Stopping the Fleecing of N.J. Pensions by Political Hacks

I know a former politician who after being a part time elected official for a number of years and perhaps having a menial public job somewhere, landed a very lucrative position in an independent public authority, plausibly to make a living but also to qualify for a juicy pension. The position was security chief and all he did was to convert the place in an Auschwitz-look-alike, and spend $ tens of thousands chasing the Canadian geese out of the grounds – a never ending crusade for the geese were incredibly persistent and multiplied… like geese do.

He also declared war against feral cats and red foxes. Two of the persecuted feral cats applied for political asylum at my house when they were babies and live happily here. This guy knew about security as much as I know about deep sea diving. That is zero.

I was engaged in an interesting debate with a friend of mine after my last article on pension returns and probably the only thing we agreed on was that the problem is pervasive: People with political connections (she disputed that her friend had any) hold menial or part time positions, or political office for a number of years, with low wages, and then as they reach the 20th or so year in the pension system, they talk to their political godfather or godmother or ally or political boss and voila – from one day to the next they become managers of things that they often have no idea how they work but which secure them juicy pensions after a few years on the public dole.

There are thousands of those cases. Christie himself has appointed a few, even at the Port Authority of NY and NJ.  Another instance is, I believe, the chief of the Delaware River Port Authority who is a former assemblyman or senator of NJ. But they are present at every level of government.  This type of thing is as Newjersian as apple pie is American.

Up to now, in my program, the line of defense against these abuses has passed not through the pension system but through civil service law. That is: I would very strongly advocate for a reform of CS Law so that almost every position in the public sector has to be open to the general public through conspicuous advertisement, examinations and/or professional vetting. Thus neither the governor nor anybody else could just pick someone and give him/her a public job, or worse, invent un unnecessary job to favor a political supporter, relative, etc.

The only exceptions would be at cabinet level, executive secretaries, etc. That is my concept of civil service reform.

But after the discussion with my friend I thought that there could also be a safety mechanism in the pensions themselves. That is: When there is a sudden and very large (we have to define very large) increase in wages, during the last ten (or so) years of public employment, then the retirement pension becomes a fraction (also to be defined) of the total employee contribution to the pension during the entire public career and not calculated on the last 5 years base-salary.

I am still turning  this idea around in my mind so it is by no means a finished product. But it would be an additional hoop pension abusers would have to jump through.

Obviously, all those in the N.J. Pension System today, such as the officials of the N.J. League of Municipalities, League of Counties, some legal and consulting firms associated with county governments, etc., who are not public employees, should be expelled from the New Jersey Pension System.

From left to right: Albert and Jimmy days after receiving refugee status at home

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Nearly 25% of N.J. Residents Lived in Poverty in 2010

This report is more realistic than the federal standard for measuring poverty – which I believe is outright ridiculous no matter where you live in the U.S. – N.J. defines being poor as making less than $36,620 for a family of three — twice the federal poverty rate. New Jersey has a higher cost of living than most other states particularly because our exorbitant property taxes, which also reflect on rental costs.

Nearly a quarter of N.J. residents lived in poverty in 2010, study shows | NJ.com.

There are a number of factors which have contributed to this imbalance in one of the richest states in the nation. But all the factors, fundamentally, find their roots in the complicity of the two dominant political parties in holding wages stagnant and fleecing the public. In other words: A lot of people, even those not comprised in the low 25%, are making too little money and paying too much to the political octopus that rules New Jersey.

Note that the 2000 or so government entities of New Jersey devour more than 10% of the state GDP of about $650 billion. And we do not even have defense expending!

This reality has had two major consequences after two decades or so:

1. A lot of people borrowed beyond their means to maintain the illusion of prosperity.

2. Disposable income plummeted and with it went aggregate demand, thus pushing the economy into an endless period of anemic performance.

Since government – and all its local subdivisions –  also borrowed left and right, New Jersey has entered a period when the high degree of leverage has the effect of quasi paralyzing both the public and private sectors. There are budgetary problems and people are taxed out. Even if millionaires are taxed, as the democrats call for, that additional revenue would amount to considerably less than $1 billion.

The millionaire surtax has become more like a political football to keep the masses distracted and pretend that there is a major difference between the two dominant political parties. It is theatre.

The democrat-proposed increase in the minimum wage – possibly to blunt my message because I am the first who has mentioned minimum wage in the last decade – would be the first in I-don’t-know-how-many-years and it is clearly insufficient to have any economic impact.

Both parties have proposed tax reductions: Christie his ubiquitous income tax across-the-board cut, which of course favors his political base, and the democrats their property tax cut. Both plans are better than nothing; the democrat plan slightly better. But the grand problem is that the state is not in a sound enough fiscal position to – responsibly – adopt either plan.

