New Jersey has elected a new governor, Phil Murphy. Mr. Murphy, from the Democratic Party, has not previously held office. He is smart (Harvard, Wharton Business School), energetic (Goldman Sachs), and a committed progressive. New Jersey is in trouble, writes Francis Menton at the Manhattan Contrarian.
New Jersey’s biggest problem is clearly its way-underfunded public employee pensions. Although some might award the title to Illinois or California, New Jersey is in contention for the worst-funded public pension program, both as a percentage of liabilities and as a per capita burden on the state’s taxpayers. Current governor Christie has tried to negotiate to reduce the obligations, but, failing at that over union intransigence, has refused to fully fund the obligation. Murphy says that he will fully fund the obligation. Really, Phil? According to this chart at Pension360, that will mean increasing contributions to the pension funds by something around $3 billion per year — this in a state with an annual budget running about $32 billion per year. In other words, increasing state spending by about 10% per year with no increase in services of any kind to the citizens. He says he can do it by reducing fees paid to the money managers. That will be at most a couple of hundred million per year. Well, simple arithmetic never was the strong suit of these “smart” progressives. Reality is going to come up and smack this guy in the face around about the first day he takes office.
Mr. Murphy’s next big issue? Making a public pension program available as an option to private employers.
In other words, doubling down on the single most glaring and disastrous failure of the government.
Read more here.