Pension Madness

I happen to think Jason Method is one of the better statehouse reporters, but he really buries the lede here:

TRENTON — Local governments will have to pay an average of 22 percent more toward the state's pension system next year, a bill that will put further pressure on municipal budgets and property taxpayers. 

Some 1,700 municipalities, counties, authorities, schools and fire districts will be expected to make $1.7 billion in total contributions. In many instances, entities must pay hundreds of thousands, or even millions, of dollars more in pension costs. 

The pension payments — $300 million more than the current year — will be in addition to an 11.7 percent increase in state health benefit costs for municipalities and 5.7 percent hike for school boards that are on the state's plan.

Then scroll down to the bottom...

From 1997 to 2003, local governments were not required to make contributions to the Public Employees Retirement System or the Police and Fire Retirement System because of surpluses that existed in the funds at that time.

In 2003, the Legislature allowed them to build back up to making full contribution in 20 percent increments over a five-year period.

Most local governments resumed making full contributions for the police and fire system in 2008 and for public employees in 2009.

But in fiscal year 2009, the state Legislature also gave local governments the option to defer half of their required pension contributions for that year and to pay them off in installments over 15 years beginning in fiscal year 2010. So far, 364 local government units have elected to use that option for public employee contributions, and 152 have chosen it for their police and fire contributions, state figures show.

That 22% increase really takes on a different meaning when you view it in this light, doesn't it? Considering how little the state and localities have been contributing up until now, it's a wonder the increase isn't more. Method should have stated this right at the start of his report.

It's worth reiterating that state and local employees were paying their full share of pension contributions the entire time this was happening.

Confronting the pension crisis has always meant confronting the use of property taxes to fund schools and services in NJ. Property taxes are inherently regressive and allow the state to continue to give huge tax breaks to wealthy individuals and corporations while shifting the tax burden to the middle class and working poor.

The entire point of kicking the pension can down the road was to delay the inevitable conversation this state must have about making our taxes progressive - or, at the very least, flat. But this must never, EVER be allowed to happen. So we've put off paying into the pension until it's too late.

The governor can immorally and illegally attempt to slash pensions all he wants, but the dirty little secret is it will never be enough. Anyone who is serious about this must acknowledge that revenue is the key problem.

NJ is ranked 40th in state and local spending as a percentage of total state income. We are 46th (!) in fee reliance. We are not spending too much; we're collecting revenue from the wrong places and the wrong people.