By Erica Klemens | Americans for Prosperity-New Jersey
Bullhorns are great for projecting a voice – and sometimes for drowning out other voices. But they are poor tools for meaningful conversation. That’s why I wish a few protestors had put down their bullhorn at our recent press conference and listened. I bet their response would have been very different if they heard our message.
Our public workers need and deserve dependable, well-funded retirement and health benefits that can’t be stolen by politicians. No one’s promised retirement benefits should be threatened because the state made poor financial decisions. No one should fear for the future because their employer isn’t making pension payments.
Outside of New Jersey, millions of workers in the public and private sector enjoy dependable plans that they can control. They get to pick a retirement plan that works best for them, and the money is kept in funds locked away from their employer. If they change jobs, they have the freedom to move their retirement fund with them.
Don’t New Jerseyans deserve the same security?
We think so. And we think it’s unacceptable that our state continues to use our state employee pensions as a piggy bank to pay for other projects, like when former Governor Whitman withheld billions from the pension fund to balance the state budget. As the state and local pension and health benefits liability grows to $169.5 billion, politicians are jeopardizing the state’s ability to offer jobs and benefits to future workers.
If we stay on the current track, the liability will continue to outpace funding. This year, the state will add another $3.6 billion in debt for pension and health obligations. That amount will grow even larger in coming years. We literally can’t raise taxes high enough to meet the massive liability. A so-called “millionaires’ tax” would not raise even the additional $1.6 billion needed to make this year’s payment.
Fortunately, there is a better way.
We support giving new state employees more control over their pensions via hybrid or 401k-style plans similar to those used by federal employees, many workers in other states, and most private sector employees. A 401k style plan for new employees does require workers to contribute a bit more to their retirement, but it offers them more security, control, and freedom in return.
Right now, NJ employees contribute only about 18% of the premium costs of pension and health benefits, while their private sector counterparts contribute 24% on average. Keeping payments artificially low has been nice for workers, but it simply isn’t sustainable for taxpayers. By slightly increasing contributions and moving to a 401k style plan, workers will gain significantly more control over their retirement plan.
The pension plans are currently managed by some of the least-trained investors in the world: Trenton lawmakers and bureaucrats. These geniuses rashly projected an 8.25 percent rate of return on pension investments, whereas the historical average is closer to 7 percent. Letting Trenton continue to manage pensions is a recipe for more grand promises and more disappointment. We propose that Trenton stop trying to beat the market with workers’ retirement funds.
Our hard-working state employees should not have to worry every year whether Trenton politicians are going to do the right thing and pay their pension liabilities. Workers should be in control of their own future.
Moving to the Pension & Health Benefits Commission’s recommended cash-balance hybrid system or 401ks for new employees is one of the best steps we can take to show our workers respect and honor the obligations for their years of service. Let’s put down the bullhorns for a few minutes and discuss how to give workers a secure, dependable retirement fund. And then let’s turn that bullhorn on the State House!