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

Wednesday, May 21, 2014

Why Didn't Anyone Ask Christie About the Pensions in 2013?

If you are at all shocked by this, you just haven't been paying attention:
In a stunning reversal, Gov. Chris Christie today announced plans to grab, over two years, $2.43 billion meant for public workers' pensions to balance New Jersey's ailing state budget. 
The plan threatens to derail one of Christie's signature accomplishments in Trenton — a series of reforms to replenish New Jersey's strained pension fund over the long term — but it would solve an immediate crisis for the governor, who has to find $2 billion somewhere to cover budget shortfalls for the current and incoming fiscal years. 
At a Statehouse news conference today, the Republican governor said his plan is to take $2.43 billion budgeted for the pension fund during this fiscal year and the next one. He ruled out alternatives such as raising the state income tax or cutting funds for schools and Medicaid. 
A payment to the pension fund scheduled to be made before June 30 will be reduced — from $1.6 billion to $696 million — via executive order, Christie said. 
To all my fellow public employees who voted for Chris Christie: I hope you're happy. This clown broke an explicit promise to you, and now he wants to take money out of your pocket and put your pension at risk. But, hey, he was such a straight shooter back in 2013, dontchaknow! And you just loved his no-nonsense style! Plus, he was with you on marriage equity/guns/abortion/insert-your-favorite-conservative-social-wedge-issue-here...

Honest people can debate any of those social issues. But I've never understood how a public employee could think any of them are more important than being able to take care of yourself and your family.

Of course, back in 2011, when Christie - abetted by his Democratic allies in the legislature -- forced us to pay more into our pensions on the promise the state would start meeting its obligations, he told us that he was "fixing these systems in order to save them." Plenty of suckers appeared to believe this; only snarky teacher-bloggers, it seemed, bothered to point out that Christie had never put forth a plan to raise the revenue his legislation requiredOver and over, the warning signs were there: without additional revenue, the payments required by Christie's law -- the one he constantly touted across the country -- would not be made.

Flash forward to 2013 and the gubernatorial race: Christie still had not told us how he was going to come up with in excess of $5 billion by 2018. He refused to raise taxes on corporations or the wealthy, both of whom had making out like bandits under New Jersey's regressive tax regime:



This was Christie's signature legislation; his shining, bipartisan moment... but he still hadn't let us in on the plan. You would think someone -- anyone -- would ask him about this.

No one did.

Don't believe me? Here are the two debates from 2013 between Christie and his challenger, Barbara Buono. Number one:



And number two:



There were lots of serious questions about serious issues asked in the debates: marriage equity, minimum wage, gun control, property taxes, etc. There were also plenty of questions about issues that I think are far less important: Christie's political ambitions, the Christiecrats who endorsed the incumbent over Buono, Wawa vs. 7-11 (seriously), etc.

But pension underfunding cuts right to the heart of the fiscal health of New Jersey. If anyone cared one whit about whether New Jersey would weather its budget crisis, they had to be concerned about the pensions. Why didn't anyone bother to ask about the pension payments?

To be fair: Barbara Buono, who I like and respect, never bothered to ask Christie about this either. I suppose she avoided the question because she figured she'd have to admit that she would have to raise taxes to make the payments. From my perspective, she would have been better off doing just that... but that is, admittedly, Monday morning quarterbacking.

In any case, the press didn't need for Buono to bring up pensions; they could have addressed the issue themselves. Unfortunately, the editorial boards of the state's newspapers utterly failed in their obligation to get an answer from Christie on this most basic of questions.

For example: when Tom Moran, chief of the Star-Ledger's editorial board, famously published his mea culpa for the paper's endorsement of Christie, he couldn't bring himself to address the problem of the pension payments:
But there is more to it. Christie has made good progress on education with a focus on struggling cities, especially Newark and Camden. His pension and health reforms helped contain public costs that were spiraling out of control. [emphasis mine]
Dear lord, what an obtuse statement. There is no cost containment without the state making its payments -- and Christie never told us how he would make them. The S-L's original endorsement worried that Christie hadn't come up with the funds to pay for open space purchase and transit projects. But any worry about the pension payments? Nope: the pension bill was "important." Unfunded, but "important."

Let's be fair: the Ledger wasn't alone. The Philadelphia Inquirer said Christie put "pension funding on a better track." The Asbury Park Press editorial board said: "Public employee pension and health benefits have been reined in, with the largest impact on taxpayers still to be felt." The Bergen Record editorial board didn't even mention pension payments in their endorsement.

The Atlantic City Press, in their endorsement of Christie, proclaimed: "Whether those reforms succeed in shoring up the pension system will depend on the huge payments they require in future budgets, but this legislation, pushed strenuously by Christie, is a step in the right direction." But how could there be a "step" without a payment plan? Did it occur to the paper's editorial board to ask what the plan was?

Please.

Pension payments are the central fiscal issue in New Jersey, but not one editorial board in the state bothered to address it in the last gubernatorial election.

And so now here we are: Chris Christie has reneged on his promises, the state's bond rating is now in free fall, and we are no closer to pension "reform" than we were four years ago.

I want to be clear: there are some very good reporters in the state doing some very good work. But on pension payments, the punditocracy of New Jersey utterly failed their readers and viewers. What happens next is as much on their heads as anyone else's.

NJ's Editorial Boards take a stand on pension payments...

12 comments:

Giuseppe said...

Christie, the GOP, the tea party types absolutely hate, loathe and despise public worker defined benefit pensions. These public pensions go against their social Darwinism and far right wing ideology of "limited government" (for the masses) and "personal responsibility" (for the 99%, not the top 1%). Christie is purposely sabotaging the pensions so that at some future date they will be obliterated and the state will renege on its pension promise. But to be fair, the Democrats aren't much better than the GOP and the corporate Democrats like Emanuel, Booker and Cuomo are just as bad as the GOP when it comes to education and pensions.

