Panel
seeks $12B infusion to fix pension
system
Recommendation is among the most
dramatic in report by state benefits task force
Friday, December 02, 2005 • BY JOE DONOHUE •
Star-Ledger Staff
A state advisory panel looking to fix the
state's troubled pension system called yesterday for an
immediate infusion of $12 billion, plus an array of other
painful fixes to rectify years of neglect and
abuse.
That amount of money -- representing more
than two-fifths of the entire state budget -- would restore
full solvency to the public pension funds that serve nearly
three-quarters of a million people.
"This challenge is so large and so
important to so many people that there needs to be a fair,
equitable apportionment of pain, and it has to be affordable
to everybody and we hope we've achieved that," said Philip
Murphy, a former Goldman Sachs executive who chaired the
Benefits Review Task Force.
The panel said state officials should
stop skipping pension payments and relying on gimmicks like
borrowing for short-term fixes.
As reported in The Star-Ledger yesterday,
it also recommended raising the retirement age for full
benefits from 55 to 60 for teachers and state workers;
requiring all public employees who receive health insurance
through the state to cover a share of the fast-rising
expense; and ending abuses such as employees using multiple
public jobs or late salary increases to inflate their
pensions.
As an example of abuse, the panel cited
one unnamed employee who earned less than $10,000 a year in
public service for 24 years, then was paid $141,000 for one
year as a prosecutor. That bumped his pension from $3,600 to
more than $70,000 annually.
The 10-member task force was named by
acting Gov. Richard Codey in May to examine the state's
beleaguered retirement funds and soaring fringe benefit
costs and look for ways to ease the crisis.
Its most dramatic recommendation is that
the state should move swiftly to erase the system's unfunded
pension obligation of $12.1 billion. That's the projected
long-term gap between assets and liabilities for the pension
funds that serve 212,019 retirees and beneficiaries, and
532,465 active workers.
The panel said that after a decade in
which the state often skipped payments and the system's
stock market investments lagged, the gap should be fixed
quickly to avoid an even bigger problem in the future. It
said that also would reduce the annual contributions
required by the state and municipalities.
The task force "reluctantly" recommended
the sale of state assets to close the gap.
The problem is finding salable assets
worth that much. Probably the only properties that qualify
are the state's toll roads, which by one recent estimate
could generate about $20 billion through a sale or long-term
lease.
Murphy said the panel wasn't necessarily
endorsing that alternative, which Gov.-elect Jon Corzine,
his former Goldman Sachs colleague, ruled out during the
recent campaign. Murphy said that erasing the gap may
require several asset sales, and perhaps dedicating any
state revenue increases next year.
However, Michael Riccards, executive
director of the Hall Institute of Public Policy-New Jersey,
a nonpartisan think tank, said he doubts the state can
instantly solve its pension problems while also dealing with
other needs, such as education, child welfare and
transportation. "This gives us a clear idea of the magnitude
of the problem. But I'm not sure it can be solved
overnight," he said.
One person who was involved in the study
but asked to not to be identified said the panel members
realize that such a huge payment probably is not realistic,
but feel the problem is so serious that the recommendation
needed to be made.
Senate Minority Leader Leonard Lance
(R-Hunterdon) said the report provided a valuable focus on a
dire financial problem, but that he would oppose an asset
sale because "that is robbing Peter to pay Paul. That is not
likely to occur."
Ivette Mendez, spokeswoman for Corzine,
said his staff will "carefully study" the 60-page report,
and the governor-elect intends to conduct his own assessment
of the problem as part of the transition.
Codey said the panel has "done a real
service to the taxpayers and public employees of our state."
Assembly Speaker Albio Sires said the report "is a serious
piece of work and it will need to be thoroughly scrutinized,
evaluated and debated in the weeks and months
ahead."
The New Jersey Education Association,
which represents 192,000 active and retired teachers and
other school workers, is suing to force the state to
increase payments into the teachers' pension fund. NJEA
president Joyce Powell yesterday commended the report for
including a number of "common sense" reforms but labeled
"unfair and unnecessary" the proposal to raise the
retirement age for teachers.
William Dressel, executive director of
the New Jersey State League of Municipalities, said the
report offers many valuable suggestions but should not have
excluded some pension funds, such as the Police &
Firemen's Retirement System, from changes such as a higher
retirement age.
Joe Donohue covers state government and politics. He may
be reached at jdonohue@starledger.com or (609) 989-0208.
A full copy of the task force report is available on the Web
at www.state.nj.us/benefitsreview/final_report.pdf.
© 2005 The Star-Ledger. Used by NJ.com with
permission.
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