The people of New Jersey need to hear the facts as to why police and fire labor leaders in New Jersey are pursuing a separation of the Police and Fire Retirement System (PFRS) from state control. With all due respect to the current administration and its predecessors, there has been much said that does not fit the facts and, unfortunately, little acceptance of responsibility for the current state of affairs. And frankly, we are looking into being part of the solution rather than part of the problem, which will benefit both our PFRS members as well as the taxpayers of New Jersey whom we protect.
First of all, let’s get all the cards on the table. The state’s failure to meet its obligations and its willingness to give local employers a pass through “pension holidays” created a shortfall in the PFRS system of more than $11.1 billion. The state is on the hook for more than $2.7 billion and local employers owe $8.373 billion. And one wonders why the members want greater control? Is it being suggested that the “transfer of full responsibility for the Plan” (see Christie’s Pension Reform Commission recommendations) absolves the debtor of its obligations?
So what exactly does this PFRS governance bill require? Specifically, on page 16, the primary responsibility of the trustees, acting in a fiduciary capacity, is to ensure the full funding of the plan for the benefit of members and their beneficiaries. Any suggestion that benefit enhancements will be granted willy nilly is ludicrous. And by the way, acting in a fiduciary capacity will be a new concept in the state of New Jersey since neither the governor, treasurer or any of the administrators currently have that responsibility.
And what exactly does this bill do that is so onerous and which will place any more of a burden on the taxpayer than currently exists?
This bill provides for a board to be appropriately trained in ethics (another alien concept in New Jersey) and investments.
This bill provides for the trustees to be supported by a professional staff responsible to the board, not the treasurer or the administration.
This bill contains provisions for the board to contract with the Division of Pensions, currently administering day-to-day activities, as well as the Division of Investments if the board deems it appropriate to do so. But the board will also determine its investment policy, which may be different than the whims of the front office, which has paid exorbitant fees for terrible returns.
The bill does nothing to change the obligations of the employer and will determine contribution requirements in the same way they are determined today.
Frankly, this bill does far more to protect the interests of the participants and the taxpayers than anything Trenton has managed to do over the past 17 years.
The primary drivers of this legislation, which has been developed after two years studying similar plans across the country, are to minimize political interference that has created the staggering deficits the plan currently suffers as a result of the failure of the Trenton politicians to meet their obligations; to maximize potential investment returns, again free from political interference; and to provide the members of both the PFRS and the employers supporting the system with confidence that the plan is being managed in the best interests of all.
Some have also referred to the “depressing history of public-pension-fund scandals and the need for constant vigilance.” As they say, the fox is guarding the hen house. Nothing is more scandalous than the way state treasurer after treasurer has been complicit in ignoring their obligations to fund pensions.
The proposed bill was not considered lightly. The initiative to create a new governance model is a serious effort to address a serious problem created by the failure of the state to live up to its obligations to those who protect and serve the people of New Jersey. Again, an alien concept for those who serve in the administrations we have lived under for the past 17 years.