Captial Quickies has an interesting piece this morning about the 2011-2012 budget.
In addition to listing programs and the money to be spent on those programs, CQ says that the budget sets parameters for the programs that defines the administration’s leeway in spending.
One of the restrictions that CQ lists strikes me as odd:
Caps spending on Department of Transportation snow removal costs that the Treasury Department can approve without legislative approval at $10 million.
What happens if we get another historic blizzard late next winter and the $10 million limit has been met? Would DOT have to spend the last $100K getting the legislators to Trenton to approve spending over the $10 million cap to clear the roads. What if there are people in life threatening situations like there were during the December blizzard last winter?
I don’t think it is wise to have the legislature micromanaging the DOT’s snow removal spending. Legislative approval for cost overruns of road projects might make sense. Not snow removal.
I was in Maryland on business this afternoon when I received the news of Alex Desevo’s arrest. Someone was calling me with a scoop. Word of the arrest had made it to the holmdel-patch police blotter and the sordid details were leaking out.
My first reaction was sadness. A member of my community, someone I know by name and who knows me by name, was in the middle of a personal, family and career crisis that was about to become very public and very humiliating.
That Desevo is “on the other side” didn’t even occur to me until my friend who called with the scoop said, “do you know what they would be doing it if was one of us? They made stuff up about our guys and called their employers trying to get them fired.”
“True, but we’re not like that,” I said. The truth is some of us are like that.
Within an hour I was receiving more calls. The APP had the story. Desevo’s professional head shot was on the front page of the paper’s website. The APP beat me to the sordid details and salacious implications that I wasn’t relishing reporting.
Desevo was not the only Middletown resident charged with possession of a controlled dangerous substance by the Holmdel police on June 18. He was the only one who became front page news. That is part of the price one pays when you’re a proverbial big fish in a small pond.
Sometimes, especially on a local level, I think it is appropriate to relate to each other and to both good news and bad news not as us and they but as we.
There is no point piling onto Desevo. He won’t be a candidate much longer. His arrest should not be a campaign issue, assuming he resigns his candidacy. He needs to get help and do some serious work on himself. His career is likely in shambles. His family must be under a lot of stress.
Desevo’s problems are not Democratic problems or Republican problems. They are human problems.
Desevo does not deserve our sympathy, as he brought this upon himself. Nor is his plight a cause for celebration or scorn. Concern is appropriate. Holding to account is appropriate. Support of his recovery is appropriate.
Governor Christie Secures Final Legislative Passage for Bold, Bipartisan Reforms to Restore Fiscal Sanity to an Out of Control System and Provide Over $120 Billion in Taxpayer Savings
Trenton, NJ – Demonstrating once again that New Jersey is leading the way with bipartisan solutions for the toughest challenges facing states today, Governor Christie secured final legislative passage tonight for landmark pension and health benefit reform. The reforms passed this evening in the Assembly after receiving passage in the Senate on Monday. The fundamental reforms, passed with bipartisan support from Senate President Steve Sweeney and Assembly Speaker Sheila Oliver, will shake up New Jersey’s out-of-date, antiquated and increasingly expensive pension and health benefit systems. These historic reforms bring to an end years of broken promises and fiscal mismanagement by securing the long-term solvency of the pension and benefit systems, while at the same time achieving critical savings for state and local governments. Pension reform alone will provide savings to New Jersey taxpayers of over $120 billion over the next 30 years, and an additional $3.1 billion over the next 10 years from health benefits reform.
“Together, we’re showing New Jersey is serious about providing long-term fiscal stability for our children and grandchildren. We are putting the people first and daring to touch the third rail of politics in order to bring reform to an unsustainable system,” Governor Chris Christie said. “I want to thank Senate President Sweeney and Speaker Oliver for putting aside politics, committing themselves to reform and remaining unwilling to settle for anything less than the real, viable solutions New Jerseyans have been demanding.”
The reform legislation both secures the long-term solvency of the pension system by achieving a projected funding ratio of 88% within the next thirty years while providing over $120 billion in savings for New Jersey taxpayers. Similarly, the reforms to the health benefit system will save New Jersey taxpayers $3.1 billion over the next 10 years alone while offering greater choice and affordability. The combined savings from these reforms directly translates to real property tax relief for New Jersey families and budget relief for local governments.
