Pension 'Sea Change' in New Jersey
In what The Wall Street Journal called a political "sea change," New Jersey Governor Chris Christie this week signed legislation scaling back retirement benefits for government workers in the traditionally union-friendly state. The move comes as many states face stark gaps between what they have promised their employees and what they have on hand to fulfill those promises.
While states are constitutionally barred from slashing existing benefits for current retirees, New Jersey's new law reduces benefits for many future government employees, forcing all of them to contribute — or contribute more- to their retirement. According to The Record of Bergen County , part-time workers will no longer be eligible for the state pension system and pensions for new hires will be less generous. Under another provision, public employees must pay 1.5 percent of their salaries toward health care, another huge cost for the state.
New Jersey faces a $46 billion pension shortfall, with about 800,000 people in its retirement system , The Wall Street Journal reported . The paper noted that Christie, a Republican, already has brought major changes to Trenton by tacking the pension problem.
The legislation he signed on Monday (March 22), The Journal wrote, "represents a sea change in New Jersey, where many politicians in the Democratically controlled statehouse who rely on union support typically have resisted any clampdown on benefits for government workers. Indeed, retirement benefits would often be enhanced by Democratic politicians during election years."
New Jersey is far from alone in its pension woes, as noted in a recent study by the Pew Center on the States , which found a $1 trillion gap between what states have promised their workers and the assets they have on hand. Other large states have been making grim pension headlines this week, too.
For the first time since 1997, Florida's pension system is running a deficit, the St. Petersburg Times reported . While Pew highlighted Florida as a national model and the state was one of the few to enter the current recession with a fully funded pension system, The Times warned that "like a tiny leak, this unfunded liability can grow into a gusher if not addressed quickly."
In Illinois — which, according to Pew, has the nation's worst pension-funding crisis — every man, woman and child is on the hook for more than $6,000 in unfunded retirement promises, according to a report this morning on National Public Radio . The public radio network has run an in-depth series this week examining states' unfunded pension obligations.