I don’t know details about other states, but I do know about NJ and other states are in a similar pickle. The short of it is that over the years politicians and union leaders made deals that included generous pensions and other benefits, especially retiree benefits that were (1) far more generous than what is available to average citizens and (2) were unaffordable because politicians didn’t want to raise taxes to cover these promises and thereby alert taxpayers to what was going on.
As I have said repeatedly, the real solution is to bring the non cash compensation of state employees in line with that of workers in the largest ten or twenty employers in a state. What possible reason can there be for anything higher? It is far better to adjust cash compensation as needed to be fair with total compensation. Cash compensation costs are immediate, predictable and not subject to outside variables such as interest rates, the stock market and health care inflation, and they are not subject to political budget games.
Somewhere in this discussion we always hear about teacher pay. In New Jersey that averages about $60,000 a year. That is pay for 191 work days or 1528 hours at eight hours a day (but teachers are scheduled to work less than eight hours). In any case, let’s use 1528 hours which means that the average teacher earns $39.27 an hour or the equivalent of $81,675 for a full-time job. That is good pay no matter what, but now on top of that add pensions and other benefits largely unknown today even among large companies and you have a most generous total compensation package. Compare that cash income for one person with the median family income in NJ of $85,426. A couple of married teachers are doing quite well even by NJ standards, add in the pensions and benefits and you now know why they are unaffordable.
Now if you don’t believe me, find two college graduates and send one to teach and the other to a job in business and see which comes away with the better deal.
Back to the original question. What is the right thing to do to fix all this? Do you fix the basic problem and adjust the total compensation of state workers (which could be higher cash compensation) or do you do as Democratic politicians want to do; raise taxes to pay for these overly generous packages.
In NJ Christie gets continuous flack for not fully funding unaffordable pensions. At the same time the opposing party wants to raise taxes on incomes over $1,000,000 to 10.75% vs 8.97% for four years which does not actually fully fund pensions, not to mention is not a permanent fix in any case.
So what is the right thing to do, fix the problem in a way fair to all citizens in NJ or perpetuate the problem and apply a bandaid based on a tax the wealthy strategy which is so popular on the political left❓
I’m guessing public employee unions and state workers have their preference and average citizens probably don’t care, but the question is what is the right thing to do?
Curiously this inequality problem is not between rich and poor, it is between average Americans working in the public sector versus the private sector worker.
QUINNSCOMMENTARY 
Corporations are pulling the same trick with their pensions when they decide they can’t afford to pay what they promised. I’m not personally affected, but I think a promise is a promise, and they shouldn’t try to balance their bottom line by making retirees pay the price. They agreed to work for the compensation package that was offered. If the entity can’t pay, it should be taken to court, it’s assets liquidated and distributed first to the individuals that made that entity’s agenda possible.
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I agree promises should be kept, but employers are under a different set of stricter rules. They must buy insurance for the pensions, they must keep minimum funding levels and they cannot take away already earned benefits, but can reduce future accruals. If a company tried to do what many states have done a lot of people would be in jail.
Companies also closely monitor what they promise and can afford and generally maintain the appropriate relationship with their unions unlike state politicians who put votes ahead of prudent negotiations. Company pension plans to the extent they exist are nowhere as generous as public pensions.
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The right thing to do is to give employees and retirees a choice:
Accept a reduction in benefits as necessary to match actual funding, or
Increase contributions as needed to fill the funding gap.
Process:
You calculate the benefit that would have been provided based on the funding actually provided, and adjust the benefit to be paid to that amount, or
You calculate the contribution that should have been made, and raise the employee’s contribution so that, if they want the higher benefit, they can finance that benefit.
Basically, the best solution is to ensure that you do NOT give effect to the lies made by the union representatives and the managers who promised benefits that they were NEVER willing to fund. You put in place provisions that allow the taxpayers to ignore all the promises, to confirm that the amount taxpayers are willing to fund = actual promise of a pension, and to give the employees choices on how to respond.
Reduce the pension promise to an acknowledgement that those who lied, those who made promises they were never really wiling to fund, should not be able to bind future taxpayers with their deliberate lies of the past.
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