If a tax cut – any of them – is implemented, it will amount to a tax deferment rather than a tax cut. When such tax becomes due, 10, 20 years from now, it will also come with accrued interest so we will end paying more for this meaningless relief today.

While both political parties endeavor in buttering up the voters in back-to-back election years, I am presenting  – in this website – my program of reforms, which I believe are the minimum essential to save New Jersey.

Citizens of New Jersey beware: Our problems are complex. Any politician that presents a simple solution to a complex problem is eminently dishonest.

Term-Limits for the New Jersey Legislature Are a Must

If two people so immensely different as governor Christie and I are supportive of the same measure – setting term limits for NJ legislators – there must be some merit in the idea. In fact, there is not just some merit: It is very much needed.

Christie favors term limits for state legislators | The Source | NorthJersey.com.

The main ingredient to the sclerotic political system of New Jersey resides in the Legislature whose two political parties gerrymander the electoral districts to keep the membership of the two chambers almost constant term after term. Members die in office and their relatives come or at least attempt to finish the term of the diseased as if the legislative branch of the State of New Jersey were a hereditary succession system. Once in a while, some of the legislators leave the office just to take some more lucrative patronage positions in the numerous independent authorities created by themselves. The long stay of the legislators in their offices leads to the rise of political bosses, such as George Norcross.

I favor limits of two terms for both the Assembly and the Senate. Furthermore, NJ legislators should be subject to the same pension and health benefit contributions as all other public employees.

The two branches of the State of New Jersey, executive and legislative, use above $500 million from a $31 billion state budget. That is also excessive. If elected governor my first budget will propose significant cuts to both branches.

As a side note, the NJ Division of Taxation is engaging in what I perceive as harassment, possibly because of my militancy and candidacy. Since my tax returns are very simple – wages only – they have resorted to attempt to collect NJ tax again on my contributions to a small 457 retirement account I once had. Employees’ contributions to 457 retirement accounts are tax deferred by the federal government but New Jersey taxes them in the payroll. They are demanding that I pay again. The distribution was in the tax year 2008 and the notice I received lists me as customer 001 – like sending me a message – I presume.

New Jersey could only tax at distribution any dividend earned during the life of the account and that tax was paid with the 2008 return.

Additionally, they arbitrarily rejected my homeowners credit in this last return of tax year 2011 offering no reason. Of course I meet all the criteria and my tax return was impeccably simple. I contacted the division by phone and they said it was their error which they would correct but with two incidents back-to-back, when I know I am correct in both, I do not trust the system. Some hack has been instructed to get on my case by any means possible.

Although the total amount in question in the two incidents combined is $452.60, I have sued the Division of Taxation in Tax Court, with the complaint served  to them and the NJ Attorney General today. The court fee is $35 and the postage certified and return receipt to all 3 was about $18.

The Access-To-Region-Core Tunnel Debacle

Without a good infrastructure, there can not be economic growth.

There is no chance that a new tunnel will be planned – much less built – within any near future. And it was just announced that MTA # 7 train will not be extended to New Jersey after all. Our rail crossings of the Hudson River will remain the two 100-year-old tubes shared by Amtrak and NJ Transit.

When governor Christie announced the cancellation of ARC in October 2010, I was not critical of his decision, based on the figures he provided and the fiscal situation of New Jersey. I also had some reservations on the New York end of the tunnel although I must confess I did not have an abundance of knowledge of the engineering portion of the job.

It now appears that governor Christie misled the people of New Jersey with a deliberate campaign of exaggeration of the cost in order to justify the cancellation of the project. And it also appears self-evident that at least one of his motives was to raid the Port Authority NJ-funds allocated to ARC to refill the empty coffers of the NJ Transportation Fund. The latter is supposed to be funded by the NJ gas tax but that revenue has been used to balance the budget rather than fixing roads and bridges. 

U.S. GAO – Commuter Rail: Potential Impacts and Cost Estimates for the Cancelled Hudson River Tunnel Project.

“I refuse to compromise my principles,” Christie said, according to the Star-Ledger. “So when they want to build a tunnel to the basement of a Macy’s and stick the New Jersey taxpayers with a bill of $3 to $5 billion over, no matter how much the administration yells and screams, you have to say no. You have to look them right in the eye, no matter how much they try to vilify you for it, and you have to say no. You have to be willing to say no to those things that compromise your principles.”

Christie has become a legend in his own mind but cancelling the tunnel and turning down the $3 billion in federal funds for it have made him a rock star in the intellectually challenged republican party.

