I will protect your pensions. Nothing about your pension is going to change when I am governor. - Chris Christie, "An Open Letter to the Teachers of NJ" October, 2009

Saturday, August 21, 2010

Pensions, pensions, pensions....

Scarier than Shark Week - Pension Week!

NJ 101.5 did a series of reports. Fred Beaver seems to be a decent guy, although my radar pings whenever a news organization leans so heavily on one guy for their perspective. Still, for a talk-radio report (talk about setting the bar low), this was almost somewhat informative and relatively fair; unfortunately...

- The pensions are "underfunded by $100 million"? Come on, says who? Just because some yahoo at a wing-nut welfare head shop throws numbers around doesn't mean the press should just parrot them without some scrutiny.

- This report should have mentioned Christie's "Open Letter To Teachers" at least once. It was a major part of his campaign and he is poised to make a huge flip-flop. "I will protect your pensions. Nothing about your pension is going to change when I am governor" is as close to an unequivocal promise as you will find, and he is clearly gearing up to breaking his word.

- Blaming the pension woes on the 2001 9% increase is, to my mind, ridiculous. IF the state and the localities had been paying into the pension between then and now, maybe this would be a valid point; the fact is they weren't. That, more than anything else, is why we are here. And, as Beaver points out, it wasn't like the 9% was terribly out of line with what other states were doing.

- Why was there no union voice in this report? Why was there no academic voice in this report? 

- Zombie lies (because you just can't kill them), courtesy of Beaver:
"The real problem here is nobody is looking at the total compensation package; salary and benefits," explains Fred Beaver, former director of the State Division of Pensions and Benefits. He says for years the argument has been that public workers give up higher wages for greater benefits, but then asks and answers the following, "Are the direct salary compensation comparisons valid anymore? I would argue that they're not."

Beaver relays what he heard after the Murphy Commission on pensions and benefits reform created by former Governor Dick Codey put out its final report, "Wages are far outpacing the private sector while benefits are still at the Cadillac scale." 
Again (sigh):

  • Over the last 20 years, teacher pay has grown more slowly than the pay of the average worker in NJ (teacher pay rose 150%; the average pay rose 162%).
  • Teacher salaries have actually declined with respect to non-teacher wages over time in NJ, even when comparing wages for the same number of hours and weeks worked, and at same degree level and age.
  • Elementary and Secondary Public School Certified Staffing Salaries have DECLINED as a percentage of Total State and Local Expenditures from 1997 (13%) to 2007 (11%).
  • A NJ public employee with a bachelor's degree makes an average yearly salary of $56,641; in the private sector in NJ, that average is $89,041. The gap is wider for workers with a masters: $107,328 for the private worker vs $69,171 for the public worker.

- This stuff drives me crazy:
"You need to have some serious change in the system," says Fred Beaver, former director of the State Division of Pensions and benefits. "You cannot just keep talking about putting a 1.5% health premium contribution by employees and retirees. That's meaningless when those costs are going up 8%-9% a year. Salaries are not increasing at those rates so, you're going to have a constant erosion." 
Why aren't we doing anything to stop the rise in health care costs?!?! It amazes me to hear someone like this be so sanguine about the insane inflation the health insurance industry continues to impose on the state. Isn't there anyone who thinks it may be a good idea to attack this problem as a way to get the state's fiscal house in order? Is everyone on the Horizon/Blue Cross payroll now?

Credit where it's due: the report shows that Christie skipped payments while Corzine made them, so I can't say this was a total Christie love-fest like so much of what goes on at the station. Still, some glaring flaws kept this from really shedding some light on the issue.

One more thought:

Steve Sweeney is on the right track here:
Why would Governors and legislators make these decisions that are considered by many experts to be very poor decisions? State Senate President Steve Sweeney think he has a pretty good idea what the answer to that question is. 
"People that understood knew that you could get away with it for a period of time because it takes time to catch up," explains Sweeney. "In a lot of political lives, by the time the day of reckoning comes the people that did the damage are gone."
Fair enough; of course, cutting teacher pay is the same. Five or ten years from now, when Christie's carping has driven qualified workers into other fields, he won't have to deal with the shortages of qualified teachers. Same with the Christie/Sweeney property tax cap: they won't be around to fix the inevitable mess it will create.

Politicians always like to kick the can down the road, which is why I find this quote from Sweeney so annoying:
Sweeney thinks that rather than taking any benefits away, the state needs to start ponying up cash for the system and public workers need a reality check too. He feels unionized government employees are getting a lot of benefits for too little cost, "I would tell my union friends, 'don't tell me you [sic] paying what it costs because you're not.'"
That's NOT what a pension is supposed to be, Senator Sweeney; a pension is part of a TOTAL compensation package. The state and the localities do not want to pay qualified workers what it takes to draw them into public service up front, so they backload pay by offering pensions. But when you take away that benefit, you decrease total compensation, and more qualified workers leave the field or don't enter it in the first place. Supply and demand, pure and simple.

I hear the punditocracy and political class tell public workers over and over again they aren't part of the "real world". Sorry folks, but they are: they've made a choice to enter pubic service based on the compensation offered. It flies in the face of basic economics that Sweeney thinks we can decrease compensation and nothing will happen to the public service workforce.

"But we're in a recession! Look at unemployment!" OK, that mitigates things, but only to a certain degree. Many public workers need a certain skill set and certain education to do what they do. You simply won't get enough people to invest in getting that training and experience if you don't make it worth their while, even in a down economy.

So understand the price you pay by raising pension and health care contributions: fewer qualified workers. Pretty soon, you're back to Tom Kean in 1982 calling for increasing teacher pay to improve the quality of the teaching corps.

That's kicking the can, too.

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