New Jersey, the only state with a worse pension funding status than Illinois (according to Pew’s 2020 compilation based on 2018 data), is pretty happy with itself 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 âRICH Fundâ), as proposed in the current legislation. review by the New Jersey Senate. , which he promotes in a commentary on NJ Spotlight News. He writes,
“This 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.
âSenate Bill 3637, which could be considered by the Senate Budget and Appropriations Committee this week, would create the Guaranteed Holding Fund for Pension Infrastructure – RICH, for short – as a trust fund for the infrastructure to hold and manage the assets transferred to the public enterprise by the state. and local governments for the benefit of New Jersey 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. . . .
“State and local governments own water systems, reservoirs, real estate and parking lots that could generate stable income for pension systems in the same way the lottery system has done in recent years. years. “
But none of the assets listed, when owned by the state, 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 condition, and more so for the benefit of those most in need among us. Certainly, private companies are gaining market share in the United States, supplying water to 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, it won’t be long before Chicagoans share their painful experience with parking meters, whose 75-year-old earnings were sold to a private company for a one-time cash payment of $ 1.16 billion, during 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 case 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 sources of income 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. 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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