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Published: Sunday, August 15, 2010
Star-Ledger Editorial Board

New Jersey, it seems, has two choices: It can start paying its astronomical pension bills or keep ignoring them and hope for an astronomical intervention — that a meteor hits the state soon, taking out all retired and soon-to-retire state workers.

Since the odds of that happening are (thankfully) small, it’s time to find down-to-earth solutions to the gap between what we owe our public employees and what we’ve set aside to pay those obligations.

Gov. Chris Christie has said he will push for more benefit reforms this fall. Members of the Assembly Budget Committee responded that reforms must be tied to payments: No more benefit cuts unless the state puts hundreds of millions into the starving funds in a good-faith gesture. The committee chairman, Assemblyman Louis Greenwald (D-Camden), said it’s time to start paying up. He’s right.

But it’s not an either-or proposition. New Jersey must do both. And more.

While scraping together money to put into the funds, and adjusting benefits for those yet to enter the system, the state also must bring unions and actuaries to the bargaining table to work out a fair solution for those already in the system. Because the sad fact is, promises were made that can’t be kept. Taxpayers need give-backs.

The alternatives are ugly: Raise taxes immediately and steeply. Slash spending even more. Or allow the funds to go bankrupt — a terrible blow to workers and retirees and to the state’s economy and credibility. Everyone loses in those scenarios.

In March, pensions were prohibited for part-timers, and benefits were slashed for new hires. The new laws also rolled back, but only for new hires, an irresponsible 9 percent pension increase granted in 2001. That hike — the single-most damaging blow to the system — should be rescinded for all workers as soon as possible. But much more is needed, and urgently, because researchers say the funds could go bankrupt by 2013.

Like other governors before him, Christie has exacerbated the problem. During the campaign, he promised to make state contributions into the pension fund, then balanced his budget by forgoing a $3.1 billion payment. Now, he says the state might not have the money to make even a half-billion-dollar downpayment on the state’s obligation next year.

Is it any wonder the workers feel betrayed? For years, while they made pension contributions — ranging from 5.5 percent of salary for state workers to 8.5 percent for police and firefighters — politicians spent the state’s share on other things, hoping the stock market would save them. It didn’t.

The result: As of last year, the pension funds were underfunded by $46 billion; some analysts say the gap is much larger. The pension promises of yesterday can’t be kept with the paychecks of taxpayers today.

We’re not endorsing unilaterally cutting benefits. Taxpayers and public employees must share the pain, and that requires give-and-take. But let’s be clear: Workers, even those already in the system, will have to contribute more, accept less and wait longer before collecting.

“Pensions are numbers,” state Senate President Stephen Sweeney says. “Let’s find out what the numbers are. We can fix this.”

Can we? The doomsayers insist the pension fund obligations are so enormous, they could never be met. It’s time for an adult conversation: How much will it cost over, say, the next 20 years to get New Jersey on the road to pension health? What’s a rational expectation for a return on that money? What benefits are reasonable? Which aren’t? How much should workers pay into the fund? How much should taxpayers?

Both sides have a beef. The workers say the state and municipalities should be making their payments. But taxpayers weren’t at the bargaining table, and the clueless politicians representing them never computed the stratospheric cost of irresponsible promises.

Repairing the system will be long, painful and costly. Retirees will insist the state keep its vows. Workers will say it’s too late for them to adjust their retirement plans. But without an affordable solution, taxpayers, most of whom don’t have pensions, will revolt. The unions realize this. They already rejected the idea of a referendum to force the state to fulfill its obligations each year, because they feared voters would nix it.

Workers deserve their pensions. The question is: How much is fair for both sides?
Yes, it’s time to start paying up. But it’s also time for serious negotiations.

Because the meteor isn’t coming.