It was Jeff Tittle, the unpredictable director of the Sierra Club in New Jersey, who coined the phrase “The Tunnel to Macy’s basement.”  Thanks Jeff. Sometimes I wonder on whose side the Sierra Club is. It is possible that the Sierra Club is on the side of the Sierra Club. In any event, Christie rapidly adopted the catchy propaganda line, as well as an odd cost-projection made by the Federal Transportation Administration which estimated a higher cost rising curve in August 2010. Both allowed Christie to put his foot in the door: He cancelled the ARC and took the Port Authority money.

NJSpotlight writes that Michael Drewniak, Christie’s spokesman, emphasized in an email yesterday: “No matter what projects are proposed or under consideration now or in the future, the governor will not sign New Jersey up for another such project unless there is a truly equitable cost-sharing structure, with participation from all the benefiting parties, including New York.”

Allegedly, the issue, according to Drewniak,  is how Port Authority of NY and NJ had distributed its revenue. Remember ARC was a NJ/NY/US/Port Authority operation. Whereas  the Port Authority had marked its NJ revenue for the tunnel, which would benefit both NY and NJ, it put all the NY money into the World Trade Center tower which only benefits NYC. But the PA management is – to  great extent – Christie’s creation. He is the one who has sent  as many as 50 0f his buddies there. He has got no one to blame but himself.

If the GAO report is correct and the cancellation was done to cannibalize the ARC money to refill the empty coffers of the NJ Transportation Fund, this may turn out to be the stupidest act by this administration. Once the work had been advanced sufficiently, a correction to the NY-end could have been more easily considered. A vital infrastructure project and engine for regional job creation was dismantled just to perform a political stunt.

Governor Christie has not hesitated in committing public funds to private construction projects which have much less benefit to New Jersey. Among those are the Revel casino, the Xanadu mall, and the relocation of several companies withing the state. Comparatively, the cost of the tunnel would have been greater but so would have been its benefits and the latter would have been longer lasting. A tunnel is there to stay for the next 100 years. We can not say the same for the Revel or Xanadu.

Now what?

If I am elected governor in 2013 I will take several steps to set the conditions right so that if there a possible interstate agreement on building a tunnel, New Jersey will be in shape to undertake the enterprise .

1. I will seek to reform the NJ contract bidding laws to make cost overruns in public projects less likely. This effort may include making performance bonds mandatory in public contracts and allowing change-orders only in catastrophic circumstances. These measures will make low, unrealistic bidding with-the-idea-of-inflating-the-price-as-we-go, less likely.

2. The Port Authority of NY and NJ is an interstate compact sanctioned by Congress. I would most likely seek to denounce the compact and extricate New Jersey from the PA. Because the bridges and tunnels connecting NJ and NY are still – on this side of the Hudson – on NJ territory, we would have a say on the tolls. This separation would allow New Jersey to keep all its portion of the revenue generated from the river crossings and eliminate a site of festering political patronage.

3. Actively seek the partnership of the U.S., New York, and Amtrak toward the new tunnel.

4. Reanimate the New Jersey economy so that we are on sounder fiscal footing to engage in this grand undertaking.

We need that new tunnel. But if we attract businesses from NYC to NJ – as I expect once our tax, economic, and political reforms are in place – we shall need that new tunnel more than we need it now.

Winners and Losers with Tax/Economic Reforms I Propose

Winners:

a) Anybody who works for less than $15/hr with benefits or $18/hr without benefits. Their gains are dampened somewhat by the fact that state income tax will be higher. On the other hand, they will have no sales tax and if they are homeowners they will have no property tax. If  they are renters, a payroll credit softens the impact of the higher income tax.

b) Anybody who works for a pay rate or salary above those described in (a) because the minimum wage increase will place an upward pressure on all wages. Inflation of consumer goods is checked by neighboring states as consumers would flock to PA and NY if NJ merchants increased their prices significantly.

c) Homeowners who are New Jersey taxpayers. They will only face the general income tax which is proportional to income. Seniors in particular are among the principal beneficiaries. In cases where a NJ resident works outside New Jersey and does not pay NJ income tax, a prorated portion of the property tax remains in effect.

d) All corporations, regardless of type and size, and professional employers who have employees in the State of New Jersey will not only enjoy zero tax on their earnings but they will pay no property taxes in their sites. Some rural areas of the state may be excluded from this policy as a conservation barrier. Same applies to limited partnerships and limited liability companies (which could be C or S corporations as well.)

e) Farmers and landowners. Absence  of property tax will ease the burden of holding on to large tracks of land.

f) Merchants of all types. Lack of a sales tax and higher wages should increase demand, drawing consumers even from outside New Jersey if New Jersey merchants maintain level prices.

g) Investors, regardless of income, who invest in New Jersey or in corporations which operate in New Jersey would see zero tax rate on their dividend and capital gains. Dividend and capital gains from New Jersey receive “Most Favored Nation” treatment.

