WHAT IS the best way to protect our pensioners and the state while solving the pension problem in a way that is fair to everyone?
Embedding mandated payments on a quarterly basis into the New Jersey state constitution is not the answer.
The state constitution is the framework and the expression of our principles of governance. The issue of pension payments does not rise to that level. The New Jersey state constitution should not be a warehouse for politically sensitive issues.
This pension issue is clearly a legislative issue and it should be resolved by our Legislature and our administration.
For any proposal to be considered for a constitutional amendment, proper analysis and vetting needs to be done.
For instance, what do we do when revenues for the state budget fall short of projections? What contingencies would we have in place to ensure that payments are made on time – payments that currently exceed $2 billion per year and will more than double beginning in 2018?
Some unattractive options would be for the state to institute huge tax increases, severely cut services or borrow more money.
Unquestionably, any of those options are undesirable and would have a profoundly negative impact on the state economy and everyone in New Jersey.
There is also the question of cash flow. I am not aware of any cash flow analysis that has been done to determine if making quarterly payments is a fiscally sound approach.
State revenues are received unevenly throughout the year. Will there be enough cash each quarter to make the mandated payments? If not, borrowing probably is the only option. Can we borrow after so many credit downgrades, and if so, at what cost?
We need to take a step back. We do not need to rush into a solution that has not been thoroughly thought through.
The idea of a constitutionally mandated payment to the pension fund was only raised recently and has been subject to only two legislative hearings. Contrast that to solutions proposed to fund the Transportation Trust Fund. Those solutions have been vetted for nearly three years with nearly a dozen legislative hearings.
We need to thoroughly examine and evaluate solutions to the problem that make fiscal sense for everyone, such as some of those proposed by the Healey-Byrne Commission that, since their introduction, have received limited attention.
The importance of this issue to many people, and to the future of our state, requires the process be done correctly.
Potential solutions need to be sourced, carefully examined and vetted by our lawmakers.
But as they do so, both Democrats and Republicans in Trenton need to understand that it no longer matters whose fault it is that funding for the state pension plan has become such a crisis.
The numbers are the numbers, and all that matters now is that we find solutions based on sound fiscal principles that won’t kick the problem farther down the road, impede our state’s economic recovery or cause pensioners to be treated unfairly.
Let’s solve this issue the right way, through our legislative process.
Also, let’s not forget that thoroughness is always an ingredient for success. Speed is not.
Tom Bracken is president and CEO of the New Jersey Chamber of Commerce.