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Trenton Times – NJ’s Pension System - A bleak but avoidable future | Opinion
By Times of Trenton guest opinion column
on July 09, 2015 at 7:00 AM, updated July 09, 2015 at 7:06 AM
By Thomas Byrne
What happens if we don't enact pension reform? Nothing terrible happens immediately, and that is the danger. Disaster is a decade away, so politicians see no urgency. But disaster it will be.
Consider this. The State's 2015 budget was approximately $33 billion; its pension plans paid out $7 billion in benefits. That money came the $79 billion of pension plan assets. Let's fast-forward a decade or so and imagine what will happen if pension plans run dry.
The unions will go to court and say that even if the plans are broke, retirees still have a statutory and contractual right to receive their monthly pension checks directly from the State. But if the Court said the State doesn't have to pay $2 billion now, will it mandate a payment of up to $10 billion in another decade? Moreover, the US Supreme Court has already ruled that states can use their police powers to impair contracts in an "emergency." So I wouldn't bet my pension security on the courts.
Tax increase proposals may be more of a gambit to build political alliances than to actually solve the problem. First, Democrats don't have the votes to override a veto, so the pledges of new revenue now may be just another round of illusory promises. Second, the revenue package addresses only one year and does not address the stepped up revenue needed in subsequent years. Third, voters reacted violently when Gov. Florio raised taxes. So who knows if there will ever be enough votes for another multi-billion dollar tax increase. Finally, the court has made it clear that it does not have the power to raise taxes.
There is some risk that higher tax rates wind up actually hurting pensioners. If tax rates continue to rise we run the risk of losing key taxpayers to other states. Relatively few people can have a material impact. One half of one percent of New Jersey taxpayers account for almost a third of income tax revenues, and only 600 filers - many of whom may already have second homes outside of New Jersey – account for about $1.4 billion in income tax payments. We risk a vicious cycle in which once the most affluent start leaving, the same tax burden falls more heavily upon those less able to pay – not a good thing for middle class residents or for pension security.
It is unrealistic to think that we can squeeze the needed pension payments out of the current State budget. Already, most State spending is mandatory: School spending ordered by the State's Supreme Court, Medicaid spending ordered by the federal government, debt service spending mandated by bond covenants, and other categories. Even if we slashed all other government priorities to fund pensions – things like prisons, environmental protection, higher education and social services - we still would be billions short. And the discussion about eliminating business incentives to pay for pensions is specious, because those incentives are conditioned upon a business creating specified jobs and making certain investments in NJ – i.e., if the conditions are met, the State benefits by more than the foregone revenues, and if not, the State has no cost – so there is no discretionary cash to reallocate to pensions.
This is not a stalemate; rather, the hourglass is emptying out as the state pension system continues to experience negative cash flow. Unions need to be wary of promises for 2017 and beyond; after all, former Gov. McGreevey promised to be the best friend that public employees ever had in the Statehouse, and then barely contributed to the pensions. The rank and file should remember that Gov. Whitman's pension bond, which helped to legitimize the drastic slowing of pension contributions from the State operating budget, passed with union support. State workers, who rely upon and deserve the benefits they have accrued to date, cannot afford another major miscalculation.
That is why the pension commission proposed a constitutional guarantee of funding, which would supersede the recent court ruling. However, the funding would come from changes going forward to both the state pension plan and to public employee health benefits. The plan would fully fund the $40 billion hole in the pension funds. Benefits going forward would be lower, but still as good or better than private sector levels. The Commission can't reverse 20 years of malfeasance, but we were able to identify savings to be recycled solely for the benefit of public workers. We dealt with reality.
If politicians don't do the same, accrued pension benefits will not be secure. Soon the funding gap will be too wide for any solution that preserves meaningful benefits for public employees. Younger state workers might start to worry about a state-sponsored Ponzi scheme in which they might not even get their own contributions back when the pension funds run dry.
This is all avoidable, but not without leadership and political courage. Over-simplification of this problem will do no favors for public servants who have done nothing wrong and who deserve the pensions they have earned. Let's not dither and let the hourglass run out.
