pension – Hank Kalet

Framing public workers

It is interesting the way in which every story on the state pension problems are framed. The assumption in every single one is that the problems stem from the system and the workers and that the failure of elected officials to 1.) be honest and conservative in their estimates of the pension system’s long-term value and 2.) make the requisite payments into the system really is only a minor failing.

But the reality is that the last time the state actually paid what it owed to the system was in 1992 — under Jim Florio. Seven governors and Legislatures of both parties have been shorting the system over the last 18 years. That includes $3.1 billion this year by Chris Christie.

The massive shortfall in what we expect to have to pay and what we will have in the bank to distribute has nothing to do with the people who will get the pensions and everything to do with the people managing our state and local budgets.

Does this mean that we should not look at the pension system to determine whether the payouts going forward make sense? No. Of course we should. But we have to be honest about what created the mess before we can move forward.

The other frame is that public workers are robbing the rest of us and we should tear them down. That’s just a foolish race to the bottom. Instead, we should be fighting to rebuild our own pension and health programs so that we get what the public worker gets. But that is a debate for another post.

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Read poetry at The Subterranean.
Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
Suburban Pastoral, a chapbook by Hank Kalet, available here.

Dispatches: Blaming Peter to pay Paul

This week’s Dispatches column is on the pension mess and why it’s not state workers’ fault.

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Read poetry at The Subterranean.
Suburban Pastoral, a chapbook by Hank Kalet, available here.

Christie’s pension gambit:Making it worse to make it better?

No one should be surprised by the report released today on the state pension funds. Observers have been saying for years that the people who handle the state’s money have bailed on their fiduciary responsibility, preferring instead to push problems off into the future.

We could recount the devises used to avoid paying into the pension fund since Christie Whitman took office in 1994, but that would be foolish.

And we could blame Jon Corzine — not because he created the mess, but because it is convenient to go after an unpopular governor. Of course, he avoided fixing the problem, as well.

This brings me to our current governor, who with much fanfare is withholding the small payment the state was slated to make on the grounds that nothing should go into the pension fund until reforms are passed. This is the height of foolishness. The money we are talking about is money promised to former workers, money they are due and that we have a moral obligation to pay.

I don’t disagree that there are problems with the pension system as it now stands and that changes need to be made. Waiting to make changes in future pensions to pay into today’s fund will only result in a larger unfunded liability as we go forward. Foolish, foolish, foolish.

Send me an e-mail.
Read poetry at The Subterranean.
Suburban Pastoral, a chapbook by Hank Kalet, available here.

Hightstown grudgingly plays governor’s pension game

Hightstown is going to take advantage of the state pension holiday — but only because the state is holding towns like the borough hostage.

The state has tied the pension deferral to extraordinary aid, the pot of money the state sets aside for cash-strapped towns. The aid is designed as tax relief, but requires towns essentially to exhaust all other means to bring their tax rates down.

The aid, however, functions like an addictive drug that forces them to keep coming back for more every year.

Consider what happens to municipal surplus use. Towns are forced to use 95 percent of their surplus balance as revenue in their budget to qualify for the aid. When towns do that, they often find themselves scrambling the next year if it cannot find enough revenue to offset the amount of surplus used. That forces towns to repeat the mistake, to go back to the state for aid and spend down their surplus again, creating a never-ending downward spiral.

Towns can only reverse this trend by hoping the state provides them with more money than they have received in the past (fat chance) or by experiencing ratable growth. The problem is that many of the towns that seek extraordinary aid are built out like Hightstown or Jamesburg, leaving them with few opportunities to expand their ratable bases.

The pension deferral will only exacerbate this problem next year. Hightstown estimates that the pension deferral will save it $159,000 this year, which then has to be repaid over 15 years at 10 percent interest beginning in 2012. That means the borough is facing a minimum spending increase next year of $159,000 and then another hit in excess of $40,000 in 2012 when repayment of the deferral hits.

That’s a lot of cash, but it is understandable why Hightstown would go down this road. Not doing so would cost the borough $200,000 this year — money that would be impossible to replace in the budget. Plus, Hightstown is not alone. Manville also is deferring its pension payments, primarily for the same reason.

While Plainsboro Mayor Peter Cantu says that, because of the current economic climate the program makes sense, it is just another example of the state’s dysfunction when it comes to budgeting. After nearly four years of criticizing past practices that essentially kicked fiscal problems down the road, the state is doing the same and asking municipalities to join in the fun.