Will New Jersey Fund Pensions With Stealth Taxes? An update on asset transfer
New Jersey, the only state to have a worse pension funding status than Illinois (according to Pew’s 2020 compilation based on 2018 data), is quite happy with himself because, like the State announced in a recent press release,
State Treasurer Elizabeth Maher Muoio announced that the Treasury Department today launched the start of the new fiscal year by paying the entire state funded portion of the $ 6.9 pension contribution. Billion dollars forecast for fiscal year 2022 (fiscal year 2022). This is the first time in more than 25 years that New Jersey has made the full actuarially determined contribution to the pension fund, plus an additional contribution of $ 505 million, and also the first time in years that the State pays a lump sum payment, rather than quarterly payments.
And the President of the Senate, Stephen Sweeney, thinks he has a solution to reduce the burden of these retirement payments, in the form of the Retirement Infrastructure Collateralized Holdings Fund (yes, the “RICH Fund”), as proposed in the current legislation. review by the New Jersey Senate. , which he promotes in a comment to NJ Spotlight News. He writes,
âThis is why we have developed legislation to allow our state and local pension systems to add income generating assets such as water and wastewater treatment systems, high toll lanes (HOT), parking lots and real estate to provide new and diversified sources of income. for their investment portfolios.
“Senate Bill 3637, which could be considered by the Senate Budget and Appropriations Committee this week, would create the Retirement Infrastructure Collateralized Holdings Fund – RICH, for short – as an infrastructure trust fund to hold and manage the assets transferred to the public undertaking by state and local governments for the benefit of New Jersey’s public employee pension funds.
âThis would not only strengthen the pension system, but also give state and local governments powerful new tools to preserve public property, improve public management and maximize public benefits. . . .
âState and local governments have water supply systems, reservoirs, real estate and parking lots that could generate stable income for pension systems in the same way that the lottery system did. during the last years. “
But none of the assets listed, when public, are intended to be lucrative! People expect their water and wastewater treatment systems to operate at cost, provide clean water, and dispose of human waste in a hygienic manner, in order to protect public health. We expect our government officials to manage these systems as affordably as possible while keeping the systems in good shape, especially for the benefit of those most in need among us. Of course, private companies are gain market share in the United States, providing water for one in six Americans, according to The American Prospect. And while the rationale for privatization can potentially be strong – the inability of a municipality, especially a small one, to fund needed improvements, and the expectation that a large multinational can manage more effectively, generally – too often (as indicated in Philadelphia Applicant), cities see it simply as a quick injection of cash, regardless of the long-term cost to residents in the form of higher tariffs. (And, yes, Chicagoans will be quick to share their painful experience with parking meters, whose 75 years of revenue was sold to a private company for a one-time cash payment of $ 1.16 billion, in a transaction in 2009 under former Mayor Daley.)
In other words, when these components of basic public infrastructure become a source of profit, it is not a sign of good governance, but of bad governance. Any instance in which the management of an infrastructure system is outsourced to a private entity should be limited to cases in which that private entity can better manage the system and benefit from the savings achieved through superior management. Handing over such an asset to a public fund, which in turn would need to contract with a third party to manage the asset, would not be appropriate.
So that’s the same as saying that Sweeney is proposing to fund state pensions through a set of taxes that are hidden from the public. How many inhabitants, after all, when they see their water bills increase, or pay more on toll roads, will know that these new tariffs are intended to finance pensions? In addition, these types of income sources are much more regressive, with higher relative costs for low-income residents, than a simple income tax. No one should congratulate themselves as if they found an innovative solution here!
Maybe that’s why Illinois abandoned its plan to fund retirement through asset transfers – not with a public announcement, of course, but simply by letting the task force die of. a quiet death, without ever publishing the draft report that its members had prepared. At least in that regard, Illinois seems to have dodged a bullet.
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