Angela Delli Santi, at Bloomberg, reported that a proposed bill of Senate
President Stephen Sweeney requires increased pension contributions from government workers but leaves retirees out of the mix. Sweeney’s proposal links pension contributions to the financial solvency of retirement funds. It also halts automatic cost-of-living increases but allows for the 9 percent benefit increase.
Governor Christie’s proposal includes a provision to raise the retirement age to 65. It is currently 62. Employee pension contributions are specifically set to 8.5 percent. In addition Christie want to roll back the 9 percent increase.
Sweeney reportedly claimed his proposed changes would make state pensions more like those in the private sector. It would be movement in that direction but the gap between the two sectors is still a wide one favoring the public sector. Sweeney again took the opportunity to call on New Jersey to make contributions to the state pensions. But to resume this the state would either have to make cuts in other areas or increase taxes. Sweeney did not indicate which option he prefers.
Eileen Norcross and Andrew Biggs put out a well researched paper titled The Crisis in Public Sector Pension Plans: A Blueprint for Reform in New Jersey. This from the abstract:
‘New Jersey’s defined benefit pension systems are underfunded by more than $170 billion, an amount equivalent to 44 percent of gross state product (GSP) and 328 percent of the state’s explicit government debt. Depending on market conditions, the state will begin to run out of money to pay benefits between 2013 and 2019.’
When the enormity of the public sector pension crisis is appreciated it becomes clear that reforms suggested by Senator Sweeney and Governor Christie, while welcome, do not go far enough. Of the two proposals Governor Christie’s goes further toward addressing the underlying fiscal problems and is the one voters would be wise to push for. Specifics called for in the scholarly researched paper include “capping salaries, increasing employee contributions, reducing the rate of the accumulation of future benefits, reducing annual cost of living adjustments (COLAs), and increasing the retirement age.”