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, May 24, 2016

The True History of NJ Teachers Getting Shafted On Their Benefits (for @BillSpadea)

When Former NJ Education Commissioner Jim Gearhart* left NJ 101.5, I thought there might be a chance for some sanity to return to New Jersey's #1 teacher-bashing talk radio station. Gearhart, of course, reveled in beating up on the NJEA, all while making the laughable claim that teachers didn't really want their union to protect their workplace rights, health insurance, and pensions.

When Gearhart left the airwaves, I thought the station might moderate the tone of its drive-time show. It had before: the truly odious Casey Bartholomew had been axed in 2011 to make way for the much more reasonable Deminski & Doyle (I've heard they each have relatives who are teachers). Maybe Gearhart's replacement would be less likely to take pot shots at teachers and their unions.

Looks like I was wrong:

"For the governor to talk about a $250 million cost cutting effort -- which is truthfully a drop in the bucket but still you've got to start somewhere -- and the NJEA just puts their foot down and says: 'No, we're not even going to discuss it,' is, I think, outrageous. I think it's time for teachers to start pushing back."
Bill, I'm a teacher, and I'm happy to push back -- at you.

You see, Bill, I talk to a lot of teachers too. And those teachers have watched while their take home pay has eroded and their health care costs have skyrocketed and their pensions have been devalued, even as their jobs have become more demanding. And they've all come to the same conclusion that I have:

For years, we were forced to pay more and get less on our benefits and pensions with the promise that the state would finally start paying what it promised us for work we have already done. But the state has never followed through. So we're not going to make our families sacrifice any more until we see some sign that the state is going to follow through on its legally binding commitments.

Just in case anyone doubts what I'm saying, let's have a little history review. This timeline from the Communications Workers of America is a good place to start; with a few minor changes, it could describe the continued screwing of just about every public employee in the state.

- 1995: Governor Jim Florio begins the modern era of New Jersey pension underfunding.

- 1997: Governor Christie Todd Whitman essentially pays for tax cuts by underfunding the pensions.

- 2001: Yes, Governor Donald DiFrancesco does raise pension benefits, but he does so basically using the same sort of revaluation tactics that Florio and Whitman had used. I find it funny that so many of the state's conservatives are appalled at DiFrancesco's revaluations, which befitted workers, while they say nothing about Whitman's revaluations, which led to tax cuts.

- 2004: Teachers' mandatory contribution to the pension, which had been as low as 3 percent, is raised to 5 percent.

- 2007: By now, everyone (except Chris Christie) knew the pensions were in trouble and had to be fixed. Teachers and state workers now paid 5.5 percent into their pensions and saw the retirement age go up 5 years. State workers now paid 1.5 percent of their pay to health benefits. The deal everyone agrees to is that in exchange for these concessions the state will start funding the pensions.

Those payments lasted only about two years.

- 2008: The state raises the retirement age again.

- 2010: Governor Chris Christie makes significant changes to the pension for all new hires, and now requires all current employees to pay 1.5 percent of their salaries toward health benefits. At this time, a report is released from respected Labor and Employment Relations Professor Jeffrey Keefe of Rutgers University which shows: "...full-time state and local employees are under-compensated by 5.88% in New Jersey, in comparison to otherwise similar private-sector workers."

- 2011: After running a campaign in which he said explicitly: "Nothing about your pension is going to change when I am governor," Chris Christie, with the support of many Democrats in the Legislature, passes a sweeping pension and benefits overhaul law. As CWA explains:
The plan for increased worker contributions is phased in over four years. At the end, in 2015, workers pay 25% more to get 30% less pension. Workers are required to pay an increasing amount of the health care premium, with a top rate of 35% of premium for the highest earners. The state budget includes a 1/7th payment for FY12. Christie makes the payment on the final day of the fiscal year, in June 2012. In response to the 2010 Supreme Court ruling, the legislature creates a contractual right to the funding of the pension.
- 2013: During the gubernatorial election, no one in the press cares to ask either Chris Christie or his opponent, Barbara Buono, how they plan to raise the revenues for a full pension payment by 2017.

