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, February 13, 2016

NJ Teachers Should Refuse To Be The SOLE Solution To the Pension Mess

I'm guessing that New Jersey's pension "reformers" are thinking the same thing: now that Chris Christie's absurd run for the White House is over, they should make their push to screw public employees out of their pensions now, rather than later when we are nearly certain to have a Democratic governor.

Hence the crush of op-eds by folks like Tom Byrne, a member of Christie's pension commission. Byrne is very, very sorry he has to shaft middle-class workers out of the benefits they are owed on a pension plan they were forced to participate in -- but, alas, there just isn't any choice:
Benefit levels are far higher for New Jersey public employees than is common in the private sector. It is the Obama administration, not Republicans, that has said health benefits at the New Jersey level should be subject to a luxury tax.
So there are two paths.

  1. Ask taxpayers to continue subsidizing a level of health benefits that even the Obama administration says is too rich.
  1. Put those benefits at or near the highest level specified under Obamacare, and use those savings to fill the hole in the pension funds. 
Certain Democrats say "just make the payments." But when the governor asked a joint session of the legislature for a show of hands on who was willing to vote for higher taxes in order to do so, not a hand went up.  
It is fair enough to say that neither the governor nor legislative leaders should have signed a 2011 deal that was premised on unrealistic revenue projections.  Let's not compound that mistake this time with a constitutional straitjacket and more unrealistic revenue assumptions.  
Delay may allow politicians to posture and build alliances. But until they deal with the facts as they are, rather than as we wish they were, it is a grave disservice to public employees who have played by the rules and deserve a secure pension. 
The commission's plan essentially comes down to this: make public employees pay more for their health benefits, and then take that money and put it into the pensions. Then the state should get out of the pension business and let the local districts offer retirement benefits.

In other words: the public workers, who have been the only ones who have made any sacrifice to shore up the pension system, should be the ones to bear all the cost of "fixing" it.

Well, screw that.

I've been teaching in New Jersey for 11 years, and during that time, I have seen both my mandatory payments into the pension and my premium payments for health insurance skyrocket. We public workers were told repeatedly that the Pen-Ben reforms of 2011, which lead to those increases, would "save" our pensions. At the same time, under Christie, taxes have gone down for millionaires while there have been billions of dollars of corporate tax giveaways.

In addition, the people managing the pensions have been making piles of money from the fees they collect:
New Jersey’s pension system spent $701.4 million during the last fiscal year on fees, expenses and performances bonuses for alternative investments, including on its money-losing hedge funds, according to the head of the state’s largest labor union.
AFL-CIO president Charles Wowkanech said that figure will be included in the pension fund’s annual report, which may not be released for several seeks. He said the fund spent $375 million on management fees and expenses for the alternative funds, as well as $328.4 million on performance bonuses for those managers.
Combined, the costs represent a 14 percent increase from the 2014 fiscal year, when the pension fund spent $615.9 million on alteratives management.
Keep in mind that Tom Byrne is a Wall Street type who oversees the investment of the pension. Apparently, when it's my money, Byrne is happy to reward folks whatever he thinks they deserve. He actually compares the outrageously high fees these investment managers get to paying Derek Jeter a large salary because he was good shortstop.

What funny about this is that Byrne believes that market incentives work for hedge fund managers and baseball players, but not for public employees. In his world, cutting the compensation of investment managers will get you less talented people -- but cutting the compensation of teachers will somehow have no effect on who chooses to enter the profession.

As I've shown many, many times, teachers most certainly do suffer a wage penalty for teaching. Public employees in New Jersey are not overpaid, and their pension benefits are comparatively modest.

But Byrne's commission doesn't want you to know that: all they care to show is that public employee health benefits are generally better than those in the private sector. They don't want to consider that the total compensation package is the correct comparison, and that pensions and benefits are part of the incentive to bring qualified workers into public service.

You can't keep cutting wages and benefits for teachers and other public employees and expect the same quality of workers to enter public service.

This idea so obvious that even Byrne knows it -- he just refuses to apply it to public workers, saving incentives instead for the Yankees and Wall Street.

All this said: do I think we can tax our way out of this? Almost certainly not. But you can't continue to ask public employees to bear the sole responsibility for getting the pension back on to a stable footing, and you can't expect public employees to simply keep shelling out more money for health care costs without doing something to bring those costs down.

So, before we public employees allow one more cent to be taken out of our paychecks, it's time for us to start seeing some other folks put some skin in the game:

- The millionaire's tax need to be reinstated -- any proposal that doesn't include it is a non-starter. Yes, I know it isn't nearly enough to fix this mess, but all the givebacks public employees have made haven't been enough either. We took the first step; it's time for the wealthiest people in the state to start doing the same.

And I don't want to hear any more about out-state migration. What makes anyone think that's going to happen, but people leaving public service when their compensation is cut isn't likely? You can't have it both ways, folks.

- The pension management fees must be contained. It's simply outrageous to ask a teacher to continue to sacrifice while hedge fund managers take billions out of the system. If the people who run the pension can't negotiate tough deals with Wall Street, they should be replaced by people who can.

- It's well past time to negotiate hard with the for-profit hospitals, the drug companies, and the private health insurers. Benefit "reform" shouldn't just mean "public employees pay more"; it should include workers getting more bang for their health care buck. Say what you will about Bernie Sanders, at least he's been able to get the idea that America way overpays for health care into the conversation. We should be heeding that notion locally.

The state has a great big pool of workers; it should be able to negotiate hard with heath care providers. They can still make lots of money -- just not as much as they've been making. If that's unacceptable, too bad.

If, and only if, public employees start seeing some real shared sacrifice from the wealthy interests that have done very well for themselves over the past decade, we can then have a further conversation about paying more for health care and stabilizing the pensions. But that day, so far as I'm concerned, is not yet here.

Over and over again, New Jersey's public workers have made concessions to fix the pension mess. Don't ask us to make any more unless and until the wealthiest among us make some sacrifices as well.

No more.


Robin Klein said...

You are eloquent and as usual, right on. Thank you for being a powerful advocate and voice for those of us in public education. I have been teaching in NJ 28 years now, and I fear that when I do choose to retire, little will be left in the pension system to fund what I have contributed and have been promised through the years by those contributions. I have little faith in our elected "leaders" based upon their recent track record towards public employees.

Giuseppe said...

NJ teachers pay into the pension system with each and every paycheck, they don't miss a payment. The teachers are being demonized and smeared for the nonfeasance of the legislators who did not properly fund the pension trust for more than 20 years. There's still a mountain of cash in the pension fund that the Wall Street bankers would like to get their hands on. Replacing a defined benefit pension with a 401k is just garbage and a sick joke. 401Ks were never designed to replace regular pensions and many 401ks were wiped out during the great recession of 2008.
As for health care, if we were a sane nation not ruled by the medical industrial complex, we would have universal health care or single payer. Everyone would be covered from cradle to grave and no one would go bankrupt from medical costs. All the other industrialized democracies have some form or version of universal health care but not the richest country on earth. Teddy Roosevelt proposed a national health care system in his 1912 campaign platform. Harry Truman tried to enact a national health care system in the late 1940s but was defeated by the GOP and the AMA. The best we could do was the ACA which is a huge sellout to the insurance industry. We have the highest priced medications of the advanced countries. Medicare Part D was another sellout to the drug companies; Medicare is forbidden from bargaining for lower drug prices and from buying drugs in bulk. It's just sick, horrible and wrong on so many levels. As Bernie says, when is enough enough?