Governor Christie continued, “We are once again showing the people of New Jersey that our state is leading the way on the biggest challenges before us and remains unafraid to do what is hard, but necessary. Instead of just talking about reform, New Jersey has come together in a bipartisan way, put our heads down and actually gotten the work done. We are fixing our pension and health benefit systems in order to save them and in the process bringing fiscal sanity to our state.”
In September 2010, Governor Christie first laid out a series of ambitious reform proposals to deal with an immediate combined unfunded liability for the pension and benefit system of $121 billion. Recognized as key cost-drivers for government at the state and local levels, the Governor once again made clear in his 2011 State of the State that modernizing the pension and benefit system in New Jersey was one of the big things to be achieved this year.
Governor Christie will sign the landmark reforms into law on Monday, June 27.
The Pension Reform Plan: Protecting Retirees and Providing New Jerseyans Over $120 Billion in Taxpayer Savings By 2041
The reforms will ensure long-term solvency, while slowing the rapid growth of government costs, spending and taxes that have overwhelmed taxpayers.
With reform, future retirees are protected and New Jerseyans provided with over $120 billion in taxpayer savings through 2041.
Increasing the Funding Ratio of the Pension System to 88%. These reforms protect the pension system for retirees, increasing the funded ratio of the combined state and local systems from the current 62% to more than 88% over the next thirty years. By 2041, this will reduce total pension underfunding to $37 billion. Without these critical reforms, the unfunded liability across the pension systems would have skyrocketed to $183 billion, resulting in a massive impact on state and local budgets.
Providing New Jerseyans Over $120 Billion in Taxpayer Savings by 2041. This comprehensive set of reforms means critical savings for state and local governments and real property tax relief for New Jerseyans.
· $79 Billion in State Contribution Savings: Over the next 30 years, the state pension contribution will be $148 billion, a projected savings of nearly $80 billion. Without reform, the state is projected to contribute $227 billion over the same period.
· $43 Billion in Local Government Contribution Savings: Over the next 30 years, local government pension contributions will be $70 billion, a projected savings of nearly $43 billion. Without reform, local governments are projected to contribute $113 billion over the same period.
Changes for All New Public Employee Retirement System (PERS) and Teachers Pension and Annuity Fund (TPAF) Employees:
· Updating the Formula for Retirement Eligibility:
Establishing the normal and early retirement age at 65 years.
Adjusting the early retirement penalty to 3 percent for each year.
Increasing eligibility for early retirement to 30 years of service.
Changes for All New Police and Fire Retirement System (PFRS) Employees:
· Updating the Formula for “Special Retirement” Eligibility:
o Changes eligibility for special retirement from 65% with 25 years of service to 65% with 30 years and 60% with 25 years.
Changes for All Active Employees (Judicial Retirement System (JRS), PERS, TPAF, PFRS and SPRS):
· Employee Contribution Rate:
Current Reform Legislation
PERS/TPAF 5.5% 6.5% (+1 additional point phased-in over 7 years to a 7.5% total)
PFRS 8.5% 10.0%
SPRS 7.5% 9.0%
JRS 3.0% 12.0% (increase phased-in over 7 years)
Changes for All Current and Future Retirees:
· Eliminating Automatic Annual Payment Increases: Eliminates all statutory Cost of Living Adjustments (COLAs).
A New Paradigm for Pension Plan Design:
· The legislation creates a new Plan Design Committee for each pension plan. The Committees will have new authority to change important plan design features — such as retirement ages, employee contribution levels, and future cost-of-living adjustments (COLA) — within a financially prudent framework that mandates an ongoing, stable level of funding for each system.
· A “Target Fund Ratio” (TFR) will define the boards’ ability to make plan design changes. The TFR is a target ratio of a fund’s actuarial value of assets (AVA) to that fund’s actuarially determined liabilities. In general, only funds that are at or above the TFR will have flexibility to make plan design changes.
o A “Target Fund Ratio” (TFR) of 75% is established as of the legislation’s effective date, increasing to 80% over seven years.
o Only funds meeting or exceeding TFR will be eligible to make plan design changes. Funds below TFR may not make changes.
o Funds above the TFR but below 80% (during the seven-year phase-in period) may make only those changes that do not reduce their funded ratio upon implementation or below the TFR at any time within the succeeding thirty years.
o Plans above 80% may not make changes that bring their funded ratio below 80% upon implementation or at any time within the succeeding thirty years.
