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News & Press: Pension

GFOA op-ed All Payers Treated Equally?

Tuesday, March 3, 2015   (0 Comments)
Share | | Joseph Monzo, Legislative Committee Chair, GFOA of NJ

Your local tax collector is a payment point for a number of other entities and obligations.  A very large portion of the property taxes collected are sent to fulfill County and School obligations.  In that list of payees is the pension payment due to the local pension systems to meet the obligation of the local employment contracts. The State of NJ has similar obligations for its employees.

You as a taxpayer have paid your tax bill and we as local government entities have subsequently paid the local pension obligations.   So where is the problem?

If it is not already, it should be common knowledge that there are four significant pension systems (excluding teachers) Local PERS, State PERS (Public Employees), Local PFRS, State PFRS (Police and Fire). The two local systems are actuarially funded at greater than 70% while the two state systems are funded at 50% or less. The reasons for this have been well documented. Local employers and employees have been required by state law to make every payment required of them. The local payments are required in every annual adopted budget and the employees make them through payroll deductions. Every One. Without Fail.

On the other hand the State of NJ has excused itself from significant contributions over the years by simply not including the payments in the state budget. In more recent years they have budgeted for the obligation but simply did not pay for it while using the money for something else. Have you tried this tactic with your mortgage company and been successful? What would happen if your employer tomorrow decided to stop paying their contractually obligated match to your 401K?

Since the Governor appointed the Pension and Health Benefit Study Commission several organizations have taken to the media to express their opinions and concerns about what their upcoming report might say and what recommendations it might make. They had all made very similar, yet valid points about the integrity of the State of NJ administered pension and health benefit systems.  While the pension systems are accounted for separately (In fact, one of the 2011 reforms included the separation of the systems — one for the state and another for the locals) they are still treated similarly when it comes to any systematic changes that might be suggested by the Commission in an effort to bolster the viability and funding for the two State systems.

The Government Finance Officers Association of NJ (GFOA- NJ) is an organization whose members are charged with a fiduciary responsibility to manage the local finances of 565 towns, 21 counties, localities and authorities. This is a task that we do not take lightly. The residents and taxpayers of these local communities and counties pay their hard earned dollars in taxes. In return they expect honest, responsive government at an acceptable price. That has not always been the case but as an organization we strive to bring accountability and transparency to the finances of your (government) town and county.

Local and county budgets have already been reduced through attritions, privatization of services, elimination or cut back of services, and deferment of needed infrastructure improvements. Reserves and you as a taxpayer have paid your tax bill and we as local government entities have subsequently paid the local pension obligations.   So where is the problem?

It should be noted and understood that the state employees (PERS and PFRS) are caught in the middle here. They are making their required pension contributions with every paycheck they receive. Their systems are at a financial crossroads because of what the State of NJ historically chose not to do, and now, does not have the wherewithal to do - simply honor its commitments.  Tomorrow’s pension may not look like today's, but the contracted obligations are due and changes prospectively must accommodate promises to those made in the past.

We offer our support of and to the Pension and Health Benefit Study Commission in this daunting task that they have undertaken. However, we do caution them that it is very difficult to solve a puzzle when a significant number of pieces are not in the box.

We support reforms when necessary but we cannot support the State of NJ abdicating its responsibilities by simply shifting the financial burdens from their budget to local and county budgets.

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