My pension is mine. It belongs to me. It is compensation I am owed for work I have already done.
And no one has the right to take it away from me.
When I started my career as a teacher in New Jersey years ago, I made a deal with the government — the same deal just about every other teacher, police officer, firefighter, social worker, and public employee in the state made.
I agreed to defer some of my compensation in exchange for a modest, steady stream of income in the future. Much has been made lately about how public pensions are far too generous, but the truth is that the average state worker’s pension benefit in New Jersey is, according to the Department of Treasury, just under $26,000. For teachers — keep in mind, we’re college-educated workers — it’s about $40,000. Police and firefighters are under $58,000, but many of them don’t receive Social Security.
By any reasonable standard, that’s hardly the “exorbitant benefit” Governor Chris Christie claims it is.
Pensions, in fact, are a good deal for taxpayers: pensions allow the government to access the power of the markets to help compensate public employees. Without pensions, local and state governments would have to pay higher wages up front to recruit and retain qualified employees: it’s a matter of simple supply-and-demand economics.
Because public employees are willing to defer part of their compensation, taxpayers can use gains from investments to offset the costs of wages for government workers doing necessary and important jobs. The catch is that governments must make regular payments to the pension funds in lieu of extra pay to public employees.
New Jersey, as we all know, hasn’t made those payments in years. That’s a shame — but it doesn’t relieve the state of its obligations. As with all of its creditors, the state does not have the right to walk away from its obligations simply because it made poor choices in the past.
And it’s not as if New Jersey’s leaders haven’t known this was coming.
For years, public employee unions have warned politicians that they must make their required pension payments. For over a decade, the New Jersey Education Association has published annual position statements on the budget that explicitly called for fully funding pension payments. Year after year, the unions warned Trenton they must meet their obligations to public employees.
Year after year, Trenton ignored them.
Policy analysts and Wall Street also kept sounding the alarm. In 2006, after years of substituting excess investment gains for actual payments, New Jersey’s pensions found themselves in an $18 billion dollar hole. The state’s actuary recommended a schedule of full payments. He was ignored.
But the press accounts of a growing pension shortfall continued. By 2009, everyone knew there was a problem — everyone, apparently, except Christie, who swore to teachers and other public employees in his first campaign for governor: “I will protect your pensions. Nothing about your pension is going to change when I am governor.”
Later, after breaking this unambiguous promise, Christie claimed: “I had no idea the pension system was about to go bankrupt.” But that is simply not credible: everyone knew, and had known for years, that the pensions were in trouble. Christie was merely the latest in a long line of New Jersey politicians who chose to ignore the warnings of Wall Street, the press, and the public employee unions.
The difference now is that the problem has become too big to ignore. So Christie’s latest argument is to pretend that the pensions could never have been sustained. In fact, there are healthy public employee pension systems all over the country — largely because they made their payments when they were supposed to.
According to a report from the Pew Charitable Trusts, as of 2010, Delaware, New York, North Carolina, South Dakota, Tennessee, Washington, and Wisconsin all had pensions funded at 90 percent or higher. Many other states are at 80 percent or over, considered to be the threshold for a pension to be declared “healthy.”
These states have proved that a sustainable pension system is not a fantasy; all it requires is honesty, discipline, and an ethical code that asserts that debts must be paid. If I run up my credit cards, I don’t get to walk away from my debts just because I don’t want to make sacrifices. States are no different: New Jersey can’t abandon its obligations just because tax hikes would get in the way of Chris Christie’s presidential ambitions.
The responsible action at this point would be to devise a way for the state to make its pension payments without cutting vital services or placing undue burdens on middle- and working-class taxpayers and homeowners.
One place to start would be to take a fresh look at tax expenditures and subsidies. New Jersey gives up billions of dollars in revenues every year through these tax breaks, yet we’ve had little discussion of whether the benefits outweigh the benefits of paying off our pension obligations.
Raising taxes on the wealthy is also long overdue, especially as wealth and income inequity continue to increase. There are, in fact, many options for raising the revenues for pension payments; and make no mistake, these revenues must be raised.
Because New Jersey’s public employee pensions don’t belong to politicians; they belong to New Jersey’s public employees. They are compensation we are owed for work we have already done.
And no one has the right to take them away from us.