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

Tuesday, August 24, 2010

Are NJ Pensions Too Generous?

I've blogged a bit on the idea that pensions are part of a compensation package that provides some needed wage competition with the private sector to attract qualified people into public service. The evidence is pretty compelling that we need to keep pensions if we are going to maintain quality workforces in education, public safety, and other public sector professions.

But are NJ pensions more generous than other states' pensions? Could that explain why we're in the third largest unfunded liabilities hole in the country?

Well, back in 2008, the Rhode Island House set up a special commission to study their pensions. They requested that the National Conference of State Legislatures compare the pensions of the mid-Atlantic states to see what benefits accrue to a typical enrollee. It's a pretty good look at our question, and the results are illuminating (go to the Final Report, then Vol II - Attachments, and look at p. 202):

Retirement Benefits in State Employee Plans,
New England and Middle Atlantic States, 2008

Annual Benefit Based on Final Average Salary of
$30,000; 30 years of service

Annual Benefit Based on Final Average Salary of
$50,000; 30 years of service
Rhode Island Schedule A
Rhode Island Schedule B
Maine  (note 1)
Massachusetts (note 1)
New Hampshire (note 2)
New Jersey
New York Tier 4
Pennsylvania (note 3)
Vermont (note 4)

Note 1.  Maine, Massachusetts:  State employees are not covered by Social Security.

Note 2.  New Hampshire:  Benefits are calculated for an employee aged 64.  A benefit rate reduction applies to people aged 65 and older and reduces benefits about 9 percent.

Note 3.  Pennsylvania.  Figures are based on calculations in SERS Member Handbook 2007.

Note 4.  Vermont: Formula produces higher numbers; benefits are capped at 50 percent of FAS.

I'm glad I'm not a public employee in CT - wonder if there's something else going on there. But look at the rest of the states - can anyone look at this an seriously suggest NJ is out of line with our benefits?

Of course, NJ has several different plans: one for teachers, one for public safety workers, one for state workers, etc. So I can't say for sure how that may conflate things. Still - for all the talk about "low-tax" PA, they seems to treat their public workers more generously than we do.

In any case - if you want to assign blame for a larger unfunded liability than any of these other states, I don't think you can blame overly generous benefits in NJ. Ours are well within the norms of our region.

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