About Even

h) People who rent. Generally speaking, the reforms are inclined to stimulate home-ownership. Income tax increase is almost balanced out by automatic payroll deduction (which is paid by rental property taxes) and elimination of sales tax.

i) Owners of residential rental property. Until we design a better method, property taxes will continue to be in effect.

Losers:

j) Investors whose dividend and capital gains are earned in operations not present in New Jersey. By far the biggest losers here although retirement accounts are exempt and there is a threshold (to be determined) below which such dividend is treated as regular income.

k) Land/homeowners who are not New Jersey residents and taxpayers. Their property tax rates are very likely to increase.

l) Career politicians. There will be many less public positions available for them once they get out of political office.

Note that there may be exist niches not included in the compilation above. For instance, some workers of current local boards of education could be displaced as result of consolidation although the number could be much smaller than expected. Another example is commercial rental property: If it is occupied, there will be no property taxes on it but if it is vacant, property taxes will apply.

Bill Aiming at Forceful Municipal Consolidation Is a Trojan Horse

Bill offers N.J. towns a choice: Share services or lose equivalent state aid | NJ.com.

Senator Sweeney, the main sponsor of S2, is right in that government overall is taking too much money from the people. Where he misses the bus is in the remedy he proposes: Nothing less than taking away state aid to towns – that is out money – if taxpayers refuse to consolidate services at a local level – that is an euphemism for reducing services and laying off workers while keeping all the political bureaucracy untouched.

To top this inequity of a legislative bill, the senator proposes to eliminate Civil Service Law in municipal services – that is the same as creating the most welcoming atmosphere possible for political patronage and nepotism.

Municipal consolidation should never be forced upon the public and what happens when two towns merge under the current property tax-propelled system of government is that one municipality ends up paying for services benefiting the other.

On the other hand, in a political system based on income tax alone, where towns’ budgets are provided by the state income tax and are proportional to population, town A with budget X merges with town B, having budget Y, and the following year the new town AB receives budget X+Y. The income tax based system facilitates mergers but does not impose such on any municipality. It just makes merging desirable because any savings would be extra cash that the new AB municipality would have available.

Where we must move to reduce government first is in the redundant layers of it. I have identified as such county governments, local and county boards of education, and a large proportion of independent authorities and commissions.

Civil Service should never be gutted because it is the best guarantee that: 1. Public employment will be open to all the people; 2. Examinations will tend to identify the most qualified applicants; and 3. Once politicians can not place their friends and relatives in public jobs, they will only create positions when they are really needed.

Sweeney’s’ move is nothing but a desperate attempt to save the political class while merging the municipal workers, with possible layoffs, and eliminating civil service to create more patronage positions. I believe this act is caused in part by my agenda of reforming government and Sweeney knows that 2013 is getting closer. The bill puts all the squeeze on the people and services and leaves the useless part of government intact. That is the modus operandi of both republicans and democrats: Always protecting the political hacks at the expense of teachers, cops, firemen, maintenance workers, etc.

From here to November 2013 we will see the most spectacular proposals from the two parties in power, trying to save their loot and their perks. The political establishment will be very eager to attempt to confuse the public and to preempt the structural reforms I propose .

Porous New Jersey Civil Service Law Permits Immense Abuses – Fleecing of New Jersey Must Stop

We must restore public integrity. Public employment must be open to all New Jersey residents and not just to political cronies.

The case of the Port Authority of NY and NJ is just the latest in a long list. Every time, the governor and politicians of turn – in this case Christie, Sweeney and co. – feign outrage and promise action. But in very plain English: They are all the same and it is all  B.S.

Because that broken system is what gets them into office, maintains the dominance of the two political bureaucracies – democrats and republicans alike – and helps to maintain the incredible perks that come with that office. And then, there is power.

Civil Service Law was created precisely to prevent these abuses and maintain a professional public work force in New Jersey. It was created to preserve integrity in government.  The law was enacted at the turn of the XX Century, by politicians who put the public interest ahead of their appetites. They modeled the new law after British Civil Service Law which served the empire so well in Britain and India. The British Civil Service was so efficient that both India and Pakistan kept most of their British civil servants after independence.

In New Jersey however, during the last 20 or 30 years, politicians of both parties have made a mockery of the law. They have literally dismantled it. And now governor Christie is up to do the same labor of destruction with Tenure Law, under the excuse of removing bad teachers.

If elected governor of N.J. in 2013, it is my intent to reform New Jersey Civil Service Law and make it as strict as politically and judicially possible.