The Pension Problem
New Jersey has a pension problem. That’s the fact. New Jersey’s pension system is one of the nation’s most underfunded.The state calculates our unfunded liability at $49 billion. That’s a pretty penny, but it is nothing compared to astronomical outside accounting estimates, which range from $135 billion to $180 billion. Not only is the pension system ludicrously underfunded, but the state is also fudging the numbers. Since no one will step up and take the responsibility, Trenton has been unable to even begin solving the problem.
$180 billion. Think about that. Hard to comprehend, right. 9 million people live in New Jersey. The average New Jerseyan owes $20,000 to the pension system.
We have to wake up. There is a real chance that the federal government (that’s right, the GOP Congress and the Breitbart White House) will attempt to privatize our pension system, returning pennies on the dollar to the pension holders and filling the Big Bank coffers.
Mark’s Solution - A Pragmatic Approach
First and foremost, as the next governor of New Jersey I will ensure that under no circumstances will our pension system be privatized nor federalized. With Trump and his Goldman Sachs comrades calling the shots, that would be catastrophic for New Jersey’s hard-working teachers, policemen, firefighters, and everyone else covered by our pension system.
New Jersey needs to stand by its word for those already in work. As governor, my administration will forge a path towards a budget reconciliation and a truly fully funded pension system. No more half measures. My short-term plan is to ensure that New Jersey honors all contracts that workers have signed with the state to the degree possible.
But we must be realistic - our unfunded pension liabilities are anywhere between 2 to 6 times the size of our state budget. My administration would bring all the participants in the pension system: unions, workers, municipalities, and everyone else to the table together. We must have compromise on this issue. Before we address our pension shortfall, New Jersey cannot move forwards financially, to truly address the structural issues we have in this state.
Our approach to a sustainable pension system is tightly interwoven with our proposal for a universal single-payer healthcare system, New Jersey Cares (http://www.markzinna2017.com/healthcare).
A large portion of the unfunded pension liabilities are linked to future retirees’ healthcare benefits. Implementing New Jersey Cares, our proposal for a modern single-payer healthcare system, would address a significant portion of the current unfunded pension liabilities, but more is required to ensure an equitable and funded pension system:
Implement quarterly state pension payments and lock in funding with constitutional amendment: We need to safeguard current retirees and employees and make sure that pension payments are made on time. This can only be done through a constitutional amendment; ensuring pension payments are not diverted to fund other state expenses. Politicians and bureaucrats must not get away with earmarking pension payments toward personal projects.
Drive down management costs: Our pension is managed by Wall Street hedge funds charging the state ludicrous fees for little gains. We will divest from hedge funds, actively managed funds, and private equity and ensure that the majority of the pension is invested in passively managed funds. This will reduce expenses substantially: actively managed funds routinely charge 1 - 2% management fees, in contrast to 0.05% - 0.2% for large-scale passive funds. Wall Street should not get rich off the money of hard-working New Jerseyans who deserve secure retirements.
Current pensioners retain all benefits: No changes will be made to current retirees’ pension plans.
Current employees, who have not yet retired, retain all benefits: All contracts with the state will be honored.
New employees will enter the workforce under a new pension plan: Move from a defined pension system to a ‘pay-as-you-go’ system. Individuals under the new pension system will pay into their pension, as is done today. . The state will then match a portion of the payments made, determined by open and reasonable negotiations between the state and the workers’ unions. Retirement benefits will be dependent on the amount put into the pension, rather than years of service provided. This will increase safety for the individual retiree—they get to understand and manage their own pension—and is easily understood as it is equivalent to the 401K system.
Impose a hard cap on yearly pension payments: For new, not yet hired employees, a cap will be imposed at 1.5 times the average household income in New Jersey. This would only limit pensions above $110,000 for 2016. Doing this will tie pension growth together with income growth in New Jersey.
Remove ‘Double-dipping’: For new, not yet hired employees, remove the opportunity for multiple state pensions. If this is going to work, people cannot game the system at the expense of everyone else.
Align incentives of pension management and pension holders: Move all liabilities, assets, and risks related to the pension system to employee organizations, such that those making the important decisions are the same as those receiving the benefits. That way, it is less likely pension dollars will be controlled by predatory politicians looking out for themselves and their investors rather than New Jersey pension holders.
Ultimately, we must all take a stand, together, and say enough is enough: corrupt politicians and their cronies should not be allowed to divert funds from the pension fund.
Anyone who tells you they can solve the pension crisis without making hard choices is not telling you the truth. Our state has squandered its residents hard-earned money for too long, and with our plan we will begin addressing this, together, with you and everyone else in New Jersey having a seat at the table.