New Jersey taxpayers are not alone in facing challenges to their public employee pension plans, though whether or not the reasons are the same may not be clear.
Saturday's Ledger carried a report on how the coming year's state pension obligations impact various local communities. (For my post on Plainfield taxpayers' pickle with this year's pension costs, see here.)
The scene was set thusly --
Across the state, local officials blanched as they learned the pension bill facing local property taxpayers statewide has soared past $1 billion.The Ledger cites two reasons for this year's steep increase --
That's $406 million more than local officials needed to include in this year's budgets, and nearly 20 times what they paid four years ago.
The steep rise in pension costs has two causes. One is the overall jump in benefit costs, which rose by 27 percent between last year's accounting and this year's.However, there are long-term drivers that really determine the pain local taxpayers face each year --
The second is the continued phase-in of the portion of the bills towns are being required to pay. Under a five-year plan designed to ease the transition from the pension funding holiday, towns have been paying only a fraction of the actual bills they owe since 2004.
Generous increases in benefits, years of skipped pension payments and the collapse of the stock market six years ago all contributed to leaving the various pension accounts for state and local government workers about $25 billion short of the amount needed to cover benefits promised to retirees.There is always a problem in listing items in a series and that is that the reader silently assumes the writer has listed them in order of priority. The Ledger may think it has done so, but I beg to differ.
The first problem with our pension system is that both the Legislature and the Governor have skipped pension payments -- for years. Increases in benefits pale when compared with the failure of fiscal nerve by these players over the years.
Secondly -- and not stated directly in the Ledger article -- is the impact of Gov. Whitman's disastrous foray into the bond market with the pension funds. At the time, observers protested that Christie was whisking up some Kool-Aid, but the Legislature -- Democrats as well as Republicans -- went along with it. We are paying for that irrational exuberance now.
Today's WashPost carries a story on how some states (New Jersey is not mentioned, but that doesn't mean no one in Trenton is thinking of this) are going into hedge funds to bulk up their pension fund balances.
Given the way the markets are being impacted by the securitized subprime mortgage mess, this is questionable at best.
Maybe they should just take it all to Atlantic City and try the quarter slots.
More Info --
- Washington Post - 7/24/2007: "Public Pension Systems Betting on Hedge Funds"
- Star-Ledger - 7/21/2007: "Numbers show communities face huge bills for pensions" -- The Ledger story details several communities' contributions.
- Plainfield Today: "Plainfield's public employee pension cost rises 121%"
-- Dan Damon
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