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A Real Budget Cutter; New Gov of New Jersey
Topic Started: Feb 11 2010, 01:52 PM (558 Views)
kbp


Quote:
 
Full Text of Gov. Chris Christie's speech on fiscal 'state of emergency'

snip

The state cannot this year spend another $100 million contributing to a pension system that is desperately in need of reform. I am encouraged by the bi-partisan bills filed in the Senate this week to begin pension and benefit reform. I commend President Sweeney and Senator Kean for leading the way to begin this long overdue set of reforms. I am sure our Assembly colleagues will follow suit with the same kind of bi-partisan effort.

These bills must just mark the beginning, not the end, of our conversation and actions on pension and benefit reform. Because make no mistake about it, pensions and benefits are the major driver of our spending increases at all levels of government—state, county, municipal and school board. Also, don’t believe our citizens don’t know it and demand, finally, from their government real action and meaningful reform. The special interests have already begun to scream their favorite word, which, coincidentally, is my nine year old son’s favorite word when we are making him do something he knows is right but does not want to do—“unfair.”

Let’s tell our citizens the truth—today—right now—about what failing to do strong reforms costs them.

One state retiree, 49 years old, paid, over the course of his entire career, a total of $124,000 towards his retirement pension and health benefits. What will we pay him? $3.3 million in pension payments over his life and nearly $500,000 for health care benefits -- a total of $3.8m on a $120,000 investment. Is that fair?

A retired teacher paid $62,000 towards her pension and nothing, yes nothing, for full family medical, dental and vision coverage over her entire career. What will we pay her? $1.4 million in pension benefits and another $215,000 in health care benefit premiums over her lifetime. Is it “fair” for all of us and our children to have to pay for this excess?

The total unfunded pension and medical benefit costs are $90 billion. We would have to pay $7 billion per year to make them current. We don’t have that money—you know it and I know it. What has been done to our citizens by offering a pension system we cannot afford and health benefits that are 41% more expensive than the average fortune 500 company’s costs is the truly unfair part of this equation.

The only principled path in light of these mountainous challenges is this—take these reform bills, make them even stronger and put them on my desk before I return here on March sixteenth for my budget address. And on this you have my pledge—unlike in the past, when you stood up and did what was right, this governor will not pull the rug out from underneath you—I will sign strong reform bills.

snip


It's a very long speech, well worth reading.

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retiredLEO
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Kbp, thanks for posting, I am currently collecting my retirement from that system. The police and fire system. The problem is that when Christie Whitman was governor, she borrowed from the pension system, to balance the state budget, kind of like what the feds do to social security.

Before Gov. Whitman started using the pension money, it was one of the wealthiest in the country. When Whitman and the legislors saw that pile of money they couldn't resist borrowing it and then spending it.
Edited by retiredLEO, Feb 11 2010, 02:25 PM.
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Baldo
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One state retiree, 49 years old, paid, over the course of his entire career, a total of $124,000 towards his retirement pension and health benefits. What will we pay him? $3.3 million in pension payments over his life and nearly $500,000 for health care benefits -- a total of $3.8m on a $120,000 investment. Is that fair?

A retired teacher paid $62,000 towards her pension and nothing, yes nothing, for full family medical, dental and vision coverage over her entire career. What will we pay her? $1.4 million in pension benefits and another $215,000 in health care benefit premiums over her lifetime. Is it “fair” for all of us and our children to have to pay for this excess?

The total unfunded pension and medical benefit costs are $90 billion. We would have to pay $7 billion per year to make them current. We don’t have that money—you know it and I know it. What has been done to our citizens by offering a pension system we cannot afford and health benefits that are 41% more expensive than the average fortune 500 company’s costs is the truly unfair part of this equation.


Exactly!

A different way to look at it is this way. If we won a lottery for a million dollars we would be overjoyed, but that is what is happening in California for tens of thousands of government employees. Except it is much more than a million dollars.

In California our unfunded pension & medical costs are over 100 billion for just local government.
Edited by Baldo, Feb 11 2010, 02:29 PM.
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LTC8K6
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Assistant to The Devil Himself
That's unbelievable...

Why wasn't it stopped sooner?

Will there be a fight over these cuts?
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retiredLEO
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I believe that in NJ the Polie and Fire Pension retirement system is seperate from the Public Employees retirement system. I know public employees pay into social security, we didn't pay into that. Our contribution was 8.5% plus an equal amount from the employer. Public employees pay about 3.5%. I don't think Whitman grabbed any Police and Fire money. Add to this the fact that most of the money, in our system is invested, that is why when stocks drop, it also hurts the states.

