Government

A lesson from New Jersey for all Americans 

New Jersey is among the highest taxed states in the US. It’s per capita property taxes are more than double the US average. In total taxes it is the 7th highest and the highest in property taxes. It’s unfunded pension obligations for government employees are astronomical.

New Jersey is ranked the 8th least friendly state for retirees.

New Jersey on Monday was hit with its 10th credit downgrade under Gov. Chris Christie, reflecting growing government worker pension obligations that are among the highest in the U.S. Standard and Poor’s Global Ratings lowered the state’s rating from “A” to “A-“. November 2016

But none of that matters to its citizens, its politicians or its public employee unions. When he first took office Christie tried to tackle the pension problem and he was vilified by unions, workers and many average citizens. Then he like others failed to fund the plans.

Recently he vetoed several new spending initiatives including $25 million for a new property tax freeze for seniors and again he is vilified, this time including by a candidate running for governor, a person I know should and does know better but hey, when does integrity matter in politics?

New Jersey pensions are only 61.2% funded (and by some measures less) and only nine states are in worse shape than New Jersey. An often cited standard for a financially sound pension plan is 80% funded. The Academy of Actuaries says nothing less than 100% should be acceptable. New Jersey’s unfunded liability could be as high as $145 billion depending on assumptions used like the earnings rate on the trust fund. No governor or legislature in NJ in decades has properly funded or managed the state’s pension plans. They have allowed the plans to provide overly generous benefits and then failed to fund the obligations created. 

So what is the lesson? Voters are highly subject to rhetoric and empathetic sounding proposals and cannot make the connection between their taxes and government spending. And like the people they elect to office, do not take a long-term strategic view on spending or policies. NJ like several other states, has significant fiscal problems that are not going to be solved without spending cuts and/or even higher taxes … and yet its citizens don’t seem to realize or accept that  

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