An important conference call today on the state’s public worker pension benefits, among the most under-funded in the nation, according to new Pew research. It’s short $40 billion. Gov. Chris Christie proposed swapping out the system and putting workers into a hybrid benefit plan and unions balked. Then lawmakers proposed a millionaires tax. Christie vetoed it. So today the Assembly speaker gathered union leaders and Gov. Christie’s Pension and Health Benefits Study Commission members to confront what one attendee called “a bleak but avoidable future.” He’s commission member Tom Byrne. He told NJTV News Anchor Mary Alice Williams that changes need to be made to ensure state workers will get their pensions.
Byrne said the current problem is large. “We have about $80 billion in the state pension fund and we need another $40 [billion] in order to meet the needs of retirees down the road,” he said.
He said New Jerseyans should worry about the deficit now because the problem can’t be solved overnight. “What the commission has proposed is a way of filling that unfunded liability over a period of time, basically by restructuring the pension plan itself, and also by restructuring health benefits. But taking all of that money, all of the money we save, and recycling it back into the unfunded liability for the benefit of state workers to make sure that their pensions are secure when the time comes to pay them,” Byrne said. “And there’s basically no other way to do that. We pay out about $10 billion a year from the state pension fund and it already has a negative cash flow. And the actuaries say that that money will disappear within a decade. And in the context of a $33 billion state budget, I just don’t see how $10 billion of that is going to be devoted to pensions. It’s not realistic.”
Byrne called the recent state Supreme Court ruling saying Christie didn’t have to fully fund the pension system significant. “One of the things that scares me about it is that the court also said that employees have the right to their pension going down the road,” he said. “It made people think, I’m afraid, that they’re going to get their money one way or another, that they have a contractual right to it and so forth. But if there’s no money, then you can win a legal case, but if there’s no money, you don’t collect your judgement. That’s the problem.”
The U.S. Supreme Court has already ruled that states can call it an emergency and not fund the systems. “That’s why our commission has proposed a constitutional guarantee of this money so that beneficiaries won’t have to trust politicians to make these payments, that we can start to take these savings that we’ve identified now, recycle it back for the benefit of pensioners,” Byrne said.
Raising taxes won’t be the ultimate solution, according to Byrne. “A millionaire tax would raise about 15 percent of the money needed every year to fund what we have to fund, which is about $4 billion a year, the actuaries say we have to come up with. And when you think the state income tax right now raises about $13 billion, that would be a pretty significant tax increase and to do it just on millionaires, you’d probably raise $600 million or there abouts of the $4 billion necessary. So it sounds good and it can be part of a solution if that’s what the politicians come to, but it’s just misleading to think that would solve the entire problem,” he said.
Byrne said the 2011 pension reforms didn’t go far enough. “What the 2011 reforms essentially were was a bet on revenue growth that didn’t occur,” he said. “There were warnings all along. There were warnings in 1995 that we had to fund this thing. And what the pension commission has done is come up with a very credible way of doing it but it does involve some trimming of benefits down. For instance on the health care side, the benefits would still be equivalent to Obamacare gold, would still be outstanding benefits.”