The biggest problem facing N.J. … and why it still isn’t talked about enough

Top panelists bring pension/benefit reform issue to light, but will any action be taken?

By Tom Bergeron
West Long Branch | Oct 1, 2018 at 6:45 am

During his 30-year run in the New Jersey Legislature, Joe Kyrillos earned a reputation as a straight shooter — and someone who was respected on both sides of the aisle.

So, it wasn’t surprising that Kyrillos — in his first public event as the public servant-in-residence at Monmouth University — would describe the state’s pension and health care benefits problem in straightforward terms.

“At its core, this is not about philosophy, it’s not about ideology — it’s a math problem,” he said to an audience of more than 100 last Friday.

Kyrillos was moderating an all-star panel on what should be the most important issue in the state. Not just to legislators and business owners — but taxpayers.

Let’s be clear. This is a big issue. By most estimates, the state is $115 billion behind in its pension obligations. On top of that, the “Cadillac” health benefits plan state workers get from the government — which means it is paid for by taxpayers — is quickly bankrupting the state.

At least that was the feeling of the panel made up of Senate President Steve Sweeney (D-West Deptford), Richard Keevey, Gordon MacInnes, Tom Byrne and Peter Reinhart.

To be clear, the state is in this mess because governors (of both parties) have avoided making full pension payments for more than two decades. But that fact doesn’t lessen the issue.

As Kyrillos pointed out, $7 billion of this year’s $37 billion budget went to pension and benefit costs. That number is estimated to grow to $12 billion in five years (which will be 25 percent of all revenue that comes in) if nothing is done.

“The future of New Jersey is bleak,” Keevey said.

The panelists had plenty of good remarks during the more than two-hour event. Sweeney’s plea to taxpayers to make this a big issue is chronicled here.

The following are a number of other interesting quotes from the event. They have been edited for clarity.

Joe Kyrillos, former assemblyman and state senator

  • “We have really overly generous health insurance coverage — for myself included, as a retired state senator. We’ve got better coverage than employees at Apple and Johnson & Johnson get.”
  • “Employee unions should want some kind of reform, because no benefit changes now could lead, eventually, to bankruptcy and no pension future at all. The majority of taxpayers will want it for obvious reasons. And the business community, people looking to expand jobs, will see an improved economy when the cost of doing business in New Jersey is lowered.”

Steve Sweeney, state Senate president

  • “We can point fingers and blame, or we can try to fix it.”
  • “I can tell you right now, I would love to sit down with public sector unions in New Jersey and negotiate with them. I would love to do, I’m open to do it. I’d love to have the conversation. What I hear is, ‘You’re not our boss, the governor is.’ Really? I’m the one who funds the contracts that he approves, so I get a say, too.”

Richard Keevey, former budget director under two governors

  • “Under any conservative projection of revenues and speeding, in the next four years we’re going to be looking at anywhere between $3.2 billion and $4 billion of shortfalls between projected revenues and projected appropriations under current activities.”
  • “Does (adjusting benefits) solve the problem? It addresses it and takes the curve down. But in my judgment, we’re going to still need more revenue. If you’re sitting out there thinking, ‘If we do all these things, we’ll have the problem solved and we’ll have a nice balanced budget,’ I have bad news for you today. I don’t think so. I think we’re still going to need additional funds.”

Gordon MacInnes, head of New Jersey Policy Perspective

  • “If you try to define the problem, you can’t do it on this year’s budget. And you can’t do it on next year’s budget. Twenty-five years ago, New Jersey was one of nine states that enjoyed a ‘AAA’ credit rating from the three major agencies. Today, we’re in the basement. And thank God for Illinois. We’re only 49th.”
  • “It’s worth examining how we get into the hole. It is based entirely on governors and legislative leaders of both political parties over a 25-year period refusing to do what had been done prior to (1994). And they did not want to take responsibility for maintaining the standard that made us a ‘AAA’ state.”

Tom Byrne, former head of the state’s investment council

  • “Part of the problem with this whole thing is that this a difficult issue to bring to life. Sen. Sweeney said that, every June, we sit down, we have a battle and we solve a billion-dollar problem. It’s not easy, but it does get done. How do you really get your arms around the order of magnitude between a billion-dollar problem and a problem that is likely over $100 billion? That’s not the kind of problem that can be solved overnight or in a long weekend.”
  • “When Gov. (Christie) Whitman ran and promised to cut the income tax by 30 percent, there was really no plan to play for that. That’s kind of what started this. And, frankly, in my view, a lot of her successors were like, ‘Well, she got away with that; I will, too. I’ll fund the immediate needs and we’ll worry about this sometime later.’”
  • “If you want to become a public employee, you’re signing up for a plan that is shaky to say the least. One of my concerns for the state, obviously is making sure we don’t screw existing state employees, but also that we want to make sure we can attract good people into the workforce moving forward.”

Peter Reinhart, director of the Kislak Real Estate Institute at Monmouth

  • “Everybody has talked about the $115 billion number (the amount the state is behind in pension payments). That’s a lot. Let me break it down for you. That’s $16,772 per resident of the state of New Jersey. If you’re a family of four, that’s $65,000 you’re obligated to pay, just to pay for pension and health care benefits to public employees.”
  • “If the state were a private business, how would they go about (solving the problem)? Well, they wouldn’t be raising costs (taxes) in an area where they are losing market share (employers). In a way, it’s a market share issue — whether business are going to come to New Jersey or go elsewhere. And yet, that’s the very issue that confronts are leadership.”
  • “It takes about 90 joint-filing taxpayers earning only $50,000 each to offset the lost tax revenue of just one taxpayer earning $1 million who moves out of the state. It takes 111,000 people to make up for one $1 billion filing. … To show another hemorrhage of our high earners. Of all the taxpayers making over $200,000 in 1997, 40 percent were no longer filing tax returns in the state of New Jersey in 2015. These are hard facts. These are numbers.”

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