I don't think this will affect me, but if may affect current employees.
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kbp

A common problem in many retirement systems (besides many that are borrowed from!) is the cash flow numbers are based on an constant increase in the growth of the number that are contributing.

The alternatives if that does not happen is a growth in the contributions made or reduction in the level paid out.

To me it resembles taxes.
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DANinZA
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kbp
Feb 11 2010, 03:23 PM
A common problem in many retirement systems (besides many that are borrowed from!) is the cash flow numbers are based on an constant increase in the growth of the number that are contributing.

The alternatives if that does not happen is a growth in the contributions made or reduction in the level paid out.

To me it resembles taxes.
Ponzi Schemes suffer from the same problem! - Ask Bernie Madoff - he knows all about them
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Baldo
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I wish the Governor well. No one has ever taken on the pension problem straight up. We simply cannot afford these high priced public pensions. Where did we ever get the idea one is entitled to almost full pay and medical for life at retirement?

I understand not every state or retiree is this bad, but California is.
Edited by Baldo, Feb 12 2010, 01:04 AM.
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Carolyn says
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Baldo
Feb 11 2010, 02:28 PM
One state retiree, 49 years old, paid, over the course of his entire career, a total of $124,000 towards his retirement pension and health benefits. What will we pay him? $3.3 million in pension payments over his life and nearly $500,000 for health care benefits -- a total of $3.8m on a $120,000 investment. Is that fair?

A retired teacher paid $62,000 towards her pension and nothing, yes nothing, for full family medical, dental and vision coverage over her entire career. What will we pay her? $1.4 million in pension benefits and another $215,000 in health care benefit premiums over her lifetime. Is it “fair” for all of us and our children to have to pay for this excess?

The total unfunded pension and medical benefit costs are $90 billion. We would have to pay $7 billion per year to make them current. We don’t have that money—you know it and I know it. What has been done to our citizens by offering a pension system we cannot afford and health benefits that are 41% more expensive than the average fortune 500 company’s costs is the truly unfair part of this equation.


Exactly!

A different way to look at it is this way. If we won a lottery for a million dollars we would be overjoyed, but that is what is happening in California for tens of thousands of government employees. Except it is much more than a million dollars.

In California our unfunded pension & medical costs are over 100 billion for just local government.

Sigh - yesterday morning when I took the Examiner ('cause it's free and it has crosswords), there was an article in there that the City is facing billions more in costs for upcoming pensions for city government workers. Billions, not millions. Now this is a city, not the state. The auditor warns that the earlier cost of 'only' $1 billion over the next 20 years was unrealistic; the real cost is nearing $3 billion - with warnings it could go higher than that. My God, this is catastrophic.

It's a repeating mantra. NO one has ever sat down with a calculator and added up the future costs. Oh, they've added it up for the next 3-5 years but no further than that. Not for the next 10-20 years. In addition, they haven't added up the additional numbers of retirees.

Lord, I'm leaving San Francisco as soon as I possibly can. I sell my book and I swear, it's a small building in the woods up north with chickens, vegetable garden and, at twilight, a shotgun resting on my lap to ward off roving bands of unemployed mortgage brokers.

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Carolyn says
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DANinZA
Feb 12 2010, 12:37 AM
kbp
Feb 11 2010, 03:23 PM
A common problem in many retirement systems (besides many that are borrowed from!) is the cash flow numbers are based on an constant increase in the growth of the number that are contributing.

The alternatives if that does not happen is a growth in the contributions made or reduction in the level paid out.

To me it resembles taxes.
Ponzi Schemes suffer from the same problem! - Ask Bernie Madoff - he knows all about them

BTW - Dan, I wish to go officially on record in saying that I LOVE your pissed off kitty! I assume, of course, that the picture is photo shopped? If not, did you slip some serious Valium into its milk to make it sit still long enough to snap the pic?




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Carolyn says
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Baldo
Feb 12 2010, 01:03 AM
I wish the Governor well. No one has ever taken on the pension problem straight up. We simply cannot afford these high priced public pensions. Where did we ever get the idea one is entitled to almost full pay and medical for life at retirement?

I understand not every state or retiree is this bad, but California is.

Okay - here's a silly question. Is it possible to legally refuse to pay those pensions? Or at least can you renegotiate them downwards?



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DANinZA
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Carolyn says
Feb 12 2010, 01:13 AM
DANinZA
Feb 12 2010, 12:37 AM
kbp
Feb 11 2010, 03:23 PM
A common problem in many retirement systems (besides many that are borrowed from!) is the cash flow numbers are based on an constant increase in the growth of the number that are contributing.

