Municipal employees shouldn't bear brunt of N.J.'s pension deficit
By Star-Ledger Guest Columnist
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on March 23, 2015 at 12:00 PM, updated March 23, 2015 at 12:01 PM
By J. Christian Bollwage
While municipal employers are living up to their commitment with nearly eighty percent of contributions made to the Public Employees Pension System (PERS) as well as the Police and Fire Retirement System (PFRS), Trenton has not. The result is $90 billion dollars in unfunded pensions and health benefit liabilities; mostly within the state employees' portion of the retirement system. The Pension and Health Benefit Study Committee has determined that change is needed, but freezing the municipal portion of the system in order to rectify the state's inability to live up to their obligations, is not the answer.
This proposed plan will leave existing public employees with nearly half the retirement benefit they were promised at the beginning of their careers and upon which financial decisions have been made throughout their lives. For an individual who started working at age eighteen for $30,000 per year and earning a two percent annual salary increase, their annual benefit at age 55 would be $42,286.83 under the current, unfrozen plan. This same individual is projected to receive $22,634.00 under the frozen and 401K-like plan that is being discussed. For many, planning for retirement begins when you start working. However, the practice of spending and saving throughout the years is determined as much by earning potential, job stability and the availability of disposable income as it is by the expectation that pre-existing retirement plans will be honored.
It is important to make the distinction that this is not a municipal pension issue, it is a state pension issue; and this inequitable sharing of the blame must stop. Municipalities have continued to fund their portion of the pension system and the state's fallback solution of making it someone else's problem can no longer be an option. It is unfair that the burden of fixing this problem has fallen again on the hardworking public employees who have dedicated their lives to serving their communities. Cities and towns have been doing what was agreed upon is fair and right for the fiscal health of their employees; they should not be the scapegoats, continually facing rule changes in the middle of the game.
The underfunded state portion of the pension system has been an ongoing problem; the question is how to proceed without penalizing municipalities and their employees? The Governor and Legislature created these issues and should be held accountable for their actions as well as inaction. Virtually merging state and local pension systems through cost sharing is not the answer and only weakens the entire system. It will leave workers enrolled in the current system with unanticipated, additional living costs upon retirement due to the relinquishment of pension responsibilities, which were established upon their initial employment. For many, enactment of this plan may result in the inability to retire.
Abuses of municipal employees collecting more than $100,000 in pension benefits upon retirement is always newsworthy; however it does not represent the majority. What about the thousands of municipal employees throughout the state making between $30,000 and $70,000 their whole career? What becomes their return on investment for a lifetime of delivering the services communities need? Who becomes their voice to ensure that quality of life in retirement can be maintained?
If the state cannot or is unwilling to deliver on these obligations, then a trustee should be chosen by the municipalities and assigned to appropriately manage their commitments. Through the formation of a committee, which would include mayors and representatives from local governments, a qualified, responsible and experienced individual would be selected to act as a trustee. This trustee would be charged with ensuring the proper administration and security of existing dollars as well as that equitable contributions and distribution of funds are made. Municipalities are not trying to balance their budgets on the backs of public employees and neither should anyone else. Local pension systems are not the rainy day fund that can be raided anytime something goes wrong. Municipalities and their employees deserve better and stand ready to rise to the occasion in order to make it happen.
J. Christian Bollwage is the mayor of the City of Elizabeth.