Welcome to the world of fiscal accountability in New Jersey. Let's go back to the days of Christie Todd Whitman, who first noticed that there was a pension shortfall of $2.8 billion, and used borrowing to make up the gap. The shortfall was there because prior administrations had failed to fully fund the pension fund.
The problems were only to get worse.
Next up came Donald DiFrancisco, James McGreevey, and Richard Codey, who all ignored the warning signs and the dot.com bust, which eliminated the so-called $5 billion surplus. What did these administrations do? They not only stopped funding the pension fund, but increased the benefits to pensioners by 9%. The combination meant that the discrepancy between what was in the fund and its obligations would not only widen, but accelerate.
The gap is now at $33 billion. That's nearly as large as the state's annual budget.
The blame game in Trenton has lots of finger pointing between the Treasury Department which is supposed to manage such things, and the Legislature, which is required to meet the state's obligations.
Gov. Corzine is not only stuck with this mess, but he's trying to do it on the cheap. Even though he recognizes the problem, he's not fully funding this year's obligations, let alone making up for the shortfall from prior years.
What can and should be done? Well, there are no easy answers, and if you're one of the people who are relying on the pension fund, you might not like the possibilities.
1) Amend state law and the state constitution to reduce the pension benefits to manageable levels and force a shift from defined benefit plans to defined contribution plans. This is the same kind of shift that has occurred in the private workforce, and would alleviate many of the concerns with the pension plan going forward. The problem is that the unions hate these kinds of changes and would fight it tooth and nail every step of the way. I would give the odds on such a change about 100-1.
2) Cut state jobs. New Jersey continues to tack on more state jobs even as the state's population declines. This untenable situation means that the state continues to spend ever more money despite having less coming in. The tax situation is out of whack, and the state spending needs to be brought under control. Cutting state jobs would work, but only in conjunction with other changes. Odds: 50-1 (same problems with unions, but unions have a tendency to hang new workers out to dry and want to protect the entrenched old timers' benefits).
3) Cut state spending and redirect money to pension funds. This means giving up pet projects and other initiatives. That new stem cell research facility? Well, sounds great until you realize that there's no money to pay for it despite it having the backing of the governor. The state must reprioritize its spending habits, and get back to basics.
Fund the pension fund. Fund the transportation trust fund. Address property tax reform and education funding in a comprehensive manner that is not only equitable, but gets the state out from under crushing Abbott rules that have done nothing to improve the education in those areas. Odds 25-1. Abbott rules have court backing and it means the legislature must decide to take on the courts, which is no mean feat. Cutting spending and eliminating pet projects means that the pork doesn't get delivered and campaign promises go unfulfilled.
The article suggests that the state should consider one-shots to get the pension system funded, such as selling/leasing the Turnpike. Funny thing about those one-shots is that they never work. All that will do is reduce the number of assets available to the state and the state will need to make the money up in another fashion. Transportation funding should come from any change in the status in the Turnpike. It shouldn't go into a general fund or address the pension problems. One of the reasons that the state is in this mess is because the state was playing with the money. Dedicated money streams would guarantee that various items would be funded and if there are shortfalls, the difference must be made up from the general fund. Surpluses shouldn't be treated as slush funds, but kept for rainy day for the individual revenue streams.
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