Thomas Byrne, the son of former Gov. Brendan Byrne, is a member of Gov. Chris Christie's Pension and Benefit Study Commission, a private investment manager and former chair of the state Democratic Party.
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Education Week - Senate ESEA Debate: What to Expect This Week
By Lauren Camera on July 12, 2015 12:35 AM
Washington
When the U.S. Senate convenes late Monday to continue considering its overhaul of the Elementary and Secondary Education Act, it will begin with a pair of largely pre-agreed upon amendments but quickly move to more contentious debates at the heart of the reauthorization—proposals to increase accountability, give students and parents more school choice options, and prevent bullying, among others.
Meanwhile, pressure mounts on the bill's co-authors, Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., to get the measure across the finish line as competing congressional priorities continue to pile up, including spending bills, a highway funding bill, a forthcoming response to the Iran nuclear framework, and more.
And the U.S. House of Representatives approved its Republican-backed version of an ESEA rewrite last week (read more about that here), clearing a major hurdle to getting a bill to the president's desk.
On Monday at 5:30 p.m., the Senate is scheduled to consider two amendments to its ESEA bill, the Every Child Achieves Act. One, from Sen. Orrin Hatch, R-Utah, would establish a committee on student data privacy policies. Another, from Sen. Tim Kaine, D-Va., would amend state accountability systems regarding the measures used to ensure that students are ready to enter postsecondary education.
Both proposals are expected to pass.
Throughout the rest of the week, the Senate is expected to continue debate on a variety of more divisive amendments, beginning with these three:
· An amendment from Sen. Al Franken, D-Minn., that would enact the Student Non-Discrimination Act, which would create a comprehensive federal prohibition against discrimination and bullying in public schools based on sexual orientation or gender identity.
· An amendment from Sen. Tim Scott, R-S.C., that would allow Title I funding for low-income students to follow them to the public school of their choice.
· An amendment from Sen. Mark Kirk, R-Ill., that would ensure states measure and report on indicators of student access to critical educational resources and identify disparities in such resources.
The amendment from Franken would be the first of potentially three different amendments that would address the issue of bullying, including providing protections for students who are lesbian, gay, bisexual, or transgender (LGBT). Alexander and Casey are also planning to offer similar amendments.
Notably, the forthcoming bullying debate will prompt the first votes on LGBT issues since the U.S. Supreme Court ruling on same-sex marriage. You can read more about the dueling bullying amendments here.
Scott's amendment marks Republicans' second effort to add a Title I portability provision to the underlying bill. Last week, senators rebuffed a proposal from Alexander that would have provided low-income students with a $2,100 voucher to use at the public or private school of their choice.
The National Education Association has been looking forward to the amendment from Kirk, which would implement its vision of an "opportunity dashboard"—a tool that would display inequities in funding, access to experienced teachers, and advanced classes, and require states and districts to help fix them.
The Senate will also likely consider an amendment from Sen. Elizabeth Warren, D-Mass., that would beef up accountability in the underlying bill by allowing states to cross-tabulate student achievement data. That proposal was supposed to get a vote last week, but Alexander and Murray pulled it from the floor in order to finesse language. You can read more about that here.
In addition, the Senate will likely consider an amendment from Sen. Richard Burr, R-N.C., that would alter the funding formula for the Title I grant for low-income students. That proposal has already sparked some hot debate on the floor, as its impact would siphon a significant amount of funding away from some states. For example, New York would lose more than $300 million and Pennsylvania would lose nearly $130 million, according to the Congressional Research Service.
You can read more about the proposal here.
As the week progresses, keep an eye out for additional amendments from Democrats that would amp up accountability for disadvantaged students, including proposals that focus on identifying poorly performing schools. And Republicans are likely to offer a few more amendments aimed at increasing choice, including one from Scott that would allow students with disabilities to use funding from the Individuals with Disabilities Education Act to attend the school of their choice.
Nearly 150 amendments have been filed so far, though it's unclear just how many will actually make it to the floor. Alexander and Murray are hoping to wrap up the debate this week, but it could spill over to next week depending on other congressional priorities.
