The proposal by the Democrat legislative leadership to constitutionally mandate pension payments each year may sound like a nice thing to do and like “we’re just keeping our word.” But it would be a disaster for the taxpayers of New Jersey as well as the very people the amendment is supposedly intended to benefit.
First, if we enact this amendment without simultaneously enacting reforms that will permit us to make the massive payments, we will be digging our huge budget hole even deeper. We will be making the same promise we had to break in 2011. This time without even a thought about reforms that would enable us to keep that promise.
No one wants to keep our word to our hard-working public sector workers more than I. But the actions of previous legislatures and governors have dug the hole so deep there simply is no amount of economic growth that will magically enable us to do so without further reforms. A constitutional amendment won’t change that reality. One need not take my word for it. Virtually every ratings agency — the same ones whose pronouncements are cited by the amendment’s proponents when it’s convenient — agrees emphatically.
We need look no further than our immediate past experience. Had this amendment been in place over the past three years — despite the fact that we made record payments into the system — we would have had to come up with an additional $4.3 billion. We fell almost $2 billion short last year alone — and that’s after making the largest payment ($1.3 billion) into the system ever. These shortfalls weren’t at the whim of Gov. Christie. These shortfalls were due to the fact that in order for the agreements made in 2011 to be honored we were counting on what appeared to be reasonable economic growth projections, which didn’t happen.
It is upon identical such wishes and hopes for magical economic growth rates that the Democrats’ constitutional amendment depends. I really wish I could give my daughter a unicorn (rainbow colored, with sparkles) but that won’t make it happen.
The fact that we didn’t have a payment-mandating constitutional amendment in place in 2011 saved us from massive, economy-killing tax increases or massive, service-decimating cuts to an already lean budget. Schools, vital support for our most in need, higher education, the environment — all slashed, and it still wouldn’t be enough. And you can totally forget about addressing that pesky little property tax issue.
One must keep in mind that the shortfall outlined above won’t stop growing for years — and will end up at between $3 and $4 billion.
The most significant, indisputable fact that the shortfalls highlight is that the 2011 reforms simply didn’t go far enough. Let me make this fact absolutely clear: We can’t save New Jersey from fiscal ruin with delusional growth projections and there is nowhere in our current budget to make massive enough cuts, and nowhere in taxpayers’ budgets to provide the necessary tax increases.
Let’s face it folks, if we give the unions everything they want — which this amendment would do — they have no incentive to give us anything we need. Don’t get me wrong, I accept that we must meet our current obligations. But we must enact reforms going forward that enable us to keep those promises, without crushing our taxpayers or destroying our state. And those reforms need not be draconian if we act before things get much worse.
Asking public workers to go from platinum-level health benefits — benefits much more generous and expensive than virtually all of the private sector workers who are paying the bills — down to gold isn’t asking too much, and can save us billions. Other prospective pension system adjustments can be negotiated so as to derive value for our taxpayers and provide fairness to our workers without destroying their retirement plans. A package of reforms and realistic promises could then be enshrined in the constitution. These things are possible as long as people of good conscience come together in good faith. Every day we fail to act the hole gets about $10 million deeper.
If we squander this moment in history, where we have the best data and the most acute understanding of exactly what we need to do to solve our problems, we will be the ones future generations refer to as the gutless leaders of yesterday.