That fact seems to confound legislators like Jon Bramnick, the Assembly Republican leader and a potential gubernatorial candidate, and Declan O’Scanlon, another Republican assemblyman, both of whom say the state can’t afford to fund public pensions and are calling NJEA and other unions to “negotiate” further pension reform.
Here’s why that’s not going to happen:
We’ve been “reformed” to death. In 2011, a pension and benefits reform law drastically cut pension benefits for all public employees — retired, currently active and future hires. The law also increased active employees’ pension contributions by more than 36 percent and forced every employee to pay up to 35 percent of their health insurance premium. However, the law also required the state to live up to its obligation, and fully fund the pensions after a seven-year phase–in.
Every provision of this law has been followed, except the last one — the state got two years into the phase-in and quit. No public employee has ever missed a single payment. Yet Assemblymen Bramnick, O’Scanlon and others — who voted for the law — condone allowing the state to shirk its responsibility while public employees have shouldered every burden.
Pension benefits are affordable and less costly to the state than a typical 401k. Public pension benefits are affordable when funded responsibly. Using the Teachers Pension and Annuity Fund (TPAF) as an example, employees are this year paying in 7.2 percent of salary out of every paycheck and will begin paying 7.5 percent next year and beyond. The current employer contribution is 3.5 percent and will decline next year to 3.3 percent. This is well below the typical employer match to a private-sector 401k plan.
The pension plans were underfunded by the state, and the state can and should make up the shortfall. Again, using TPAF as an example, over the last 20 years, employees have paid a total of $10 billion into the pension, while the state has funded only $3 billion. In most of those years, the state paid in nothing, and in only three years did the state pay what was required. As a result, the plan currently has assets to pay only about half of its promised benefits, with an unfunded liability of about $24 billion. Other state-employee plans are in equally rough shape. Critics correctly assert that the state cannot come up with such a huge sum. But it doesn’t have to. It does have to start with reasonable amounts each year, growing over time, and invested over time.
That was the premise of the 2011 law that the state violated. Actuaries have verified that had the state stayed the course, the pension would have become healthy. All of that is achievable — in fact, the Legislature has passed two consecutive state budgets that included the full funding required under the 2011 law. Bramnick, O’Scanlon and every other Republican legislator voted against those budgets. Why? Because part of the revenue came from the restoration of taxes on millionaires and the reversal of a tax cut for corporations. So it’s inaccurate to state that it can’t be done. It would be more accurate to state that they have chosen to protect tax cuts for millionaires and corporations, rather than meet their obligation to protect the long-term economic security of 800,000 active and retired teachers, firefighters, police officers and other middle-class citizens.
Bramnick has accused NJEA of using this election to punish Republicans for their votes. In fact, we have excellent relationships with many Republican legislators, so endorsing their opponents was not an easy decision for our PAC leaders.
But our members are angry. If your employer took your money, shirked its responsibilities, broke its promises, kept your money and tried to blame you for the mess it had made, you’d be angry too.
No, we’re not willing to talk about more pension reform. We’re too busy electing legislators who will meet their obligations to New Jersey’s hard-working, middle-class public employees.
Wendell Steinhauer is president of the NJEA.