Sens. Tom Kean and Stephen Sweeney coauthored a column last week ("A bipartisan fix for NJ pension system," Other Views, March 9) explaining their misguided support for a constitutional amendment that will enshrine the most lucrative pension system in the country.
The pair wrote "First, taxpayers cannot afford to maintain the status quo. Second, we need to protect the long-term economic security of the pension funds to fulfill our commitment to career public employees."
True, we cannot afford the status quo, but it defies logic that these two career politicians propose to force taxpayers to fully fund a pension system that no private sector worker could ever expect but has to pay for through the highest taxes in any state in America.
Should this dynamic duo have their way, New Jersey taxpayers this November could have a rare opportunity to vote for what may be the largest tax hike in state history to fund the bailout of a doomed pension system.
Being hustled through the Legislature under the banner of "pension reform" and with frightening bipartisan support is legislation that promises to reform the state's failing and obsolete "defined pension system."
Disguised among four bills that afford minor long-term adjustments is a dangerous attempt to amend the state's Constitution to institutionalize a system that should be scrapped. It is a ticking time bomb that commits the state to a massive unfunded liability that will drive the state's overburdened taxpayers to their knees.
The constitutional amendment is the first of its kind in the country. While other states are pushing to move away from these costly programs, New Jersey is moving in the opposite - and wrong - direction.
The amendment states the taxpayers of New Jersey will fund "the normal contribution and the unfunded accrued liability contribution" and that this payment will be phased in with one-seventh of this amount paid in 2011, increasing to 100 percent of this complex figure in 2017.
But what is "the normal contribution and the unfunded accrued liability contribution?"
Aside from being an amendment that the majority of voters do not understand, this figure, arrived at through complex actuarial procedures, was $1.751 billion in 2005 and rose to $3.243 billion in 2009, an average increase of 21 percent annually.
The actuarial projection shows that the amount taxpayers will be required to pay in 2017 is no less than $5.5 billion, a figure corroborated by Fred Beaver, director of the state's Department of Pensions.
That is at a minimum.
If the current 21 percent growth trend continues, this figure will exceed $12 billion.
Amendment proponents decry how past governors have failed to make their required annual contribution. This is only half true. As recently as 2002, the pension system was more than 100 percent funded.
In 2001, legislators and union bosses were claiming the system was so well funded it could afford an across-the-board 9 percent increase in pension benefits for every member.
The increase was granted, and today the optimistic predictions are proven wrong. Within 24 months of this increase, the pension system began to crumble.
State government's own experts testified that even if every annual contribution had been made the last seven years, the system would still be unfunded to the tune of $29 billion.
With a massive growth in the state's workforce, increased benefits and weak stock market returns, New Jersey's defined benefit pension system is unsustainable.
The biggest question facing taxpayers is: Where will this money come from? There are several economy-destroying options.
A 50 percent increase in the income tax or a sales tax of 14 percent. Perhaps the Legislature is considering a statewide $5.5 billion property tax hike. Maybe the state will just pull out the credit card and fund this nonsense with massive new debt, should Wall Street be willing to take the risk.
There is another idea lurking out there — institute Governor Corzine's "asset monetization" idea and lease the state's toll roads, resulting, over time, in an 800 percent toll hike.
One can anticipate that the state's Supreme Court will not hesitate to use its activism to force this funding once it is demanded by the Constitution. Remember, the current income tax is a response to court-ordered education funding under the "thorough and efficient" clause of the state's constitution.
Do taxpayers expect the court would not uphold the Constitution and deliver a court order to pay up?
To bring sound fiscal responsibility to New Jersey, the current unsustainable defined benefit plan must be phased out by enrolling all new employees into a 401(k) defined contribution plan, like those in the private sector, enticing existing employees to move their funding into this new program and encourage older employees to depart early.
Done properly, the state could move prudently towards scrapping this archaic and costly system, reduce the cost of government and avoid massive tax hikes, not institutionalize forever a system that will choke the economy.