New Jersey's pension reforms could provide a template for more changes in Ky.
08/20/2012 08:36 AM
Like Kentucky, New Jersey had been mentioned among the bottom states when it came to the financial health of its public employee pension systems.
New Jersey Democratic state Senate President Steve Sweeney, a union leader for the ironworkers, said lawmakers, state workers and retirees and high-paid appointees and elected officials all had to make concessions in order to stave off a financial collapse. The New Jersey retirement systems was facing a $58 billion unfunded liability and a rapidly draining pension fund.
“It was a combination of things in New Jersey: Elected officials more concerned about getting re-elected, giving the workforce many kinds of improvements without any money to go with it and not funding the pensions — not putting the money in,” he said (0:20). And on top of it, the biggest problem is in the last decade our investments didn’t make what needed to be made.”
One of the main reforms was setting out a path to put in the full funding the state needed to pay each year after shorting that amount for a decade. That’s similar to Kentucky’s woes. But while Kentucky is on a path to reach that full annual payment in 15 years (from 2010 to 2025), New Jersey is set to do that in seven.
“When I read about Kentucky doing it in 15 … I’m concerned if you’re stretching it out that far, there’s a real possibility your pension is going to go bankrupt,” he said. (4:50)
Kentucky’s Retirement System shelled out $1.5 billion in payments while bringing in less than $1 billion in assets over a three quarter payment.
“We said at 80 percent, you can then … restore the COLAs,” he said (0:30 of second video).
For instance, the New Jersey police and firefighters and the county employees’ systems could reach that 80 percent level and have those cost of living adjustments kick back in within the next few years, he said.
Other reforms include:
- Shifting new elected officials (including legislators) high-ranking political appointees and part time government workers to a 401(k)-style program. “There were too many ways to game the system,” he said (2:45 of second video).
- Capping pension calculations at salaries of $100,000.
- Increasing the employee contribution rate for health insurance, which had been free for most New Jersey workers and retirees.
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