California’s Unconstitutional spending?

For the past two days I have listened as El Rushbo, Rush Limbaugh, referred to state workers in New Jersey who could retire at age 49 and be entitled to a $3.3 million pension along with $500,000 of health care based simply on contributing $124,000 during their employment years. Not a bad ROI regardless if your contributions ramp up for 20 to 30 years.
Note: Employment years was not defined by Rush nor found in the news articles.

Now that I have a partial confirmation from today’s Newark Star Ledger I thought it appropriate to share my birth state’s financial burden with those of us living in California as we share many of the same challenges found in other states.

From last week’s Star Ledger they reported:”The state pension system, which covers more than 700,000 working and retired state, county and municipal employees and teachers, was underfunded by about $34 billion as of the last official count in 2008

On  a local assessment, the unfunded liability and resulting pension shortfall in CA are not considered debt yet we still have the obligation. If this met the traditional requirements of a debt issuance we would enjoy Constitutional protection requiring a vote of the citizenry. Technically, being generous with pension payouts is a form of spending and the only protection for taxpayers is the Constitutional requirement that the budget be balanced.

New Jersey’s proposals would require workers and retirees at all levels of government and local school districts to contribute to their own health care costs, ban part-time workers at the state and local levels from participating in the underfunded state pension system, cap sick leave payouts for all public employees and constitutionally require the state to fully fund its pension obligations each year. They would also eliminate multiple pensions and change how pensions are calculated, including for police and fire personnel.”
Today’s Ledger asks:

“Why doesn’t N.J. hold a referendum on soaring pension debt?

By Paul Mulshine/The Star Ledger February 16, 2010, 6:03AMThe Star-Ledger Gov. Chris Christie. In his speech last week, Gov. Chris Christie gave a couple of examples of why the state pension funds are going broke. One was that of a public employee who paid in a mere $124,000 during his career, but is projected to receive more than $3.3 million in pension payments.

Hold on, you may have thought. I can’t even afford to retire at 65. Yet I’m supposed to pay taxes to fund a lottery-sized payoff to send checks to some guy who moved to Florida at 55? When did I ever agree to that?

You didn’t. But you should have had the chance.

The framers of our 1947 state constitution were wise men who realized that politicians love to give things away in the present and let someone else pay for them in the future. To that end, the framers created the “debt-limitation clause.” That clause requires a referendum before the state can incur “a debt or debts, liability or liabilities of the state” that exceeds 1 percent of the budget for the year in question.

As the governor noted last week, we’re running up debt at a rate that would require putting aside about $7 billion in next year’s budget. That’s about 25 percent of expected revenues. So why no referendum?

As with virtually every other crisis that has made this state ungovernable, the fault lies with the state Supreme Court. That question should have arisen back in 1997 when then-Gov. Christie Whitman decided to borrow $2.7 billion to put into the pension funds. The court could have strictly enforced the debt-limitation clause. The subsequent referendum almost certainly would have been voted down.

Instead the court gutted the clause. That set off both a big borrowing binge and a big giveaway to the unions in the form of higher pensions and lower retirement ages. And now the state is stuck with all that debt.
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