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No Reform in Sight for Bipartisan Abuse of State Pension Loophole

Gov. Chris Christie (right) talks with Essex County Executive Joseph DiVincenzo (left) and Sheriff Armando Fontoura after their campaign walking tour of Newark's Ironbound on July 23.
Credit: nj.com/John O'Boyle
Gov. Chris Christie (right) talks with Essex County Executive Joseph DiVincenzo (left) and Sheriff Armando Fontoura after their campaign walking tour of Newark's Ironbound on July 23.

For a challenger like Sen. Barbara Buono (D-Middlesex) stuck in an uphill race and trying to cast herself as a reformer unafraid to take on the political bosses, it was a made-to-order political attack. There was Republican Gov. Chris Christie campaigning in Newark’s Ironbound with two of his most prominent Democratic supporters, Essex County Executive Joe DiVincenzo and Sheriff Armando Fontoura. Christie was on camera praising DiVincenzo for “running a clean, effective and efficient government,” proclaiming “there is no better sheriff” than Fontoura, and declaring that “I love working with these guys.”

“These guys” are two of the poster boys for a notorious New Jersey pension practice that enabled DiVincenzo to “retire” and collect a $68,861 pension while continuing to be paid his full $153,831 salary and Fontoura to collect a $62,304 pension while being paid $137,917. Fontoura has collected more than $1.2 million in pension payments since he “retired” in 1990.

But Buono couldn’t make a big deal out of Christie for campaigning with double-dippers like DiVincenzo and Fontoura, even though the practice drives her public employee union supporters crazy.

That’s because Buono’s campaign chair, Assemblywoman Bonnie Watson-Coleman (D-Mercer), collects her $49,000 legislative salary while taking a $44,724 pension from the state Department of Community Affairs. So does Senate Majority Leader Loretta Weinberg (D-Bergen), one of Buono’s most vocal supporters, who boosts her $49,000 Senate salary with a $36,000 pension from her Assembly years.

“It’s the way the system works in New Jersey, and this practice is a symptom of a problem that is endemic to both parties,” said former Sen. Bill Schluter (R-Hunterdon), who has spent 25 years fighting for ethics and campaign finance reform. Ironically, Christie signed an executive order last Wednesday creating a new unit within the Treasury Department to investigate pension and disability fraud, develop recommendations for changes in practice, and refer cases for both criminal and civil prosecution.

But the salary/pension double-dipping by DiVincenzo, Fontoura and dozens of other legislators, state and county officials is legal and will have to be addressed through legislation. And that just isn’t going to happen, Schluter noted.

“The Legislature comes up through politics, and one of the cardinal rules of politics is that you take care of your friends and honor patronage,” Schluter explained. “These pensions you cash in [while you’re still working] and the unused vacation days and unused sick days you bank are all part of the entitlement. DiVincenzo has a fulltime job and should not get a pension on top of it.”

Schluter was such a persistent advocate for ethics reform in the Legislature for 14 years that Republican and Democratic legislative leaders redistricted him out of office in 2001. He served on the state Ethics Commission, which rules on ethics violations in the executive branch, from 2006 until this past March. But Christie declined to reappoint him to another four-year term after he was the only member who bucked the governor over his insistence on putting in “his own person” to replace the commission’s longtime executive director in 2011.

Schluter was not surprised that legislation sponsored by Sens. Jennifer Beck (R-Monmouth) and Steven V. Oroho (R-Sussex) to ban the practice of government officials simultaneously collecting full pay in their current government jobs while also collecting a government pension check has not even been posted for a vote in committee more than two years after DiVincenzo’s double-dipping made the headlines. The Beck-Oroho bill would effectively ban not only elected officials, but all public employees from collecting a salary from one public job in New Jersey while pulling down a pension from another. Any New Jersey government retiree who goes back to work for a government entity in New Jersey and makes more than $15,000 would have to suspend his or her pension while working in that job in the same way that retirees who go back to work have to give up a portion of their Social Security payments if they make more than a certain amount.

“The Legislature won’t fix this, any more than it will change senatorial courtesy or any other special benefits that maintain the power structure,” Schluter said. He pointed out that former Senate President John Bennett (R-Monmouth) was able to cash in a total of $82,000 in pensions after he lost his seat because he had been classified as an employee rather than a contractor by the various municipal bodies he represented as attorney.

Currently, 18 state legislators collect pensions while receiving their legislative pay and many also receive lucrative salaries by being on the payroll of counties, municipalities, state colleges, or school districts, reported Mark Lagerkvist, a former Asbury Park Press investigative reporter who founded New Jersey Watchdog, the state chapter of Watchdog.Org, a project of the Franklin Center for Government & Public Integrity in Alexandria, Va.

“Wherever there’s a pension system, somebody’s always trying to game it to get something out of it, and this form of double-dipping is just one example of that,” said Lagerkvist, who has become a pension reform expert. “It’s human nature to game the system, but you’re looking at a pension system (in New Jersey) that’s facing a $47 billion deficit even by the state’s own conservative estimate.

“At some point, the bubble is going to burst and people who need those pensions are not going to be able to get them,” Lagerkvist said. In fact, questions have been raised about the future of Detroit's municipal pensions in the wake of the city's bankruptcy last month.

“Pensions were created so someone who works all of his or her life does not have to retire and eat pet food," he said. "Now the system is gamed to the point where people try to collect their pensions while still working and that’s not what the pension system was created to do.”

