Gov. Christie: Not all pensions will be paid

Chris Cristie is the governor of New Jersey. But he has given a wake-up call to all states with public pension problems, including California. The latest:

BELMAR, N.J. — Pension reform is going to involve breaking some promises, including reducing benefits that public employees were counting on for their retirement, Gov. Chris Christie acknowledgedduring a town hall event in Belmar Wednesday.

It was an exchange with Jean Toher, a technology teacher at at Shark River Hills Elementary in Neptune, that drew the governor into the heart of the pension debate that he has reignited in recent weeks.

“When I started working, I started at a salary of $12,800,” said Toher, who’s been paying into the pension system since 1980. “Part of the reason a lot of us accepted those low salaries all those years is because we had a benefit and we negotiated that benefit all those years.”

Christie, earlier invoked the D-word (“Detroit”) to demonstrate how dire the situation is, saying that he doubted taxes could raise enough revenue to cover the state’s future pension obligations. They must reduce benefits, he said.

“There’s a lot of emotion that goes along with this issue, but the facts are pretty simple,” he said. “The facts are that this pension will go bankrupt if we don’t make significant changes to it.”

In California, even Gov. Jerry Brown admits the state’s unfunded pension liability is $354 billion. The Legislative Analyst pegs it at $340 billion.

The market value of the assets of the California Public Employees Retirement System was $300 billion on July 31. But in April, CalPERS admitted it was 52 percent underfunded. It’s like a guy who owns a $1 million house saying he’s rich even though he owes $2 million in debt.

Recently, both Stockton and San Bernardino caved in to CalPERS pressure and took reducing pensions out of negotiations over the cities’ bankruptcy proceedings. But that’s just a stopgap. Vallejo did the same thing after its 2008 bankruptcy. But now it’s teetering on the brink of another bankruptcy. As CNN Money reported:

The California city of Vallejo emerged from bankruptcy just over two years ago, but it is still struggling to pay its bills.

The main culprit: Ballooning pension costs, which will hit more than $14 million this year, a nearly 40% increase from two years ago.

As a result, Vallejo continues to dole out large sums of money for retirees. Except for new hires, Vallejo’s police and firefighters can retire at age 50 with as much as 90% of their salary — for life. Public safety workers who retired in the last five years have average annual pensions of more than $101,000.

And the pension costs are expected to continue to rise, with a projected increase of up to 42% over the next five years.

Christie is right — for the Garden State and for the Golden State. The pensions will not be paid in full.