- 2014: To the surprise of no one sentient, Christie refuses to make the payments his own law requires. Meanwhile, reports begin to surface about inordinately high management fees paid to Wall Street firms linked to Christie. The unions file suit.

- 2015: Reports of malfeasance in the management of the pensions continue. The fourth year of the 2011 Ben-Pen law starts: a teacher making $65K now pays at least 19% of her premium for family medical coverage. As NJ Spotlight notes:
Today, however, while the cost of New Jersey public employee health insurance coverage remains the third-highest in the nation, most New Jersey public employees are paying more than the national average for state government workers toward their health insurance costs, an NJ Spotlight analysis shows. 
In fact, the average New Jersey government employee is paying more for individual health insurance coverage than government workers in any other state and the 10th-highest average premium for family coverage in the country. 
Further, state and local government workers are paying a much higher percentage of the cost of their individual health insurance policies than private-sector employees in New Jersey have been paying, and not much less than the percentage paid by the state’s private-sector workers for family coverage. [emphasis mine]
Meanwhile, New Jersey's public employee pensions have devolved into one of the least generous in  the nation, according to a New Jersey Policy Perspective analysis. And yet the state's highest court rules New Jersey doesn't have to fund the pensions, and can instead set the state up for a looming disaster.

Christie's only policy response to all of this is to appoint a commission to put out a plan that everyone with any sense knows can't possibly work.

And so here we are, halfway through 2016 and not a serious plan in sight for how to deal with any of this. As I've shown here (again, thanks to CWA for their excellent timeline), the teachers and police officers and firefighters and state workers have been making sacrifices for years, each premised on the idea that if we just give up some more, the state will finally do the right thing and start paying its fair share.

Well, every time we've paid more, the state has screwed us over. Our pension payments were 3 percent not very long ago; now they're 7.5 percent, our COLA is under attack, and our benefits are worse. Our health care was a negotiated part of our total compensation; now the state has compelled us to pay up to 35 percent of our premiums, and the care we're getting is worse.

And this has all been during a period when our raises were shrinking -- and we were already behind the private sector to begin with.

Bill, I'm sure the NJEA would support all sorts of health care insurance reforms for its members if those reforms saved money without diminishing care. In fact, reports from your own radio station confirm this:
NJEA President Wendell Steinhauer said the unions would favor changes that lower premiums but that the union mistrusts Christie because the state didn’t follow through on promises under 2011 pension and health benefits reforms. 
“No, we’re not looking to make changes in it just because the governor says ‘I’m demanding $250 million.’ We don’t accept that,” Steinhauer said. “He’s just saying, ‘Find money,’ he’s not saying, ‘Find it in a win-win situation for members and for the state.’” 
Last year, the NJEA agreed to an earlier round of money-saving changes on things such as compound prescriptions and hepatitis C medicine. The State Health Benefits Plan, for workers other than school employees, also approved three additional smaller changes. 
Between the two health plans, those earlier changes are expected to save the state $197 million in the coming year – $135 million for the SHPB and $62 million for the SEHBP. Even with that, state healthcare costs are still projected to increase by $290 million in 2017.
Bill, when you say the NJEA won't even discuss changes to health benefits, you're dead wrong -- again, according to your own reporters. What NJEA won't do, what the teachers of this state won't do, and what every public employee won't do anymore is to continue getting the shaft by giving up more in compensation without the state paying its agreed upon fair share.

New Jersey public employees are the only ones who have made their full payments into the pension system. We and our families are the only ones who've made pension and health care sacrifices in an effort to fix a mess we didn't create. But now, we refuse to continue to be patsies. 

After all of our previous concessions, we're not going to give up one more damn thing until this state starts meeting its obligations once and for all.

