Connect with us

Hi, what are you looking for?

Contributors

New Jersey Millennials Need a Pension Reform Debate Grounded in Reality

Screen Shot 2017 09 14 At 10.16.06 AM

Unfunded public-pension liabilities cast a shadow over dozens of states, counties, and cities across the country. Nationwide, state public pensions are now underfunded by nearly $5.6 trillion. Almost nowhere, though, is that shadow darker and more ominous than in New Jersey.

For a generation that considers financial independence as our No. 1 goal, millennials view the pension crisis as an almost existential threat.

And while at first glance it might seem unusual for young adults to be worried about pensions, we are the ones who will be on the hook to pay for the over-promises and bad planning of the past.

For starters, it’s clear that New Jersey’s antiquated public-pension system is not suited for the modern workforce. State employees, as those in the private sector, have been doing for years, need to begin moving into defined-contribution plans — 401(k)-style plans that empower workers to manage their own retirement money. For today’s young private-sector workers, this is a no-brainer. The days of old-style company pensions and defined-benefit plans are over. Government needs to catch up and stop leaving both workers and taxpayers at risk.

It would also help if government were more efficient and less wasteful.

The Garden State’s overall fiscal outlook is pretty terrible. The Mercatus Center, a think tank associated with George Mason University, recently ranked New Jersey’s finances 50th out of 50. The watchdog group Truth in Accounting gave New Jersey an F in its most recent financial state of the states report.

But the public-pension problem stands out even amid the larger disaster and bodes especially ill for younger residents just getting started up the economic ladder.

This is a problem that has been decades in the making. Too many promises were made that couldn’t be kept, and too many overly optimistic investing scenarios were allowed to obscure reality. And then there were the conscious decisions by politicians of both parties to simply leave the problem — and the solution — to the next generation. Well, the piper is coming to be paid, and the tune he’s playing will be costly.  

New Jersey has $235 billion in scheduled pension payments it has no way to pay for, leaving every resident on the hook for about $26,000 in unfunded liabilities.

The first public pension fund is likely to go broke in 2021. That is, in as little time as it takes this year’s high school freshmen to be ready to graduate, the Public Employees Retirement System will be out of money.

If we don’t get started today fixing this problem, we will all face higher taxes sooner rather than later. We’ll also see cuts in funding for essential government services such as roads, police and the schools from which those freshmen hope to graduate.

The prospects for improvement are mixed, at best, in the wake of 11 credit-rating agency downgrades in eight years.

The latest state spending plan includes $2.5 billion for the pension fund — about half of what actuaries say is needed to start catching up.

The good news is that bond rating agencies don’t think it’s going to get any worse right away, so the state’s credit rating isn’t in immediate danger of falling any further. The bad news is, those agencies are not impressed by the infusion of $1 billion a year of lottery funds into the pension system, and S&P has warned that continuing the funding shortfalls and refusing to reform the system mean things will eventually get worse.

Working with the Safeguard New Jersey’s Future Project, the Generation Opportunity Institute takes this crisis seriously, and we are raising awareness among state residents — and proposing solutions.

What we need most, though, is a discussion grounded in economic reality that brings all the parties together to come up with solutions that work for taxpayers, retirees and those of us who will be footing the bill for the next several decades.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

twenty − 10 =

Most Popular

Advertisement

You May Also Like

Opinion

We’ve all heard of the 50/30/20 rule when it comes to budgeting our expenses. It is one of the most popular ways to manage...

News

A photonic quantum computer chip did nine thousand years’ worth of work in 36 microseconds. Now that’s fast. And I can’t even finish my...

Health

Since the pandemic started over a year ago, signs of burnout in employees have increased exponentially. A little over two-thirds of employees are suffering...

Entertainment

Kanye West is releasing Donda 2 exclusively on the Stem Player, a device created by Kanye in collaboration with Kano Computing. The device includes...

Copyright © 2020-2022 Bold TV. Bold TV is owned and operated by the Foundation for American Content and Entertainment, a 501(c)(3) non-profit organization.