LEGISLATIVE REPORT
Pension Amendment on hold
Sizing up Chr
The proposed amendment to the state constitution to mandate pension payments to the state pension system will not appear on the ballot for the elections this November. The delay has triggered fallout that is wild, even by New Jersey political standards.
As reported in the July issue of New Jersey Cops magazine, the governor and the NJ State Legislature have been at an impasse over funding the state’ s Transportation Trust Fund( TTF).
ROB NIXON
Most people are right to wonder what building roads and bridges has to do with funding the state’ s pension obligation. The issues seem to be completely unrelated. The state has a crumbling infrastructure and our highways need constant attention. The state pension system is unfunded and every honest analyst agrees the shortfall is the result of government underfunding at a time when the fund’ s investments struggled. So these are two“ must-do” priorities that the Legislature should address right away.
Except that the fight over how to fund the TTF is at a stalemate, and the proposals on the table, especially the one the governor is demanding, will leave no money for a constitutionally dedicated pension payment every year.
The back story is important to how the pension proposal was stalled. In return for agreeing to raise the gas tax to fund the
10 NEW JERSEY COPS ■ AUGUST 2016
TTF, the governor wants a 1-percent cut in the state sales tax. The Democrats originally offered a gas-tax hike that cut a variety of other taxes and, after a month of internal debate, finally agreed to different exchange of tax hikes and cuts that the governor immediately declared dead on arrival.
The governor’ s plan was designed almost intentionally to prevent the pension amendment from succeeding. The cut in the sales tax, a concept most support on its own, would eliminate hundreds of millions of dollars from the state budget without any guarantee on how to replace the lost revenue. Those proposed lost hundreds of millions amount to much of the additional money the state would be required to pay into the pension fund.
The only way Democrats could fund the TTF and the pension amendment payments is if they could successfully override the governor’ s veto of the original TTF legislation before Aug. 8. Even with a few Senate Republicans potentially ready to vote to override the governor’ s veto on TTF funding, the Senate President could not get enough Democrats on board with the tax- hike / cut plan.
So with that uncertainty, the Senate President decided not to move on the pension amendment until after a TTF deal could be reached. The Senate President’ s logic suggests that moving the pension amendment without knowing what financial impact the TTF deal will have could force the state to slash education funding, state aid to local governments and cuts in services if the hole in the budget becomes unsustainable. The choice appears to be a delay but not a death sentence for the amendment.
The blowback from that thinking though was quick and negative. One union protest even led the Senate President to request state and federal investigations into whether the NJEA threatened him.
So where does all this leave PFRS? Unlike the pension plan for the teachers and state workers, PFRS is well-funded and healthy looking ahead. The vast majority of PBA members are members of the Local part of PFRS, and local government employers have been making their payments as required.
But state employees who are PFRS members need the pension payment guaranteed in order to adequately fund and grow the system as quickly as possible. A year’ s delay won’ t be devastating, but it is not economically sound to delay pension payments any longer. State law enforcement officers don’ t require the state to dip into their coffers as deeply as they do the teachers system. But delaying payments on the larger part of the state plan only hurts those state-employed officers who do a job most in the State House wouldn’ t do on a bet.
If New Jersey state legislators wanted to generate good faith in the meantime to make up for this delay, they could consider, as a part of any TTF deal, additional payments into the pension system this year. It would be an unofficial start to making their increased constitutional payments ahead of the passage of the amendment in 2017, when it is now likely to come up. Even if the delay was caused by rational budget planning, paying more money into the pension early would not only meet the actuarially required obligations of the plan. But it would be the right thing to do for everyone who has dedicated their lives to public service. d