Christie to Decide If Unions to Control Police and Fire Pension Fund
Despite concerns about possible costs for taxpayers, the state Assembly overwhelmingly approved a bill to relinquish control of the police and fire pension funds to a union-controlled panel. The bill now heads to Gov. Chris Christie.
The bill, S3040/A99, was the subject of behind-the-scenes wrangling for more than six months, as the unions representing first-responders clashed over representation on the proposed board. In the end, the smaller of the two fire unions remained opposed to the bill.
Ironically, one of that union’s chief concerns was echoed by the bill’s opponents in the Assembly – concerns about who would be on the hook if the new board’s investment strategy failed or it sought to change benefits, such as restoring a cost-of-living adjustment.
Assemblyman Declan O’Scanlon, R-Monmouth, said property taxpayers are clearly at risk.
“We are absolutely not just flirting with danger but inviting serious danger,” O’Scanlon said. He noted increases in pension-fund contributions aren’t covered by the 2 percent cap on property tax levies: “This could crush property taxpayers.”
Speaker Vincent Prieto, D-Hudson, said the new board will still be overseen by the Legislature.
“That board would have fiduciary responsibilities to make sure that they do their job right. So I could tell you, you’re taking a worst-case scenario,” Prieto said. “These are members, the appointments are by these unions, and they’re going to have the best interests.”
The Assembly voted 61-4 for the bill, with 10 abstentions. One of the votes against it was cast by Assemblyman John Wisniewski, D-Middlesex, a candidate for the Democratic nomination for governor, who said the idea doesn’t solve the pension crisis and potentially creates new problems for taxpayers.
“The single fact that is the worst part of this bill is that it is a ‘heads I win, tails you lose’ proposition,” said Wisniewski, who said that if investments miss their target, actuaries will call for contributions from taxpayers to be raised – and that with the actuaries’ agreement, unions control that decision.
“It is like saying to your father: ‘Give me the money, I’ll go to Atlantic City. And if I’m successful, I get to keep it. And if I’m not, you lose,’” Wisniewski said.
Unions say they’ll be protective stewards of their pension funds and reduce the amount now spent on hedge-fund managers. Prieto made similar assurances.
“There’s safeguards in this to make sure that it’s done right. After six years, there would be a review,” Prieto said. “And always as a Legislature, we’re going to monitor it to make sure it’s done properly and make sure that everyone is protected, including municipalities and counties and state.”
The organizations representing municipalities and counties are hoping for a veto from Christie – although, it’s worth noting, the bill passed with potentially veto-proof majorities in both houses.
Local governments should have equal footing with labor unions on the new board that would oversee the police and fire pension fund, said Michael Cerra, assistant executive director of the New Jersey State League of Municipalities.
“Under this proposal the way it is, the risk is being borne by taxpayers because the rate is going to be set by the board and the board is controlled by labor,” Cerra said. “… Taxpayers should be on the same footing as the labor unions.”
In 2015, a study commission appointed by Christie recommended giving unions control of pension investments – but only after changes such as adopting a 401(k)-style retirement system, said John Donnadio of the Association of Counties. He said unions face no risk under the current proposal.
“It’s like getting your cake and eating mine too,” Donnadio said.
More from WPG Talk Radio 104.1: