Desperate to take headlines away from his $400 million error on the Race to the Top funding application, Governor Christie took to a familiar tactic this week: Attack public employees.
That included a devastating attack on the retirement benefits of current workers, unveiled Tuesday. For members in PERS, which covers most workers represented, Christie’s proposal is a 9% cut in benefit level for all future service by adjusting the benefit formula to age 65 (currently it is 55). For PERS workers with fewer than 25 years of service, Christie proposes increasing the age for retirement eligibility to 65 (currently 62), increasing eligibility for early retirement to 30 years of service (currently 25), increasing the early retirement penalty to 3% for each year (currently 1%), and calculating the benefit level using the average salary of the highest five years (currently 3). Christie also proposes to increase the employee contribution rate for all employees to 8.5% of salary (currently 5.5%) and eliminating all future annual cost of living adjustments. In addition, Christie proposed requiring all active and retired employees to pay 30% of their health costs (roughly 8% now). The proposed changes will affect more than 780,000 current employees and retired workers in the pension systems — including judges, teachers, state workers and firefighters.
New Jersey is the only state in the nation that treats its pension payments as optional, and Christie refused to put a penny into the pension fund this year and won’t commit to putting a single penny in next year. Attacking workers won’t solve the fundamental problem with the pension fund, which is the fact that the state isn’t putting any money into it..
The biggest cuts in benefits under the proposal would be to workers in the PERS system, even though benefits to PERS employees are the least generous benefits and the least expensive to the state. The cuts are illegal—workers with more than five years in the system in New Jersey have a non-forfeitable right to their pension benefits, meaning the governor and the legislature can’t legislate those benefits away. Legal action will be forthcoming.
Recall, the federal government recently found NJ guilty of not fraud and not properly funding it's pension system. In fairness, this is something Christie inherited. The "New Jersey pension bubble" has been building over the last decade and possibly longer. Stock-market losses, a growing public workforce and billions in skipped payments by the state have led to an estimated shortfall of $46 billion, which represents the difference between how much New Jersey has pledged to its public workers for retirement payments and how much it has saved in investments. The gap in health care costs is $67 billion.
picture: Cobblestone street along Willow Terrace, Hoboken, NJ.