· In general, pension funds are considered to be adequately funded if their AVA funded ratio is at or above 80% (the federal standard for “at-risk” funds).
o At the end of fiscal 2010, the State’s plans’ combined AVA funded level was just 56 percent.
· The State Investment Council will expand from 13 to 16 members and include more direct public employee stakeholder input.
Changes to Reflect More Realistic and Financially Sound Principles:
· Amortization methodology is changed from a percentage of pay schedule (which defers the retirement of any unfunded liability) to a level dollar amount each year in order to retire part of the system’s unfunded liability each year and earlier than the previous methodology.
· Amortization methodology is changed from a 30 year open period (which retires less of the unfunded liability each year and results in a lower funded ratio) to a maximum open period of 20 years (phased-in over 19 years).
The Health Benefit Reform Plan: Transforming the System to Create Choice and Lower Costs for New Jersey Taxpayers
The reforms will modernize the State employee health benefits plans by bringing the system more in line with the private sector and federal government. Today, New Jersey’s unfunded other post-employment Benefits (OPEB) liability for providing health benefits is $71.4 billion. These reforms will substantially lower health benefits costs for local governments, including those at the county, school and municipal levels, representing another major step forward in providing real, long-term property tax relief. New Jersey spends $4.4 billion annually on public employees and retiree health care costs, with the cost of health benefits making up 9% of the State’s budget today.
The reforms will result in $3.1 billion savings for taxpayers over the next 10 years alone, while increasing choice for employees and ensuring affordability.
Cost Sharing Reforms for Active Employees:
All public employees will pay a statutorily-established percent of premium (“premium share”), instead of a percentage of salary, for all State Health Benefits Plan (SHBP)/School Employee Health Benefits Plan (SEHBP) and non-SHBP/SEHBP participating plans.
The employee’s share will phase in over four years.
The premium share requirement will not affect employees until their current contract expires.
Premium shares will vary by salary level and coverage, but may not be less than 1.5% of salary (the current standard).
Current employees (excepting those with 20 or more years of service as of the effective date) will pay a premium share in retirement based on the date they reach 25 years of service. If they reach 25 years after the effective date, the employee will pay the premium share in effect based on the date s/he reaches 25 years (i.e., if the employee reaches 25 years in year two of the four year phase-in, then the employee, in retirement, will pay the premium share in effect in year two of the phase-in.)
Changes for Current Retirees:
There will be no change with respect to premium cost sharing for current retirees.
Changes for Local and Education Employees Outside SHBP/SEHBP:
If the employer is not participating in the SHBP/SEHBP, then the employer and employee could agree to a different premium share and out-of-pocket cost arrangement that results in the same level of savings as the statutory premium share formula and plan design changes in the SHBP/SEHBP.
Savings would have to be certified by Division of Local Government Services and Division of Pensions and Benefits and the local Financial Officer in each local entity.
All local employers are required to offer a Section 125 “cafeteria plan” to employees.
Health Plan Design Reforms
Joint Employer and Employee Plan Design Committees:
For both SHBP and SEHBP, a state-level joint employee-employer Plan Design Committee is established. The employer and employees are equally represented.
Committee Role in Plan Design:
The Committees are responsible for providing plans with at least three levels of coverage, featuring varying levels out-of-pocket costs. The Committees have sole discretion to set the amounts for maximums, co-pays, deductibles, and other such participant costs for each plan.
The Committees must also provide for a high deductible health plan.
All current statutory requirements with respect to plan design will be repealed.
So I’m running as an Independent for the state Assembly. And I can’t wait to face the Asbury Park Press editorial board for the endorsement interview.
That ought to be interesting. I’ve been blasting them as hypocrites of the first order for over a decade. I also call them assholes whenever necessary. They deserve it.
Yet on the most important issue facing our state government – the $120 billion shortfall needed to pay pension and retiree health benefits – suddenly the Asbury Park Press has eerily followed the triCity line.
