It’s official folks.
New Jersey’s history of pension mismanagement and fiscal shell games have joined forces with the current economic climate and begun dragging the state and its residents into an ever-deepening pension fund sinkhole.
Following some massive hemorrhaging in recent months, the entire fund is now valued at around $57 million, at a time when current obligations require at least $118 billion. Yes, you read that correctly. It is worth less than half of the value that will eventually need to be paid out to public sector workers.
And instead of moving forward with reforming the entire system, Gov. Jon S. Corzine has instead suggested allowing municipalities to defer payments into the fund until a later date.
That may sound like a nice idea, but all this really amounts to is more strangling of the pension fund.
Under Gov. Corzine’s plan, the pension fund will only suffer further losses as the already dismal investment declines are compounded by another revenue shortfall, caused by the deferred payments. The system will get worse, not better, while municipal and state officials get to delay the payments and associated but perhaps necessary tax increases until the 2009 gubernatorial and Assembly election is over.
The real solution that seems to be escaping the governor is what many have already recommended: end the pension system as it is currently constituted for new hires, by no longer providing defined-benefit pensions and switching to defined-contribution programs, like 401(K)s, like the rest of the world. If that means the state has to sweeten state worker salaries or provide other incentives to attract talent away from the private sector, so be it, as long as that “it” costs less than the current system.
Old pension obligations and financial promises to current state workers must be kept, but what is going on with the fund now proves that things just cannot go on in that way. Reform, and not gimmicky payment holidays, is the real solution.