Cut state pension benefits now: There are legal ways to do it
By Seth Grossman, Political Columnist
(Reprinted from March 10, 2010 Current-Gazette Newspapers of Atlantic and Cape May Counties, http://www.shorenewstoday.com/news.php?id=7700)
“On the campaign trail, Governor Christie told cops their pensions were a ‘sacred trust,’ but now he and other politicians are attempting to break the promises made to our members. ? Stop corruption in the pension system. Fund our pensions.” ? full-page ad in the Press of Atlantic City Feb. 28, 2010, paid for by the N.J. State Policemen?s Benevolent Association and the New Jersey State Firemen?s Mutual Benevolent Association.
“Let’s protect our schools, our teachers, and other school employees from unwarranted attacks by the very politicians who caused our problems in the first place.? ? full-page ad in the Press of Atlantic City Feb. 28, 2010, paid for by the N.J. Education Association.
NJEA-PAC (Political action committee for the state teacher?s union) was successful in legislative races with unofficial results showing 72 of 74 endorsed candidates as winners. Candidates endorsed by NJEA-PAC include Democrats Nelson Albano and Matthew Milam in the 1st Legislative District and Republicans John Amodeo and Vincent J. Polistina in the 2nd.” ? NJEA Reporter, December 2009.
Bloomberg.com reported last month that New Jersey?s government employee pension funds, which pay out $6.1 billion each year, dropped from $83 billion in 2008 to $66 billion in 2009. At the same time, obligations to pay government pensions increased from $126 billion to $135 billion.
Like Bernie Madoff?s Ponzi scheme, the state pension funds pay retirees with new money taken from younger workers, since today?s retirees used up their contributions years ago.
Roughly 700,000 working and retired state, local and public school employees are entitled to pensions from these funds. Simple arithmetic shows an average of $94,000 set aside for each one.
A private 401k with $94,000 would pay about $6,400 a year, or $534 a month, for 15 years to someone who retires at age 65. But many public employees are “entitled” to retire in their 50s, and retire on more than half of the highest salary they made when they were working ? plus free lifetime health benefits!
Since there is no money in the system to pay for that, public employee unions are lobbying for a new constitutional amendment that will force 20 percent statewide tax hikes to fund these pensions. But who can afford the high taxes we already have? What new business ? like the Morgan Stanley casino ? says it can succeed without big tax breaks and other help from the government?
If New Jersey taxpayers can?t afford to put new money into the pension system, the only solution is to cut pension benefits ? and do it now. But not across the board. The lowest-paid employees who worked full time picking up garbage for cities and emptying bedpans in state hospitals, etc. deserve 100 percent. Politicians like former acting Governor Richard Codey’s brother and ex-state Sen. Nick Asselta, who juiced up their pensions with high-paid political jobs just before they retired, should get less than 10 cents on the dollar. Everyone else would get half to two-thirds of what they were promised.
This might cause hardship to many. But many government employees are young, in good health and working other full-time jobs. Many got much higher pensions than they deserved because they had clout ? in politics or with their unions. Why should they get far more than they ever paid in, while current employees younger than 50 will get almost nothing from all their years of contributions when they retire?
Promises should be kept, but the law has certain exceptions. The doctrine of ?unclean hands? applies to public employee unions who used their enormous money and organization to elect and re-elect politicians who promised them big pensions in the future, but who delayed raising the taxes to pay for them until they were safely out of office and collecting government pensions themselves.
There are other good legal arguments. Article VIII of the New Jersey Constitution clearly states that future voters are not legally responsible for any debts or obligations incurred by previous politicians ? unless those debts or obligations are approved in a statewide public vote. Voters never approved this massive unfunded pension scam.
In bankruptcy court, pension obligations, like other debts, can be reduced or eliminated when the debtor is unable to pay. The city of Vallejo, Calif., is doing that now.
Finally, there is the legal doctrine that citizens cannot be forced to pay the “odious debt” of a previous regime, if that money did not benefit those citizens, but was used only to enrich previous rulers and keep them in power. The Iraqi people used this doctrine to wipe out most debts of their ex-dictator, Saddam Hussein.
Somers Point attorney Seth Grossman appears live on WVLT-92.1FM heard throughout South Jersey 8-9 a.m. every Saturday. For information see www.libertyandprosperity.org, email firstname.lastname@example.org or call (609) 927-7333. Breakfast discussions are 9:30-10:30 a.m. every Saturday at the Athena Diner, 1515 New Road, Northfield.