of arguments in the battle between New Jersey and public-employee unions.

The unions are suing the state after Chris Christie cut the state’s pension contribution by nearly $1.5 billion and used the money to over shortfalls in the general budget.

From NorthJersey.com:

If Judge Mary Jacobson rules against the Christie administration and orders the larger payment to be made, it could force the governor and lawmakers to come up with more than $1.5 billion in revenue midway through the state fiscal year or make new cuts.

The pension system is worth $80 billion and covers roughly 770,000 current and retired employees. But for years, governors, including Christie, have skipped or made only partial contributions into the system, leaving it funded at only 33 percent.

Unions that represent teachers, firefighters, state police and other public employees are arguing that a state law signed by Christie in 2011, which overhauled the pension system, also included a contractual obligation that the larger payment would be made.

Hetty Rosenstein, state director of the Communications Workers of America, one of the unions in the lawsuit, said the language in the 2011 legislation was framed specifically in response to prior court rulings on the pension funding issue.

“I think we’ve made a compelling case,” she said.

Administration attorneys have countered that the governor is required by the state constitution to maintain a balanced budget, giving him the authority to effectively ignore the law that calls for the larger payments if he needs the money to fulfill his constitutional responsibilities.

The pension reform law signed in 2011 mandated that New Jersey contribute a certain amount of money to the pension system each year.

But when the state faced a revenue shortfall of $1 billion in 2014, Christie made the decision to cut the state’s pension payment and use the money to fill the budget shortfall.

Christie Mum on Pension Specifics During “State of the State” Address

New Jersey Gov. Chris Christie announced this summer that another round of pension reforms would be coming to the state, and he all but promised that benefit cuts would be part of the deal.

But details have been sparse since then. It was thought Christie might use his “State of the State” speech to unveil a few more details about what’s coming down the pension reform pipeline.

But his address offered few specifics.

From NJ.com:

In his fifth State of the State address Tuesday, Gov. Chris Christie called the state’s struggling pension system “an insatiable beast.”

But despite rumors swirling the past week that he might use the platform to unveil a massive pension overhaul based on the recommendations from his pension commission, Christie offered little on how he intended to tame it.

The governor, who spoke at length about drug treatment and a Camden turnaround, dedicated roughly 10 percent of his remarks to the pension system without delivering any solutions.

“This is not just a New Jersey problem. This is a national problem,” he said. “A long-term solution and sustainable future for our pension and health benefit plans are difficult but worthy things to achieve.”

While crediting his 2011 reforms with saving the taxpayers more than $120 billion over the next three decades, Christie said pensions remain one of New Jersey’s “largest and most immediate” obligations.

“But the fact that is that while we have been making up ground, the pension fund is underfunded because of poor decisions by governors and legislatures of both parties over decades, not years,” he said. “These sins of the past have made the system unaffordable. But we do not have the luxury to ignore this problem.”

[…]

“Think of it this way, in order to close the current shortfall in just the pension system alone, every family in New Jersey would have to write a check for $12,000,” he said. “That is the nature of long-term entitlements which grow faster than the economy, and in that regard our problem here in New Jersey is not that different from Washington’s entitlement problem.”

Over the summer, Christie put together a panel to review the state’s pension system and offer recommendations for reform. But the committee has been silent for months, although Christie said they are “hard at work”.

Photo By Walter Burns [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Stakeholders Listening for Hints on Pension Reform in Chris Christie’s Annual Address

Chris Christie will deliver New Jersey’s “State of the State” address on Tuesday. The question on the minds of lawmakers, labor leaders and public workers is: how much will he reveal about his plans for reforming the state’s pension system?

Christie indicated over the summer that a new round of pension reforms are necessary, and they would likely involve benefit cuts.

But new details have been scarce, and the state’s Pension and Benefit Study Commission hasn’t released its recommendations.

From NJ.com:

When Gov. Chris Christie delivers his 2015 State of the State address Tuesday, lawmakers and public workers will no doubt be listening for remarks on pension reform.

On the eve of that speech, and months after a commission’s report on recommendations for the ailing pension system was expected to be released, legislators, union leaders and lobbyists say they are expecting to hear from the governor on one of the biggest issues facing Trenton. Christie’s office has not yet provided any details about his annual address to the state Legislature.

The governor made mention of the ailing public employee pension system nine times in his 2014 address, proposing to crack down on pension fraud and engage on pension reform.

“If we do not choose to reduce our soaring pension and debt service costs, we will miss the opportunity to improve the lives of every New Jersey citizen, not just a select few,” he said at this time last year.

The debate over pensions heated up again last spring when a budget gap suddenly erupted and Christie cut back on payments that were promised in a highly touted pension reform law he signed in his first term.

Since late summer, recommending ideas about overhauling public worker pensions has been the job of a bipartisan commission Christie designated. The commission issued a report in September laying out the severity of the state’s unfunded pension and health benefit liabilities, but has not released a final report with recommendations. The commission’s chairman Thomas J. Healey did not return calls for comment.

The state is shouldering $83 billion in pension liabilities, as measured by new GASB accounting rules.

Photo By Walter Burns [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Pension Funding May Be First Fight of 2015 for New Jersey Lawmakers

At some point in 2015, pension reform will become a hot topic in the New Jersey Legislature. The only question is when the battle will heat up.

From the looks of things, the fight over pension reform could begin sooner than later.

From New Jersey 101.5:

Funding New Jersey’s public employees’ pension system could be the first major fight in 2015 and it will likely pit long-time allies against one another. Gov. Chris Christie is calling for new reform, but state Sen. President Steve Sweeney (D-West Deptford) has drawn a line in the sand and said he will support further reform.

“He (Christie) has to fund it. We actually did the things that were necessary to fix it. He needs to fund the pension fund,” Sweeney said. “No matter what changes you make to a pension system, if you don’t meet the financial needs of it at the same time – no fix will work.”

The law required the state to contribute $1.6 billion into the pension system last fiscal year, but Christie paid in only $696 million. He signed an executive order to enable the lesser payment. The payment for this fiscal year was to be $2.25 billion, but the governor said he’ll contribute $681 million.

The governor must make the full $2.25 billion payment this year, according to Sweeney, who acknowledged it will be difficult.

“It’s going to put a lot of pressure on the budget, but we knew it. The big picture here is the lack of growth in the economy and he’s been the governor for five years now so he can’t point fingers at others,” Sweeney said.

[…]

Last fall, Christie began making his case for pension reform. He said it is an important, long-term project.

“It’s something that we can’t ignore because it will first crowd out any other type of investments the state wants to make in important projects around the state, and it will then ultimately bankrupt the state,” Christie said.

Gov. Christie has made it clear that reforms would likely mean further benefit cuts.

Sweeney, on the other hand, is pushing for a funding solution that involves more state money going to the pension system.

Photo By Walter Burns [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

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