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Pension Reform Through Responsible Spending
Updated On: Nov 21, 2014
Earlier this month Paul Mulshine, a conservative columnist for The Star-Ledger, posted an article entitled "Mulshine's do-it-yourself pension bailout: No politicians required" seeking his readers' opinions on how to fix the state pension system.  Mulshine preempted his readers comments by concluding, "There's just no feasible way to make those pension payments."  To support his argument, no clear solution was left in the comments section by the readers.  This was accompanied by his constant urging to stick to specific budget lines and projecting his opinion that former Governor Whitman did not hurt the pension system.

While Mulshine makes broad suggestions regarding cuts to the state budget he paints a picture that convinces the reader of this impossible task.  There is just no way for the state to make such a drastic move in order to close the pension gap while fulfilling all of its other obligations. Conversely, one could argue that all budget lines could sustain a minimal reduction to fulfill the state's pension obligations.  What is needed to make this argument successful is responsible spending.  Does this administration possess that ability?

In the July 2014 issue of New Jersey COPS, the official publication of the New Jersey PBA, recently elected PBA President Pat Colligan penned an article, "Mr. Governor, I offer you 'Plan B'."  In his article Colligan identified this spending that he felt could have be used in a better way:

  • Christie Bridgegate “Investigation” Legal fees (discounted) paid to Gibson Dunn & Crutcher: $3.26 million (and climbing).
  • Race to the Top School Funding “application error:” $400 million.
  • “Special” Senate Election to keep Booker off the Christie ballot: $23.8 million.
  • “Stronger than the Storm” high bid Chris Christie family commercials: $2.20 million over low bid.
  • “Alternative Investment Fees” paid by the NJ Pension Fund for New Jersey’s high-risk hedge fund managers (mostly friends and donors of you know who): $1.2 billion.
  • Difference in profits between Christie’s “Alternative Investments” and the median national public pension investment return (12.9 percent vs. 16 percent): $2.5 billion.
  • State subsidy to the Camden County “Regional” Police Department: $35 million.
  • Pension padding for Christie pal Gene Feyl following his appointment to Highlands Commission:$300,000 (over 10 years).
  • In May, 2014 the governor’s office staff received average raises of 23.1 percent (21.1 percent more than the 2-percent cap imposed on police/firefighters): $305,636.66 in excess of 2 percent.
  • AshBritt no-bid contracts after Hurricane Sandy: $150 million.
  • Legal fees paid to the law firm of Patton Boggs by the Christie campaign (Lawyers to the New Jersey Republican State Committee) for Bridgegate: $314,000.
  • Legal fees paid to the law firm of Patton Boggs (Lawyers to Christie Campaign and the New Jersey Republican State Committee) to negotiate with the Department of Transportation for the ARC Project cancelation: $1.2 million.
  • Amount New Jersey owed to the federal government after improperly overseeing Medicaid’s patient-care services: $145 million.
  • Since 2010, New Jersey’s Economic Development Authority has awarded 252 companies more than $4 billion in subsidies (tax breaks and credits), more than triple the amount awarded over the previous 13 years (Including $261 million to Revel Casino): $3.9 billion.
  • “Dollar-for-dollar” tax incentive grant to build a practice facility in Camden for the billionaire owner of the second- worst team in the NBA ($8.2 million/year over 10 years): $82 million.

PBA President Colligan concluded his column by stating, "If my addition is right, I think I came up with just about $5,943,379,636.66. That’s more than enough for this year and just about covers next year’s payment, too."  All of this wasteful spending was part of the budget, and while all of it may not have been re-appropriated for pension payments it still could have been better used by the Departments that it was budgeted to.  

To achieve pension reform and provide savings to the state and municipalities the state needs to fulfill its pension obligations, and satisfying these obligations through responsible spending is more realistic than some think.  The state pension system has a history of being self sustaining when it is fully funded which is why it was so attractive to past governors to raid or short change.  While the pension system is allowed to prosper on its own, payments by the state and municipalities could be offset by growth.  

In addition to full funding the state pension payments should be made monthly.  One has to wonder why, if money is budgeted, does the state delay in making its pension payment until the end of the fiscal year?  Public employees make their pension payments every paycheck, but at the end of the fiscal year they are left wondering if the state will make its pension payment or will that payment be used to make up the shortfalls of the budget.

Pension reform should focus on the practices of the state, not placed on the shoulders of public employees.


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