One more thing, Bill: if you want to try to play the game where you separate teachers from the union leaders, good luck. I've never agreed with my union about everything; I don't think any public employee is ever 100 percent aligned with his union. But I damn sure trust my union way more than I'll ever trust Chris Christie or the Democrats who supported his repeated screwing of public employees.

If there is dissension in my union right now, it's largely because there are who members don't think NJEA has fought hard enough against the steady erosion of our pay, our benefits, and our workplace rights. Whether that's true or not remains an open question; what's not open to debate is whether teachers and other public employees think they have been treated fairly over the last few years. I guarantee you they have had enough of giving and giving and giving and getting nothing back in return.

These are decent, hardworking people who do important jobs. They teach our kids and protect our streets and put out our fires and build our bridges and provide social services to our neediest and work hard to keep vital governmental services available to the citizens of New Jersey. They have, perhaps grudgingly, made many sacrifices to try to keep this state afloat.

But they aren't suckers.

ADDING: Bill, it takes a lot for me to give up on a media figure. Want to hash this out? Drop me a line.

* It's a joke. Well, not really...


Dave said...

Once again, you've nailed it. Thanks. - DZ

walt sautter said...


StateAidGuy said...

The origins of NJ's pension crisis are very complex and anyone trying to explain how the state got into this mess has to be careful not to oversubscribe blame to any one party.

NJ's pension system was a growing state expense even in the 1980s. During Kean's governorship, government expenses doubled, but pension payments tripled. From 1978 to 1988 COLA payments quadrupled.

The deficit that Jim Florio inherited in 1990 was due to the recession combined with steadily increasing pension and post-retirement health care expenses.

When Jim Florio tried to offload teacher pensions to 220 school districts to pay for Abbott the furiously objected, saying that the pension obligations were "ticking time bombs." The aid-losing districts did not object nearly as strongly to losing operating aid, but pension assumption terrified even the most moderate suburban superintendents.

In retrospect, NJ's pension funds depended on two things to stay solvent.
1. A steadily growing NJ economy
2. A steadily growing corps of public workers who could increase their own contributions.

Since NJ's economy slowed down compared to the nation around 1990 and has grown at half of the national average since 2000, you can see that the economic growth hasn't been there.

Although revenues increased in the 1990s anyway, but with new very expensive demands for state aid, NJ's pension contributions fell from $750 million annually in 1990 to $0 in 2001.

I don't have data on the number of teachers NJ has had, but I assume there's some correlation with the overall population. NJ's population is growing very slowly now. In the 2000s our pop only increased by 4.5%, compared to 8.9% in the 1990s. Since 2010, our population has only grown by 1.9%.

I know for a fact that NJ's studnet population has decreased by 1% in the last few years, so my guess is that teacher employment for the 2010s has been flat at best.

Without a growing number of teachers, contributions to TPAF from active teachers grow very slowly and there is a pressure on TPAF that wasn't there in times of robust growth.

"- 1997: Governor Christie Todd Whitman essentially pays for tax cuts by underfunding the pensions."

State spending and taxes are fungible. If Whitman's tax cuts are responsible for pension underfunding, then so is Abbott (and the politically necessary spending increases for non-Abbotts). Remember, pension contributions fell dramatically under Florio in order to make room for increases in education spending.

Also, Whitman kept taxes higher than they had been pre-Florio. I think that indicates that NJ had a structural deficit.

I think this Florio-era NYTimes article captured the origins of NJ's Pension Crisis.

"The protests [from middle income districts over lost aid] quickly dissipated when education officials announced plans for the extra infusion of $341 million, which would be made possible by reducing the state's contribution to public employee pension funds."


Woroworld said...

Sounds like New Jersey now has a state run, court sponsored PONZI SCHEME,
The only difference with the private sector, in NJ we blame the victim/ worker.

Giuseppe said...