In other words, I look forward to their endorsement.
From my column last week:
Any day now, you’ll see our Republican Governor and Democratic legislative leaders announce a deal to “reform” our state pension system.
Don’t believe it. This is a problem requiring 20 years of fiscal discipline. These people can’t see beyond the next election in 20 weeks….
So when you see our Republican Governor and Democratic legislative leaders announce some deal to address this problem, remember this: It’s all about the election in five months when the Senate and Assembly are up for grabs. It’s not a permanent deal. It can always be reversed or changed later…
Sure, they’ll make some progress with their deal – just enough to con you to think something is getting done. But not on a scale that really solves this problem. There’s not enough political upside and way too much political downside.
Indeed, the next day such a deal was announced. Three days later, the Press ran a front page article on the agreement entitled “Experts: Reforms not Enough”.
A better headline would have been “Jacobson was right”. Here’s the Press:
Government workers are white-hot angry over a proposal to make them pay more for their pensions and health care.
But with the state now facing a $120 billion long-term cost for the unfunded portion of pensions and retiree health benefits, experts say that the measure, expected to be voted in the full state Senate on Monday, does not go far enough.
“It’s a healthy modest bipartisan step, but it doesn’t deal with a lot of the major problems,” said Michael Riccards of the Hall Institute, a nonpartisan think tank that specializes in state issues. “I see a lot of it as postponement.”
Jeremy Gold, a New York-based actuary consultant who reviewed the pension and benefit reform proposal for New Jersey Press Media, agreed. “Any step in the right direction, I don’t want to be too harsh about,” Gold said. “But they are a long way from solving their problems.”
…(E)xperts see flaws in the package. Riccards, who has written extensively about the pension and benefit problems, said the state has yet to deal with the high cost of health care, such as the price of drugs, especially common drugs such as antibiotics.
He also noted that the state must still pay for retirees’ medical care out of the annual budget. In tough economic times, that could be a problem, Riccards said.
Gold said he takes issue with how the funding levels of the pension funds are calculated and said government rules over public pensions are too lax.
Tell you what. I was certain the Press would fall for the hype and cover the bipartisan “reform” as if it solves this catastrophic $120 billion crisis. They’re usually pretty clueless. To my shock, they got it right.
As did I.
Hell, I didn’t even have to see the so-called reforms beforehand. I knew what was coming.
(Sure, I’d vote for this bipartisan deal – it’s better than doing nothing. But I wouldn’t brag about how great it is, as you’ll now see the Governor and some Democratic leaders do as they compete for votes this November. The experts interviewed by the Press had it right: This is only a modest bipartisan start – the tough stuff still remains. Why am I not shocked?)
OK, so now what?
The elected officials are utterly incapable of dealing with something of this magnitude: The proposed state budget for this year is only $29 billion compared to the $120 billion gap we face on pensions and retiree health care.
My framework for a solution? Ripping the problem away from the politicians. I see no other way out.
I’d advocate a constitutional amendment – approved by the voters – establishing an independent Board of Trustees to oversee the pension and retiree health benefits system. They’d calculate the true amount necessary to make the system solvent – and take it out of the Treasury every year.
No cheating on figures. No cheating on the funding. Remember that the pension system has been underfunded for over 15 years. The politicians spent that money elsewhere. Just like what happened with Social Security on the federal level for the past 20 years. But in the end, we’re all responsible for this debacle. We elected these people.
The problem of pension and retiree health benefits in New Jersey can’t be solved without spreading the pain among everyone in our state. And the sooner we get to it the better. Otherwise, this debt will destroy us – and you’ll see the streets of Trenton looking like Athens, complete with the tear gas and rioting. What a nice image of New Jersey as a place to live and locate your business.
The constitutional amendment I envision would empower the independent Board of Trustees to draw up a rescue plan with the directive to seek equity in the sacrifice of the populace. That means benefit cuts to workers already retired and who will retire. And new revenue from taxes. The Amendment would specifically require both. You can’t do it any other way. Any politician telling you otherwise is lying. If you want to keep buying the bullshit, go ahead. It’s worked great so far.