The alternatives if that does not happen is a growth in the contributions made or reduction in the level paid out.

To me it resembles taxes.
Ponzi Schemes suffer from the same problem! - Ask Bernie Madoff - he knows all about them

BTW - Dan, I wish to go officially on record in saying that I LOVE your pissed off kitty! I assume, of course, that the picture is photo shopped? If not, did you slip some serious Valium into its milk to make it sit still long enough to snap the pic?




I am not guilty of animal cruelty, and no animal was harmed or injured while being converted to an avatar! I saw the photo on the web some years ago, and saved it. I felt I needed an avatar with head ear and neck protection - a safety precaution considering all the sharp edged three dollar words being tossed around here.
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Baldo
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Carolyn says
Feb 12 2010, 01:14 AM
Baldo
Feb 12 2010, 01:03 AM
I wish the Governor well. No one has ever taken on the pension problem straight up. We simply cannot afford these high priced public pensions. Where did we ever get the idea one is entitled to almost full pay and medical for life at retirement?

I understand not every state or retiree is this bad, but California is.

Okay - here's a silly question. Is it possible to legally refuse to pay those pensions? Or at least can you renegotiate them downwards?



That's a loaded question but it goes directly to the heart of a serious political and financial question. Certainly a contract is a contract, but what if there isn't enough money?

For cities and counties there is a remedy, bankruptcy. However Judges are political creatures and are probably loathed to void those contracts.

For the state it is different as they can't really declared bankruptcy. However what if they don't fund the pension set a side?

I guess it depends on how bad it gets. I don't think the average citizen would stand for those pay-outs if states, counties, and cities are in desperate shape and they try to raise taxes to pay those pension liabilities. What do you cut in order to pay retirees?

It will all come down to what is fair.
Edited by Baldo, Feb 12 2010, 01:31 AM.
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sdsgo


The federal government changed the rules back in 1987:

FERS Retirement

Congress created the Federal Employees Retirement System (FERS) in 1986, and it became effective on January 1, 1987. Since that time, new Federal civilian employees who have retirement coverage are covered by FERS.

FERS is a retirement plan that provides benefits from three different sources: a Basic Benefit Plan, Social Security, and the Thrift Savings Plan (TSP). Two of the three parts of FERS (Social Security and the TSP) can go with you to your next job if you leave the Federal Government before retirement. The Basic Benefit and Social Security parts of FERS require you to pay your share each pay period. Your agency withholds the cost of the Basic Benefit and Social Security from your pay as payroll deductions. Your agency pays its part too. Then, after you retire, you receive annuity payments each month for the rest of your life.

The TSP part of FERS is an account that your agency automatically sets up for you. Each pay period your agency deposits into your account amount equal to 1% of the basic pay you earn for the pay period. You can also make your own contributions to your TSP account and your agency will also make a matching contribution. These contributions are tax-deferred. The Thrift Savings Plan is administered by the Federal Retirement Thrift Investment Board.

<snip>

http://opm.gov/retire/pre/fers/index.asp

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sdsgo

Baldo
Feb 12 2010, 01:30 AM
Carolyn says
Feb 12 2010, 01:14 AM
Baldo
Feb 12 2010, 01:03 AM
I wish the Governor well. No one has ever taken on the pension problem straight up. We simply cannot afford these high priced public pensions. Where did we ever get the idea one is entitled to almost full pay and medical for life at retirement?

I understand not every state or retiree is this bad, but California is.

Okay - here's a silly question. Is it possible to legally refuse to pay those pensions? Or at least can you renegotiate them downwards?



That's a loaded question but it goes directly to the heart of a serious political and financial question. Certainly a contract is a contract, but what if there isn't enough money?

For cities and counties there is a remedy, bankruptcy. However Judges are political creatures and are probably loathed to void those contracts.

For the state it is different as they can't really declared bankruptcy. However what if they don't fund the pension set a side?

I guess it depends on how bad it gets. I don't think the average citizen would stand for those pay-outs if states, counties, and cities are in desperate shape and they try to raise taxes to pay those pension liabilities. What do you cut in order to pay retirees?

It will all come down to what is fair.
Generally, the government agency can't directly reduce current pensions, but there is talk about cutting (but not eliminating) annual cost of living adjustments (COLA) for existing retirees to reduce outlays gradually over time. For instance, if inflation runs at 6%, then reduce the COLA to 4%.

As you can see, inflation provides politicians political cover to reduce retirement costs.
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