Trenton needs to keep its eye on the financial crisis ball

By RICHARD A. MERKT

“SNAFU” is an acronym coined to describe the messes that regularly occur in our armed forces due to stupidity.  In printable form, it means “Situation Normal; All Fouled Up,” a description that calls to mind the state of affairs in Trenton these days. 

New Jersey is going broke, to put it bluntly.  Everyone “in the know,” knows it.  You would think that the state’s dire financial straits would cause the politicians in charge to drop everything and focus on working together to save New Jersey from financial collapse.  But, incredibly, you would be wrong.  Politics still trumps stark reality in Trenton, at least for now.

The sad truth is, New Jersey’s financial situation has gotten worse over the past eight months.  The state’s unfunded liability for public pensions, for example – officially pegged at $46 billion — is way underestimated and growing due to both a wave of employee retirements and Trenton’s “skipping” $3 billion in pension contributions in this year’s budget.

Taking into account public pensions, state debt service payments, and health benefit costs for retired public employees, we, the people of New Jersey, are now on the hook for at least $170 billion in long-term state financial obligations – and the final number could be twice that. To put these numbers into context, the state’s annual revenues are only about $28 billion, so even if we could spend every dime of state income paying off the long-term “nut,” it would take us longer than six years.

Such an obvious financial crisis should shake our state leaders out of their normal lethargy and inspire them to tackle the problem head-on, for fear of what a financial collapse could mean to the future of New Jersey.  But what do we see instead?  The usual partisan bickering and finger-pointing, combined with a near total lack of focus on what matters.  This is leadership?  Saints, preserve us!

It’s time for everyone in Trenton – legislators and administration alike – to keep their eye on the ball:  New Jersey is going broke, and if they don’t fix this, nothing else matters.  Not the Ground Zero Mosque; not windmills offshore; not Xanadu; not ethics reform; not the Delaware River Port Authority; not Atlantic City; not dual office-holding; not the blown “Race to the Top” grant application; in fact, not any of the “issues of the week” that have distracted their attention in recent months.  Folks: none of these issues means anything if our state goes belly-up, and that’s where things are headed right now.

How do we fix New Jersey’s broken finances?  Certainly not with the timid, half-measure “reforms” we have seen out of Trenton so far this year. Anyone serious about saving New Jersey from financial collapse needs to put forth a bold agenda that deals honestly with the fiscal realities of our time.  Specific responses to each part of the problem may vary, yet they must all address the following fundamental issues:

1)        Accrual of further pension credit by all public employees must end now to keep the liability from getting any worse than it already is.  What pension credit they have earned to date, they should keep, but, going forward, public retirement programs should be changed to 401(k)-style defined contribution programs that rescue taxpayers from open-ended liabilities;
2)        All full-time public employees must be offered health insurance coverage that requires them to make contributions on a par with contributions paid by employees in the private sector;
3)        The legislature and administration must commit to end all state-authorized long-term borrowing unless specifically authorized by the voters in a referendum, and this commitment must be embedded in the state constitution by amendment to prevent back-sliding by future legislatures and administrations; and
4)        The legislature and administration must commit to spending no more in the annual state budget than the state’s regularly-recurring revenues, ending a long-standing, unsound (and bipartisan) practice of using “one-shot” infusions of revenue to “balance” the state budget.  This reform, too, needs to be embedded in the state constitution, based on a long history of abuses by elected officials.

These proposals will doubtless outrage nearly everyone in Trenton, from legislators to administration officials to public employee labor unions, but these reforms – or something similar to them – are essential to give the state a plausible chance of working its way out of the present financial crisis. One thing, however, is unarguable: New Jersey cannot afford a SNAFU in Trenton any longer.  Time is running out for everyone there to wake up and do the right thing.

Richard Merkt is a former Republican assemblyman from Morris County and a 2009 candidate for governor.

Trenton needs to keep its eye on the financial crisis ball