Melissa T said...

Thank you for saying this. People should be completely ashamed of themselves for not coming out and voting for another candidate.

Grenfrod said...

I, and I suspect the vast majority of NJ citizens, applaud Christie's action. We do HATE public employees and resent their ever escalating pensions. It is the worst system of government imaginable, if a select group can vote en-masse to enrich themselves. Which is exactly what public sector employees look to do.

You paint it as a position of 'providing for your families'...but you must recognize, it comes at the expense of our families.

Shame on the public employees. You should, by law, be forced to collect your pensions only so long as you remain a resident of NJ. And at least then you will pay in taxes your a small portion of your largess.

czarejs said...

@Grenfrod You applaud his action? For what? Did you miss the entire point of this article? Christie has done NOTHING except endanger the fiscal health of this state. That's bad for your family and ours.

Giuseppe said...

Grenfrod, got it; you do hate police, professional paid firefighters, teachers, professional paid EMTs, etc. So that means you hate the police, firefighters, EMTs and other first responders who gave their lives to save thousands of lives on 9/11. You need to keep up, public pensions are not ever escalating. Public employees pay for their pensions, it's their money in the pensions fund, it comes out of each and every paycheck. The pension fund was in good shape in 1995 UNTIL Whitman borrowed from the pension fund to give tax breaks mostly to the rich. And then subsequent governors failed to make pension payments to balance the budget, that's the problem, not pensions per se.

JSB79 said...

Mark,

You are right to point out the lack of progressivity in NJ's tax system, but you have to compare it to the tax systems of other states in order for this to be a meaningful comparison.

Other states generally have _less_ progressive taxation than what NJ has. Seven states have no income tax at all. Another seven states have flat income taxes, including Pennsylvania, with a 3.07% rate.

Also, 31 states have no estate or inheritance tax. New Jersey is the only state with BOTH an inheritance and an estate tax.

Finally and most importantly, NJ has one of the highest income tax rates in the US for the top bracket. NJ's top bracket is 8.97%, which is slightly higher than New York's, and only has Oregon, Rhode Island, and California above it.

True, New Jersey could bring back the "millionaire's tax" to bring in more revenue, but the various versions of the millionaire's tax that have passed the legislature would only bring in $600 million to $1 billion a year. New Jersey's deficit is larger than that. The evidence on tax migration isn't conclusive, but it does appear to drive out retirees. In the long run high-income people living in NYC who have decided to move to the suburbs will factor in tax rates into their relocation decisions.

With respect, I think you oversimplify what a solution would look like. The state's tax system isn't perfect, but it is already more progressive than what most other states have. Given the size of NJ's deficit and the ability of high-income people to relocate (and avoid NJ altogether) I don't think that taxing our way out of this mess is a viable solution.

JSB79 said...

Giuseppe,

NJ began underfunding its pensions under Florio.

To pay for Abbott funding (and give large amounts to rural districts as well) Florio had wanted to nearly eliminate school aid for suburban districts and require them to pay for their own employees' pensions and retiree health care.

This bill actually passed, but there was tax revolt and the GOP took control of both houses of the legislature.

It was part of a compromise to maintain Abbott funding while providing suburban districts with at least some school aid (the aid was dramatically reduced anyway) the state began to reduce its pension contributions.

http://www.nytimes.com/1992/03/12/nyregion/gop-in-trenton-seeks-big-cut-in-florio-s-budget-on-school-aid.html

JSB79 said...

Giuseppe,

FYI, the NJEA was totally opposed to having local districts being responsible for pension responsibilities and retiree health benefits.

The NJEA worked with the GOP to successfully undo local responsibility for pensions.

Suburban taxpayers and pensioners should be glad that the local pension responsibility was undone. Few suburban towns would have the financial strength to sustain pensions and retiree health care on top of their other obligations.


JSB79 said...

Mark,

Another problem with relying on high-income individuals for your revenue (which you propose) is that their incomes fluctuate wildly.

In 2013 the stock market was up nearly 30%, so you have huge incomes for people in finance and huge revenues for states.

Ok, what about in a year when the market is down? Even if the real economy isn't impacted by a fall in the market your revenue collections are down and you are going to have to make cuts.

The bottom line is that states have to be more responsible with their spending.

Giuseppe said...

In the 1950s the top marginal tax rate was 91% and the effective tax rate was about 51%, after all the loopholes. Now the top marginal tax rate is 39.6% and God only knows what it is after all the loopholes we have today. From Kennedy until Reagan the top marginal tax rate was in the low 70% range. The wealthy should be paying more in taxes since they benefit so richly from all the tax payer services and infrastructure. I think that most retirees leave NJ for a warmer climate; many of those retirees still maintain their NJ homes so they can return to NJ in the summer and be close to their families still in NJ. NJ has amongst the highest percentage of millionaires and billionaires in the country, it's in the top tier for that category. Princeton has extremely high property taxes and the rich are not fleeing that town. The rich are tripping over themselves to locate in Princeton. Another big problem is that the corporations get so many tax abatements, tax write offs, sweetheart deals and almost free land to locate in NJ. The corporations get the states in bidding wars and the states never get back all they gave away in supposed "job creationism."

Giuseppe said...

State income taxes:
CA 10.55%
DC 8.5%
Hawaii 11%
Iowa 8.98%
Oregon 11%
RI 9.9%
Vermont 8.95%

Giuseppe said...

NY 8.97%