We are burdened with right wing/hate wing radio nationwide, from sea to shining sea. Most of talk radio is skewed far right wing, about 95%-98% loud right wing/libertarianish bolderdash. Many years ago, while commuting in my car, I used to listen to 101.5 for its very good weather and traffic reports. The rest of the programming was trashy, crude and EXTREMELY LOUD. Gearhart was the cherry on the top of this toxic garbage heap of right wing given "wisdom": unions bad, public employees bad, defined benefit pensions bad, blah, blah, ad nauseam. I nearly drove off the road listening to Gearhart's anti-teacher rants. He most probably belonged to one or more unions which fought for his rights but that did not stop him from demonizing and sliming teachers, the NJEA and teacher pensions.

Giuseppe said...

I was under the impression that the pension fund was fully funded in 1994?
In any case, from a prophetic article by Bob Herbert in 2-22-1995: This is best illustrated by Mrs. Whitman's decision to withhold billions of dollars that should be going into the public employee pension funds over the next few years, and using the bulk of that money to balance the state budget. Then, with an audacity that dazzles her supporters and even draws grudging admiration from opponents, Mrs. Whitman smiles and characterizes the withheld funds as savings.

Of course, they are not "savings" -- not in any sense of the word. The pension obligations at some point will come due and future generations will have to meet them.

Not only will the money have to be made up, but future taxpayers will be deprived of the income that the money -- if properly invested now -- would be expected to generate.http://forums.njlawman.com/post?id=4603580

StateAidGuy said...


Yes, my understanding is that the pension funds were legally fully funded in 1994 and through at least 2000. However, there are different ways to measure the assets of a pension fund, the expected rate of return of those assets, and a funds future liabilities, and by the more conservative pre-1992 standards NJ’s pension funds would not have been considered fully funded.

The pension system was always unsustainable, but the Florio-era Pension Reevaluation Act* was the beginning of the end for NJ pension contributions. However, it was supported by most (not all) public sector unions and it actually “worked” in the short-term because its optimistic projections about economic and stock market growth turned out to be correct. Unfortunately, the Pension Reevaluation Act broke the ice on defunding the pensions and it was bound to be disastrous as soon as the bull market ended.

Whitman is more responsible than any other governor for the pension crisis and I cannot stand it when she is on TV and is treated as a wise elder stateswoman, but even after her cuts, tax rates were higher than they were pre-Florio and despite her tax cuts, revenue did increase. Whitman’s administration is remembered by liberals for the tax cuts but she also increased spending, especially on education and especially for the Abbotts.

The worst years of pension underfunding were the early 2000s, when contributions fell to zero for three years and NJ didn’t make a real pension contribution again until 2006. During the early 2000s the Abbotts got hundred-million dollar increases annually. (After 2002 non-Abbotts were flat-funded for 4-5 years.)


*Florio vetoed the Pension Reevaluation Act for technical reasons but his veto was overriden by the legislature. Florio clearly supported the concept of the Pension Reevaluation Act and took advantage of the lower contributions it allowed.

StateAidGuy said...

PS A pension fund gets into problems not only when it is underfunded or its benefits are made too much for a state/city to afford, it also gets into trouble when the pensions are expanding to new classes of workers.

I don't have the time now to look this up right now in the Star-Ledger archives, but in 1996 or 1997 there was a big expansion of who would be covered by TPAF.

Kerri said...

The TPAF was OVERfunded at the turn of the century. That was why our pension payment went down to 3%
The overfunding was also why the pension formula went from n/60 to n/55.
Yes, the pension was stressed when Christie took office, but when Christie made noises about changing the N formula back to 60 and making retiree pay for health benefits, many people retired, at least twice as many as normal. When TEACHNJ passed making more work that helped no one, and making the job far less enjoyable, more people retired. We have traded 7% of higher salaries for 7% of lower salaries, and all to pay more retirees than the actuaries planned for. Christie caused some of the stress the system now faces. Then he doesn't make the payments. What a guy!

Unknown said...

NJ's teachers pension is going to run out between 2023 and 2024. If you look at their reports, they are two months late or more on asset numbers. I think there's a reason.