Remember this: The more you spread around the sacrifice, the less of a burden it is on everyone individually. But you can never pull that off in the political system. That’s why I’d have the Pension Trustees do it for us. Of course, their rescue plan would require voter approval. You got to have that to raise taxes and cut benefits in this fashion.
If voters reject their rescue plan, the Trustees would still take what’s needed each year from the state Treasury to fund the system. No more putting off Judgment Day. And then the three ring circus – the Governor, the Senate and the Assembly – can figure out how to pay for it. That ought to be one hell of a show.
In my proposal, I’d have the Board of Trustees appointed to staggered and lengthy terms by the Governor with the approval of the state Senate. They’d be barred from political activity, and would have no past connections to unions for a decade if not more.
The concept is to get a group of our state’s best talent to tell us the truth, and present us a plan made in good faith to deal with this issue. In the end, we make the call. If the Trustees get too political, or go too far off the rails, the voters would reject it. Anyone got a better idea?
An independent Board of Trustees sounds reasonable to me. Which means it will never happen. But in the unlikely event I get elected to the Assembly – only one Independent has done so in 50 years – at least someone will stand up and speak the truth about this explosive problem.
Just like I did in this space last week – as the Asbury Park Press most unexpectedly confirmed a few days later.
Man, this campaign is already getting awfully weird, and it’s only been three weeks.
(The 11th District where I’m running includes: Asbury Park, Long Branch, Red Bank, Ocean Township, Neptune, Neptune City, Interlaken, Deal, Allenhurst, Loch Arbour, West Long Branch, Eatontown, Shrewsbury Borough, Shrewsbury Township, Tinton Falls, Colts Neck, Freehold Township and Freehold Borough.)
The Monmouth County Board of Chosen Freeholders are scheduled to approve five union contracts at their Regular Meeting on Thursday June 23, 7 PM at the Neptune City Municipal Building, 106 W. Sylvania Ave, Neptune City.
MMM attempted to learn the terms of the contracts today, to no avail. We’ll follow up tomorrow.
What an informative show we had yesterday! Having just listened to a recording of the show, I am really impressed with the breadth of knowledge of our two guests, former Colorado Senate President John Andrews and New Jersey Assemblyman Declan O’Scanlon, and with their ability to share so much with our audience so concisely.
In the first half hour of the show, Andrews discusses the many reforms that have been enacted in Colorado over the last twenty year that have made government smaller and more affordable.
Colorado has had term limits for elected officials for twenty years. Andrews gave us a candid view of how they are working.
Colorado has a Taxpayers Bill of Rights (TABOR), a constitutional provision that requires that all tax increases and all government spending that exceeds a formula of inflation and population growth at all levels of government be approved by the voters. Andrews discusses this in depth. His segment of the show should be required listening for all New Jersey policy makers and advisers.
During the second half hour of the show we were privledged to have Assemblyman Declan O’Scanlon, the Republican Budget Officer and Policy Co-Chair join us.
O’Scanlon got into the nitty gritty of the pension and benefits bill passed this week in Trenton. O’Scanlon made the case that the bill is not Reform In Name Only and discussed how it will impact the budget that will be crafted over the next week.
I hope you enjoy the show and that you tune in next week to the live show on Tuesday from 5PM-6PM on WIFI AM 1460.
B4K Calls for Bipartisan Common Sense Changes to New Jersey’s Public School System
New Brunswick (June 22, 2011) – Better Education for Kids (B4K), a 501(c)(4) organization, launched a new statewide radio ad this morning.
The ad, which begins the second campaign launched by the organization this month, calls for bipartisan common sense changes to New Jersey’s public education system.
“We need a new way forward in New Jersey. It’s time to end politics as usual and give parents, students and concerned citizens a real voice in this debate. Every child deserves to receive a first-rate education and an opportunity to succeed in the 21st century. We need to act now and make New Jersey’s public school system a national model for student achievement. It’s time to end special interest domination of our public education system and put our children’s interests first,” said Derrell Bradford, Executive Director of Better Education for Kids.
B4K believes student achievement should be the first priority of the New Jersey school system. Every student should have the opportunity to learn from a great teacher and every school should have a great principal. We need to elevate the teaching profession so that great teachers and principals are rewarded with merit pay and tenure becomes a significant professional milestone!
