Article: Pension crisis awaits Corzine

NJ-a good copy-72% after 40 years and they still have difficulties funding it (John Curry)

Posted by the Asbury Park Press on 11/27/05

If recommendations included in a draft summary of a report on the state's impending benefits crisis are ultimately adopted and implemented — and soon — New Jersey has an opportunity to begin the long road back to financial recovery.

But those are big "ifs." Similar studies have offered similar suggestions before, to no avail. And most of the preliminary recommendations in this latest study, commissioned by acting Gov. Codey, won't sit well with the unions. This time, Codey's successor, Gov.-elect Jon S. Corzine, and the Legislature have no choice but to tell the unions, "Too bad."

Corzine will soon inherit a budget deficit estimated at $5 billion, more than $28 billion in state debt — the fourth highest level in the nation — and a pile of bills for everything from transportation projects to new school construction.

It's estimated that more than 20 percent of the state budget will be consumed by employee pension and health benefits for the state's 570,000 government workers by 2010, compared to 8 percent today. If benefits aren't scaled back soon, essential state services will be at risk. And growing numbers of residents won't be able to afford their property tax payments.

Gannett New Jersey's "Pension Peril" series in May helped draw attention to the magnitude of the problem and its causes. Unlike the private sector, where 80 percent of workers have no employer-funded pension plan, state workers receive generous pensions. Upon retirement with 40 years' service, teachers and state and municipal employees can collect up to 72 percent of the average of their three highest years' salaries. Police and firefighters with 30 years receive 70 percent of their final year's base pay. Worse still, most government employees contribute little or nothing toward their health insurance premiums.

As a follow-up to Gannett New Jersey's "Pension Peril" series, we developed our own 10-point benefits reform plan. Soon after the series and our pension editorials ran, Codey appointed a commission to study the issue and develop recommendations for dealing with it. Happily, many of the panel's recommendations mirror our own.

The draft study recommends steps to end the abuses of the pension system by self-serving politicians, including pension tacking, the practice of taking multiple government jobs to boost one's pension, and pension boosting, where officials move into a high-paying patronage job shortly before retirement to pad their pensions. Pensions for professional service contractors and vendors also would be eliminated.

The study proposes raising the age at which workers can collect full benefits from 55 to 60, imposing a permanent moratorium on early retirement plans and basing pension payouts on the average of an employee's five highest years' salaries, rather than the current three for most government workers.

It also recommends that all active and retired employees contribute at least something — it doesn't specify how much — toward their health care premiums, and that the state increase the use of generic drugs in prescription drug programs.

They are all reasonable, common-sense recommendations designed to strike a proper balance between the need to fairly compensate career public servants and the ability of taxpayers to afford to continue living in this state.

It won't take Corzine long to answer whether his pro-union loyalties and sympathies will affect his resolve to head off a looming fiscal nightmare. Given the power of the public employee unions and the fact that many of the worst pension abuses are perpetrated by elected officials, if Corzine chooses to represent the interests of taxpayers, it will be a bloody battle. It's a skirmish all of us must join.