This is just the situation that the Beck-Oroho bill is intended to address. But the legislation has been languishing in the five-member Senate State Government Committee, whose chairman, Sen. James Whelan (D-Atlantic), collects a $35,160 state pension, his $49,000 legislator’s salary, and $71,564 as a fulltime teacher in the Atlantic City school district, according to Lagerkvist, who has been crusading on the issue for more than two years.

A second committee member, Sen. Samuel Thompson (R-Monmouth), collects a $51,996 legislative pension along with his $49,000 legislative salary – one of six Republican legislators out of the 18 lawmakers on the New Jersey Watchdog list.

Christie, who has called for passage of the Beck-Oroho bill banning the practice, was mild in his criticism of DiVincenzo two years ago when the story broke, particularly in comparison to his vitriolic attacks on New Jersey Education Association union leaders, the Passaic Valley Sewerage Authority, high-paid school superintendents, and other targets of his famous YouTube wrath.

That was in part due to DiVincenzo’s public support the week before for the pension and health benefits overhaul that Christie and Senate President Stephen Sweeney (D-Gloucester) were pushing through the legislature. It requires teachers, police, firefighters, and state and local government employees to pay more toward their pensions to bail out a system that is dangerously underfunded, partly because of decades of legal and illegal pension abuses designed to benefit the political class. Police union leaders held a mock “retirement” party for DiVincenzo before an Essex County Board of Freeholders meeting at which they served “double-dip” ice cream cones, but their efforts to derail the Christie-Sweeney pension and health benefits bill ultimately would prove to be unsuccessful.

Another reason for Christie’s mild reaction to DiVincenzo might be that Christie’s deputy chief of staff, Louis Goetting, also was engaged in the same practice, collecting an $88,860 pension from his years at the state Treasury Department plus $140,000 for his senior post in the governor’s office – a story that came out after the original week-long media feeding frenzy over Divincenzo. . Christie spokesman Michael Drewniak attempted to differentiate Goetting’s case by noting that Goetting actually had retired and had been called back out of retirement to join the governor’s staff.

But Goetting is just one of 19 officials serving in the Christie administration who are collecting a pension as well as a state salary. Under the Beck-Oroho bill, Goetting could have come back to work for Christie at the agreed-upon $140,000 salary, but he would have to give up his $88,680 pension while he did.

Christie on Wednesday appointed Jim Scott, a former U.S. Internal Revenue Service criminal fraud investigator who works in the state Attorney General’s Office, to head the new Treasury unit he created through an executive order Wednesday to investigate pension and disability fraud, develop recommendations for changes in practice, and refer cases for both criminal and civil prosecution.

“Siphoning of pension and disability benefits by fraud or ineligibility hurts everyone, including honest current and future pensioners and, above all, New Jersey taxpayers who support the system and expect it to be fair and free of fraud," Christie said in a press release.

Scott’s Treasury team, the governor announced, would work in cooperation with the Attorney General’s Office and state Comptroller Matthew Boxer, who worked in the U.S. Attorney’s Office under Christie before being tapped by his Democratic predecessor, Gov. Jon Corzine, to head the independent investigative agency almost five years ago.

Boxer, whose office has been aggressive in investigating pension fraud, reported last summer that 202 town and school board attorneys, engineers, and other professionals who were working part-time while continuing to illegally add years to their pension service in violation of laws designed to limit pensions to employees earning at least $7,500 a year.

Accrual of pension time while serving as part-time legislative aides or in other political positions paying the previous minimum of $1,500 a year was another way the political class had of rewarding supporters. Because pensions were based upon the highest three years of salary, a part-time legislative aide who spent three years in a patronage position in state or local government that paid $80,000 and spent 17 years collecting $1,500 a year as a part-time legislative aide for occasional work would receive a pension twice as large as a state worker in a psychiatric hospital who worked fulltime for 20 years and retired with a maximum salary of $40,000.

Christie supported the $7,500 minimum for pension eligibility that was included in the pension and health benefits bill he signed, and has been harsh in his criticism of Democratic foes -- as opposed to allies like DiVincenzo -- for practices he deems unethical.

Christie has repeatedly targeted Sen. Nicholas Sacco (D-Hudson) for being paid more than $300,000 for serving as a state senator, as North Bergen mayor, and as an assistant schools superintendent. Corzine and the Democratic-controlled Legislature passed a bill banning dual office-holding, but “grandfathered in” those already serving in two or more positions. Christie has called for a ban on elected officials holding other fulltime government jobs.

Two years ago, when Weinberg attacked DiVincenzo, then acknowledged that she too was engaging in the same practice, Christie derided Weinberg as “the queen of double standards. No matter how long you've been around here, the hypocrisy meter has to tilt on her."

Christie criticized Weinberg for “hiding behind Bernie Madoff” after Weinberg said she filed to collect her pension on top of her legislator’s salary only after she was victimized by the Wall Street swindler.

The governor was more measured in his criticism of DiVincenzo in 2011, telling reporters he called his Essex County ally and told him the practice was “wrong,” and that it was wrong “not just for him. It’s wrong for all the other people who are doing it.”

Christie declined to take the proffered bait when a reporter asked at a Statehouse news conference if DiVincenzo had been “greedy.”

"I don't know how to answer that question,” the governor told reporters. “Everybody defines greedy in different ways.”

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