Share this
Twitter
Myspace
Digg
Del.icio.us
Reddit
Slashdot
Furl
Yahoo
Technorati
Newsvine
Facebook
Export PDF
Print
E-mail
TagsBY BOB HOLT
NEWJERSEYNEWSROOM.COM
New Jersey Governor Chris Christie's reputation for speaking his mind occasionally causes him problems. The governor's remarks that rising health-care costs in New Jersey might "bankrupt" the state, made the same day of a planned bond sale, drew criticism for bad timing.
The New Jersey Economic Development Authority was scheduled to present a $1 billon tax-exempt bond offering.
But thestatecolumn.com reports that shortly after Christie made the bankruptcy reference, the Authority reduced its offering to $712.3 million.
"He is scaring some people when he says the state is going bankrupt," said Gary Pollack, head of bond trading at Deutsche Bank Private Wealth Management in New York.
Christie said health-care spending "will bankrupt" the state unless it requires its workers to pay more for medical coverage. Bloomberg.com reports New Jersey will spend $4.3 billion on employee and retiree health insurance this year, and that cost will rise 40 percent within four years, he said. He wants all public employees in New Jersey to contribute more than the current 1.5 percent of salary toward medical benefits.
"Mr. Christie made a rookie mistake," said Mike Pietronico, who oversees $360 million as chief executive officer of Miller Tabak Asset Management in New York. "The market is very sensitive to the word ‘bankrupt.'"
"The governor has been making these comments and warnings for months, all while instituting and pursuing reforms to fix the well-documented policy failings of prior administrations ---- which, by my recollection, analysts have recognized and applauded," said Christie spokesman Michael Drewniak.
The fiscal impact of having to scale back the bond sale compounds other revenue losses by Christie's administration, including $400 million in federal school aid and $3 billion in U.S. funding for a commuter-rail tunnel to Manhattan that the governor canceled, said Senate Majority Leader Barbara Buono and Budget Committee Chairman Paul Sarlo. Both are Democrats who have criticized many of Christie's decisions.
John Lawlor, head of municipal markets at Bank of America Merrill Lynch, which led underwriters on the New Jersey bond sale, said the offering was cut because of market conditions.
The Los Angeles Times reports the municipal bond market is already badly spooked by fears over state and local government budget woes.
Prices of municipal bonds fell broadly for a fourth straight session Thursday, driving yields on some securities to new two-year highs.
The ROOT CAUSE is grossly excessive pensions and benefits, the employer (meaning taxpayer) paid share of which has a value at retirement 4 or 6 times greater than the employer paid share of the pension afforded a Private Sector worker (by his employer) making the SAME pay, retiring at the SAME age, and having the SAME number of years of service. And this is NOT a phenomenon of just the highly paid. This relationship 4, even 6 times the pensions exists at every (yes EVERY) pay level.
Gov. Christie CORRECTLY recognizes the problem is EXCESSIVE PENSIONS & BENEFITS, not a lack of revenue. Unfortunately, even with his recommended (a) COLA elimination, (b) increased Employee Contributions, (c) increased Retirement ages, and (d) the sometimes discussed (sometimes not) 9% rollback of NJ’s 2001 benefit increase, I think its “too-little-too-late”, as the annual asset drawdown (via payouts to retirees) is now too large to overcome.
I think Gov. Christie knows this (we’ve only got 2-3 years left before ALL remaining Plan assets represent out-of-pocket contributions of current employees, and it would be quite unfair to pay these amounts out to the current retiree group), which is one reason he’s in no rush to throw more money down this toilet, and would rather end the BS (by starving the beast to death) and reforming it properly …. hopefully by replacing it with a 401K-style Defined Contribution (DC) Plan with a modest matching contribution.
NJ needs a REAL solution, the best of which is a “hard freeze” on the pensions with everyone switched to DC Plans, but that’s not gonna happen because the Democrats still run the legislature, are still in denial, and are still no doubt gladly accepting Union campaign contributions. Unfortunately, politics being what it is, the crisis is gonna have to get even worse before it gets better. Greed and denial, a nasty combination.
Hopefully the new Republican House of Reps. in Congress will (a) pass the Pension transparency bill, (b)pass a bill allowing Bankruptcy for States, and (c) make it clear that there will be no State bailouts with Federal money, and you’ll just have to get your own house in order ……... and short of the "hard freeze" mentioned earlier, that’s going to have to include AT A MINIMUM very significant BENEFIT reductions for FUTURE years of service for CURRENT (yes CURRENT) workers.