Are You Paying Attention New Jersey?

I've been writing about New Jersey's financial troubles for quite some time now, and I was warning that Gov. Jon Corzine's plan to defer payments into the pension plan was a disaster waiting to happen.

A ticking nuclear explosion is more like it (HT: Instapundit).

he state of New Jersey is insolvent. Bankrupt might be a better word. New Jersey is $60 billion in the hole on pension funding and the Governor is planning on skipping payments in a “pension payment holiday” until 2012 so as to not increase property taxes. To top it off, the ongoing plan assumptions are 8.25%. Sorry NJ, that simply is not going to happen.

The state can't afford Corzine's plan, which basically says that it's okay for municipalities to defer payments to already insolvent pension plans because it would reduce the pressure to raise property taxes still higher. New Jersey is seriously in the hole for overly generous pension plans that are severely underfunded. Corzine would actually make the situation even worse, and require still more tax hikes to cover pension obligations that are going to come due in future years.

New Jersey’s pension fund has lost more than $23 billion this year, dropping to its lowest level since 2003 as a collapsing financial market battered its investments, a new state report shows.

The latest losses — nearly $9 billion in October, and another $3 billion so far this month — mean the fund is now worth $57.8 billion, or less than half the $118 billion in benefits it is due to pay out over time. . . .

While Clark delivered his report to the State Investment Council in Trenton, Gov. Jon Corzine was in Atlantic City promising a convention of local government officials that he would let them postpone about a half-billion in payments they are scheduled to make to the pension funds in April.

Specifically, Corzine proposed letting local governments skip paying $541 million of the $1.1 billion due. They would gradually work their way back to full payments by 2012 under his plan.

Cutting the payments in half may avoid a big surge in property taxes, but it also will add to the shortfall in the pension accounts dedicated to local government workers, police and firefighters.

I can't quite understand why anyone still thinks Corzine is a fiscal wiz since he's pretty much abdicated his fiscal responsibilities to state taxpayers by pushing this half baked plan.

The state needs to seriously cut its spending, while bolstering its existing obligations. It must take an axe to future benefits obligations, which means telling state workers that they should not expect to see the kind of benefits that previous state workers received. The state can no longer afford gold plated benefits, specifically pensions that require huge outlays. When the stock markets were going gangbusters, the state cut back on its pension payments, figuring that the stock price increases were sufficient to cover obligations. That was a mistake. Now, they're looking to cut back payments when the stock prices are dropping drastically, accelerating the deficit on pension plan obligations.

The madness must stop, and that starts with telling Jon Corzine and the legislature to stick it. They lied about property tax relief when it came to imposing personal income tax obligations years back. They lied about property tax relief when it came to increasing the sales tax. They keep lying, and yet New Jersey taxpayers keep falling for the same story time and time again.

The federal government is not going to be in a position to bail out the states, as much as everyone thinks that they will bail out anyone who is holding out their hands. New Jersey made hugely dumb choices on spending and showed tremendous fiscal irresponsibility. And we'll be paying for those mistakes for a generation to come.