Next
governor to face pension challenge
Monday, October 10, 2005 • By
TERRENCE DOPP • The
Express-Times
TRENTON -- Call it one of those
gut-churning issues politicians in the state capital love to
skirt. Pension reform.
The rising cost of providing benefits and
health care to the Garden State's retired government
workers, elected officials, teachers, police and
firefighters is expected to rise by $500 million in the
coming year alone.
The winner of the Nov. 8 contest between
Republican Douglas Forrester and Democrat Jon Corzine will
need to find a way to cover the cost or to restructure perks
and entitlements for state workers, one political scientist
said.
"It's not a sexy issue, or one that grabs
the public's attention and holds it for very long," said
David Rebovich, director of Rider University's Institute of
New Jersey Politics. "But it is a top issue for the next
governor and Legislature because (the cost) is likely to
prevent the next governor from pursuing his
agenda."
Currently, 212,019 retired public
employees derive benefits from six separate pension
systems.
They include the Public Employee
Retirement System, covering state, county and local
government employees; the so-called Alternative Benefits
Program, covering higher education workers; the State Police
Retirement System; Teachers Pension and Annuity Fund; Police
and Fire Retirement System; and the Judicial Retirement
System.
All of the programs are funded with
investment earnings from a $70 billion master investment
fund. Any shortfall between investment earnings and total
payout is covered by taxpayers, $5.3 billion this
year.
According to the Treasury Department, the
state contributed $755 million this year, a number that will
climb to $1.7 billion in 2008 and $2.5 billion in
2010.
Employees are eligible to retire with
full benefits at age 60 or when they accrue 20 years of
service, whichever comes first. Cash benefits are then
calculated by dividing an employee's years of service by 55
and multiplying it by the average of their three highest
earning years.
Example: State employees have an average
salary of $50,763, according to the Department of Personnel.
An employee who retires after 30 years of service could
expect a lifetime benefit of $27,412 annually plus health
care, according to state formulas.
Both Forrester -- director of pensions
under former Gov. Thomas Kean -- and Corzine have called for
fully funding the pension system.
Corzine said he would also audit the
system before making any changes. "The schemes the state
hatched in the 1990s to avoid making pension contributions
are classic examples of the failed tax, borrow and spend
philosophy that I will replace with a strategy to invest,
grow and prosper," he said, referring to a decision by Gov.
Christie Whitman to use a bond to cover a pension
plan.
Corzine said he would be open to a
"two-tiered" system in which present and future employees
are granted different levels of benefits only if negotiated
openly with employees' unions.
"The state also must do a better job of
managing pension assets by moving away from over-reliance on
stocks and diversifying its portfolio responsibly to real
estate and other investments to maximize returns and reduce
risks. Of course, we also must put a stop to abuses like
pension-padding," the Democrat added.
Corzine recently came under fire after he
forgave a $450,000 personal loan to an ex-girlfriend who is
president of one local chapter of the state's largest public
union -- Communications Workers of America.
Forrester said his experience leaves him
better prepared to tackle the issue.
In addition to fully funding the state's
contributions, he would look at the level of benefits given
to holders of multiple jobs. Forrester said he would aim at
loopholes such as the one that allows those in patronage
positions earning just $1,500 in a year to receive one year
credit, which they can then use to pad their
pension.
Forrester said he would like to expand
the 13-member board of trustees of the Division of
Investment controlling the fund and safeguard it against
improper and overly political use.
"The people who are gaming the system are
the people we need to take out," he said. "Some changes will
be (easier) and some will require quite a bit of
scrutiny."
Forrester said he would resist a
two-tiered structure, an arrangement he said leads to low
morale, and said he would not alter benefits for rank and
file members.
"It's easy to find solutions but to
actually implement them is difficult," he added. "Recruiting
and retaining good public employees has to be the driving
force."
In two high-profile protests this year,
public employees made it clear they would resist changes to
the pension system.
One official with Communications Workers
of America Local 1032 called assertions public pension
benefits have grown too costly for taxpayers "hyperbole" and
false.
"Is that going to cause distress for
whoever is elected? Probably," said Dudley Burdge, political
action coordinator for the CWA local, which represents state
judicial workers, Department of Transportation personnel in
South Jersey and members of the Warren County Prosecutor's
Office. "At some point they're going to have to bite the
bullet."
© 2005 The Express-Times. Used with
permission.
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