If you are relying on pension promises for your retirement, maybe you need to reconsider.
No matter what is promised and no matter what the law says, if the money does not exist, you will not be paid.
I am in general an ardent admirer of New Jersey Governor Chris Christie against the unions (I don’t admire him in many other areas). The pension promises that have been made by politicians are wrong and immoral.
At the same time, I wonder at the ethics of going to the court and arguing that the pension promises do not impose any obligation on the government. According to Reuters: “New Jersey says it does not have to make pension contributions.”
An attorney for New Jersey Governor Chris Christie’s administration argued in court on Thursday that the state cannot be forced to make its contributions into the public pension system.
The state’s 2011 pension reforms violated the New Jersey constitution when they made state pension contributions a contractual right, forcing future legislatures to pay for something they themselves did not approve, Assistant Attorney General Jean Reilly argued.
Public sector unions sued the state last year after Christie said he would not pay for the “sins of the past” and cut nearly $900 million from the state’s fiscal 2014 pension contribution and directed the legislature to slash $1.57 billion from the 2015 payment as well.
They argued that with those cuts, Christie violated the 2011 law that he has touted as a hard-fought partisan victory achieved through cooperation with the Democrat-led legislature.
These union pensions were always insane burdens on the taxpayers that needed to be put to an end. They were a way in which public employees got to live off the people they were supposed to work for.
They were immoral in the same way that all public debt is immoral. They made a claim on future generations who had no say in the decision. When governments go into debt, they basically get to spend in the future on the basis of robbing people who are, at the time, too young to vote. Pensions operate on the same principle. They bind future taxpayers down. The politicians get the benefit in the present while others will be stuck with a bill at a future date.
I wish the New Jersey state government would admit all this, rather than simply demanding that the legislature be free from obligation.
New Jersey’s pension system is funded at just 44 percent, according to one measurement using new accounting rules. One of its funds will run out of money within 10 years, the measurement shows.
However the liabilities are measured, the state’s long history of shorting the pension system is at the root of its deterioration, Standard & Poor’s Ratings Services has said.
Under Christie’s watch, the state has been downgraded eight times by Wall Street credit rating agencies. New Jersey is now the second-lowest rated state behind Illinois.
Governors and legislatures have been shorting the system since before Christie first took office in 2010. Christie says his administration has put more money into the state’s retirement system than any other in history.
Pensions get their funding from contributions by employers, employees and returns on investments. New Jersey Superior Court Judge Mary Jacobson said that the legislature had used “unmistakable language” in crafting the 2011 law to make the state’s payments into the pension system a contractual right for workers. New Jersey’s pensions cover about 300,000 current retirees.
Jacobson sounded skeptical of the state’s arguments, saying that a contractual right to a state pension contribution seemed to have been “deliberately” included in the law in exchange for higher contributions from public employees.
“You trivialize the contracts clause. You seem to push it aside as if it’s meaningless. I can’t afford to do that,” Jacobson told Reilly.
The reality is that legislatures who approve or vote for a significant tax increase will not stay in office. The only way to uphold the “right” to a pension is to annul the legislature and give the courts the authority to order higher taxes. But that would obviously be a usurpation of authority.
Like Illinois, New Jersey is headed for a financial crisis. No union lobbying or court decision can overrule that fate. When the crisis takes place it will undoubtedly shake up private companies, including those who have made pension promises. What are the chances anyone will make sure that the promised money will be delivered to the people trusting in those promises?