23 Oct 2017
New Jersey’s public pension and health benefits system is looming disaster that threatens the state’s future. According to my research and a recent WNYC report – under new, more realistic accounting standards, the total unfunded liability for public pension plans and retiree health care is $ 253 billion. The state budget is $ 35 billion. As a result of these liabilities, the Mercatus Center at George Mason University ranks New Jersey last in tax status, and New Jersey has the second lowest score of any state (above the Illinois broken).
The recent New Jersey Pensions and Health Benefits Commission concluded that funding for all promised benefits is “no longer within the means of the state.” By fiscal 2023, the state’s annual pension and benefit costs are expected to reach $ 11.3 billion, an unsustainable 27% of the state budget.
The sad truth is, we just don’t have the money to pay these obligations.
How did we get into this situation?
Our state’s pension crisis is a direct result of public sector unions using their enormous political influence to increase the benefits of their members, regardless of the state’s ability to pay. And the most powerful union of all – the New Jersey Education Association – is the root cause of our state’s financial crisis.
How did the NJEA accumulate all its power? Mainly on the backs of taxpayers – with the assent of lawmakers who fear the union monster they helped create.
Decades ago, the NJEA rigged the political system to funnel property tax money straight into its coffers by forcing the legislature to pass two key laws. The first is the “agency fee”, which effectively requires teachers to pay union dues to the NJEA whether or not they want to join the union. If a teacher joins the union, she must pay the full membership fees; but if a teacher chooses not to join the union, she must still pay up to 85% of the dues in “agency fees”. Not surprisingly, over 99% of teachers are unionized.
The second key to the success of the NJEA is the automatic withholding of union dues from teachers’ pay checks, which not only greatly facilitates the collection of dues at taxpayer expense, but also serves as a huge state subsidy to the NJEA, a private organization.
Typically, private organizations like the NJEA have to spend large amounts of their budget to recruit members and collect their dues. Not the NJEA: It’s guaranteed almost 100 percent membership and automatic collection of its taxpayer-funded dues, saving the union millions of dollars a year in operating expenses.
This rigged system has served the NJEA well. The NJEA embezzled $ 121 million in property tax-funded dues in 2016 and a total of $ 1.85 billion since 1994. This gives the union a lot of money to spend on politics, which is exactly what the NJEA did.
Political spokesperson n ° 1
The NJEA has long been the state’s biggest political spender. According to reports from the Election Law Enforcement Commission (ELEC), from 1999 to 2015, the NJEA spent a total of $ 73.3 million. As ELEC Executive Director Jeff Brindle concluded: “When you combine the lobbying and campaign spending of the NJEA, no interest group has ever come together. “
The true scale of the NJEA’s political spending goes beyond the ELEC figures. The numbers do not include UniServ, a statewide NJEA-funded group of political professionals who help local unions vote to pass school budgets or support NJEA legislative initiatives; or for the annual Pride in Public Education (PRIDE) campaign, a statewide public relations effort aimed at mobilizing local communities to support the priorities of the NJEA. They also do not fully take into account the communications and government relations divisions of the NJEA, which are heavily involved in political activities.
From 1999 to 2015, the NJEA spent $ 687 million on this array of unreported policy tools. Adding this to the reported expenditure of the NJEA (and adjusting for some overlaps), the total political expenditure of the NJEA amounts to $ 725 million, or $ 43 million per year. These numbers provide a much more accurate measure of the real political power of the NJEA. And that still ignores the thousands of NJEA “volunteers” who work in political campaigns in districts across the state, who are often seen as the NJEA’s most powerful political weapon.
With the enormous resources at its disposal, the NJEA usually gets what it wants. In the early 1990s, after Democrats walked through the NJEA by transferring pensions to local school districts and cutting public aid to education, the NJEA approved 46 Republicans and three Democrats and was credited with having changes the legislature from a Democratic majority to a Republican super-majority. Neither Democrats nor Republicans have forgotten.
In 1997, the NJEA obtained the “non-transferable right” to pensions, which was adopted by an overwhelming majority. As a result, 89 percent of current teachers are protected from any cuts to their pensions, significantly complicating reform efforts (including Governor Chris Christie’s 2010 and 2011 reforms, which could only primarily affect new teachers) .
In a remarkable demonstration of the influence of the NJEA and fiscal irresponsibility, in 2001 the legislature fabricated a pension surplus by tracing back stock prices inflated by the 1999 dot.com to value pension assets of the state. Using this bogus surplus, the Legislature passed a 9 percent pension increase for current and future retirees – even though in 2001 pension assets were billions lower due to the dowry collapse. com. The NJEA called the raid on pension assets “one of the most significant legislative achievements in the history of the NJEA”.
With its enormous power, the NJEA has also been the main obstacle to meaningful pension reform. In 2005, Acting Governor Richard Codey created a Benefits Review Task Force to review public employee pensions and benefits and to recommend changes that would control costs and taxes. The NJEA launched massive protests and blocked the legislative proposals that followed. The NJEA also successfully rallied around the recommendations of the Special Session of the Legislative Assembly in 2006. In both cases, the winner was the NJEA and the loser was the taxpayers.
The people of New Jersey need to realize that we have allowed a special interest to rig our political system for its own benefit. The pension crisis is just one symptom of this underlying disease. This corrupt status quo threatens the future of the state. Without reform, our unfunded liabilities will consume more than a quarter of the state budget in five years, requiring massive tax hikes, cuts to public services, or both. All New Jerseyans will likely suffer, including retired teachers who rely on these pensions.
It doesn’t have to be that way. New Jersey must end the special privileges accorded to the NJEA that give it such enormous political clout and funded by taxpayers. We need to change the laws that effectively oblige teachers to join the union. We need to end the taxpayer funded deduction of dues, which is equivalent to a multi-million dollar state grant to a private organization.
It is only by reigning over the political power of the NJEA that we can adopt the sensible reforms necessary to address our pension crisis, such as those presented by the recent Commission of Inquiry on Pensions and Benefits. health.
It is time to take back our condition.