"If something cannot go on forever, it will stop," said pragmatist Herbert Stein, and the New Jersey public employee pension system appears to have hit that wall. Last week the bipartisan Pension and Health Benefits Study Commission declared that “the situation is not only getting worse, but is also fast approaching the point at which it will be beyond remedy.”
So what’s the cure for a pension system that Mark Magyar describes on this website as a
It’s thethat was “jointly drafted” by the fiscal experts that make up New Jersey’s Study Commission and, apparently, leaders of New Jersey Education Association, whose members have the most to lose. This mind-meld is signed by commission members Thomas Healey and Raymond Chambers, and NJEA President Wendell Steinhauer and Executive Director Edward Richardson. Gov. Chris Christie made this “unprecedented accord” the keystone of his budget speech last Tuesday.
Now the NJEA is in a bind and the front office is popping out retractions like candy through a Pez dispenser. This makes its leadership look weak. But the NJEA can turn this around by taking a page from its own playbook. Back in 2012 when the state Legislature was debating new tenure laws, the union nimbly preserved an old form of job security (LIFO) by presenting its own tenure reform plan and, eventually, lawmakers adopted the NJEA version almost whole-cloth. Now NJEA has a similar opportunity to propose its own pension and health-benefits reform bill that acknowledges the grim reality described by the commission but maintains some semblance of the benefits its members enjoy.
This venture will, at first, be a lonely enterprise. Gov. Chris Christie is on his quixotic quest for the White House and desperate to resurrect his erstwhile popularity. He’s got no skin in this game. His strategy is to salute the commission’s report in the hope that it will make him look once again tough-minded and consensus-building. NJEA’s disavowals of accord only elevate his crusader narrative.
The other major player on the scene is Senate President Steve Sweeney, who is ogling that vacancy in the governor’s office in 2017. In order to beat back an opponent like Jersey City Mayor Steve Fulop, he’ll need to fully muster union support, especially after his fall from grace during the passage of the 2011 pension reform bill. (Then-NJEA President, “If you are a teacher in New Jersey, the message from Chris Christie and Steve Sweeney is chilling: ‘Don’t expect a raise”; the union even withheld its endorsement from him during that year’s election.)
Now Sweeney’s strategy is to play savior and build support from labor unions who have forgiven him for past misdeeds. After the budget speech when Christie trumpeted that “unprecedented accord” between fiscal experts and NJEA leaders, Sweeney told reporters, “What you heard today was no plan to fix the economy, what you heard is -- I don’t know what you heard. It was nothing,” And, “(Christie) tried to hurt them, what he did was an attempt to hurt their credibility. He really did a number on them today.”
Maybe that’s true. Maybe Christie did do a number on them. But it’s not too late to seize control of the narrative, as well as members’ retirement and healthcare security.
First, though, union leaders have to acknowledge the math. State balance sheets reflect $83 billion in unfunded liabilities, which by 2016 will require $4.3 billion in annual payments in order to secure full funding for retirees, as well as another $3.7 billion per year to cover premiums for health benefits.
“We stand at a crossroads,” the fiscal experts who make up the commission warn. One path points towards a “road of ruin” that portends pension insolvency or 29 percent across-the-board income tax increases. The second path, paved with concessions that make NJ’s 2011 pension reform bill look like candy corn, leads to the preservation of employee-deferred compensation and healthcare. “The need for urgency in adopting a solution cannot be overstressed,” the commission intones. “The already narrow window for a reasonable solution is closing fast.”
(Last week’s court ruling that requires the state to make an additional $1.57 billion payment into the pension fund has no significant impact on the depth of the pension hole.)
So the commission recommends a six-part plan that the NJEA either did or didn’t sign onto. Elements include freezing the current state and local pension plans (members would keep benefits credits earned before the freeze); creating new retirement plans and health-benefits plans that mirror stable private-sector plans; transferring both the old and new plans to a trust managed by NJEA; and requiring school districts to pick up the tab for pension contributions that have always been paid by the state, presumably through savings accrued through more modest healthcare plans. Implementation would require legislative passage of a constitutional amendment by early August in order to skirt the ban on reducing contractual benefits and, then, a public referendum.
So not happening, right? But other ideas, like the widely-touted millionaire’s tax or the legislated state payments that don’t reflect the depth of the pension system’s insolvency, do nothing to address the commission’s unassailable math. There’s no quick fix here, only radical reform.
Hence, the NJEA’s opportunity. Acknowledge the numbers. Make concessions when necessary to protect members’ retirement funds. Engage in debate and educate the public on pension reform, just like back in 2012 during productive discussions about necessary and inevitable changes to tenure law. Propose a substantive, data-driven, reality-based plan to preserve members’ retirement and health benefits. In doing so, union leaders will once again look like warriors, not wimps.