Government Employee Pensions’ Threat to New Jersey’s Fiscal Health

New Jersey residents pay the highest state and local taxes in the nation, notes the New Jersey Taxpayers’ Association (NJTA). And what do they get for all that money? For most New Jerseyites, not much more than residents of other states, but for government employees, the benefits are great, according to a NJTA analysis of the state’s public employee compensation.

For example, a police officer who retires with a $105,000 salary after 25 years of service can end up making more in retirement, after 29 years, than he or she did while working.

But that’s not all. Public employee pensions are a ticking time bomb that could bring fiscal catastrophe to the state.

New Jersey’s public employee pensions are under funded by billions of dollars which means there is going to be huge political pressure applied by Public Employees and Retirees to yet again increase taxes on the residents of New Jersey. However, that will simply be a stall tactic. The math will not work over the long term. There are too many employees and retirees in the current pension plans, the benefits are too generous, and there are too few tax payers with enough income to support these pensions. The New Jersey Pension Plans are under funded by roughly $50 billion (some studies and assumptions put the real liability at substantially higher levels). Therefore, on average, every NJ taxpayer will be required to pay more than $20,000to continue these pension benefits in addition to current tax rates. For each day that passes in which these plans are not modified, that tax burden will grow.

New Jersey, California, and Michigan may be egregious cases, but there’s no reason to believe that this situation could not repeat itself in even more states.

For more on public sector unions, see here.