Christie's Bad, but He's Right about Atlantic City

I have to agree with Chris Christie that Atlantic City's contracts with its employees are retirees are beyond excessive and amending them should be on the table in any effective state rescue of Atlantic City.  Vincent Prieto is either carrying public sector union water or Steve Fulop's.

Or, as Christie colorfully asserts "When you see Vinnie Prieto’s mouth move, you know that Steve Fulop’s talking."

http://politickernj.com/2016/03/christie-says-hell-oppose-north-jersey-gaming-if-ac-takeover-and-pilot-go-down/

Whatever Prieto is doing it's working in riling up public sector unions.  The president of the state PBA said "We stand with Speaker Prieto and the members of the General Assembly who have displayed courage and leadership in standing with the men and women of the New Jersey State PBA throughout this latest attempt to trample collective bargaining rights and hurt hard working middle class families."

By implication, the State Senate, ie Steve Sweeney, is "trampling collective bargaining rights and hurting hard working middle class families."  

If Sweeney tramples "collective bargaining rights" the PBA is going to look to Prieto's ally Steve Fulop as their protector.  

http://politickernj.com/2016/03/governor-would-rather-attack-than-work-on-atlantic-city/

Atlantic City: "We siphoned off as much as we could".  Now it is like Detroit.  And I don't care. 

Atlantic City, Bracing for Takeover, Sees Camden as Cautionary Tale

http://www.wnyc.org/story/atlantic-city-bracing-takeover-sees-camden-cautionary-tale/

lord_pabulum said:

Atlantic City: "We siphoned off as much as we could".  Now it is like Detroit.  And I don't care. 

You should care. It's going to cost the state (you, if you pay taxes) a ton of money and if bond holders end up crammed down it'll cost them (you) again in higher borrowing costs. 

Once again, the local machine buys power by spreading spoils across supporters and then demands non-residents come in and dig them out.

Regarding pensions & contracts- as egregious as they may or may not be, they're the deal the entity made when they made it. If there is a problem now there was a problem then. If Christie and the ppl of NJ don't like pensions then switch to defined contribution. Hitting retirees, even if they're grossly over paid, shouldn't be taken lightly. 

Do you want the courts determining what YOU in retirement get paid? I get as a public entity, when politicians are using it as a spoils system, no one speaks for the tax payer. That should be remedied at the ballot box.

Then again, why should anyone vote for fiscal restraint if they know other people are going to have to pay for it anyway?

Let it crumble. Honor contracts, both to bond holders and retirees. Sell off every asset the city has. Go through the books as closely as possible and punish the guilty. Start over.

The state of NJ for years was thrilled to take the revenues from AC and apply them elsewhere, now that it is in trouble the state (Christie) says screw you.

Any changes to the pension system should be for new employees only. Retirees aren't the only ones who need protection. Someone who has worked for the government and contributed to their pension for over a decade, holding up their end of the bargain, should just suddenly be told that their retirement account is now worthless because governor after governor decided that not paying the state's share was ok and just now realized what what the tab has ballooned into. 

And if they do hit current employees with this, then every governor who participated in this theft should he held legally accountable. 

I gotta say, the whole Flint fiasco has made me rather cautious about the idea of state takeovers of local governments...

Atlantic City has been a one-industry town for decades.  That industry is failing, so they've lost their tax base.  They now have far too little income to support basic services and infrastructure.  It was folly for the governor to spend millions of tax-payer dollars to try to prop up the casinos.  They needed to diversify, not pour more money into a failing industry.

I don't really get why people act as though the financial catastrophe of Atlantic City is the solely the fault of unions.   It's a much bigger problem and it's been brewing forever.  

Paul Mulshine had a good column on Atlantic City.  The problem starts and ends with a failure to understand that the Jersey Shore (and Atlantic City) is no longer an entertainment destination like Las Vegas.  It is mostly a family vacation destination where people want to rent a place for a week to enjoy the beach.

The Unions are one piece of a very big puzzle of doom for AC.  Why wouldn't you care?  There are people there who will lose their jobs and suffer.  That alone is worth caring about. 

mjh said:

Atlantic City has been a one-industry town for decades.  That industry is failing, so they've lost their tax base.  They now have far too little income to support basic services and infrastructure.  It was folly for the governor to spend millions of tax-payer dollars to try to prop up the casinos.  They needed to diversify, not pour more money into a failing industry.

I don't really get why people act as though the financial catastrophe of Atlantic City is the solely the fault of unions.   It's a much bigger problem and it's been brewing forever.  

^ YES ^

Haven't been in several years but the first time I went, I was pretty gagged. Any Bostonians out there? If so, AC reminds me of the old Combat Zone. CZ is no longer like the old CZ but AC still is the skeevy AC. AC is the hood. Pawn shops, young prostitutes, liquor stores, run down homes -- it's appalling. All that money and this is what's in the backyard? It has in the past ranked as one of the most dangerous cities. Has that been addressed? Also, no one hangs out in AC. After gambling, people usually go to Cape May. Quaint, family friendly, safer and better looking. 

Don't know why no one, as @mjh said, never thought about diversifying the city. But again, in order to bring in business, one has to clean up. It's the Tale of Two Cities: AC can't be like Vegas and Detroit can't be like Chicago. Each have so much in common, offer many of the same things but yet, one got it right and the other one just didn't. 

tjohn said:

Paul Mulshine had a good column on Atlantic City.  The problem starts and ends with a failure to understand that the Jersey Shore (and Atlantic City) is no longer an entertainment destination like Las Vegas.  It is mostly a family vacation destination where people want to rent a place for a week to enjoy the beach.

This.  Those entertainment venues are white elephants from the 1950's.

spontaneous said:

Any changes to the pension system should be for new employees only. Retirees aren't the only ones who need protection. Someone who has worked for the government and contributed to their pension for over a decade, holding up their end of the bargain, should just suddenly be told that their retirement account is now worthless because governor after governor decided that not paying the state's share was ok and just now realized what what the tab has ballooned into. 

And if they do hit current employees with this, then every governor who participated in this theft should he held legally accountable. 

New employees only?

If the changes only affect new employees then you have to wait decades to see any savings and Atlantic City and many other indebted cities and states don't have the luxury of waiting.  

Your proposal also endangers the pension system itself since the pension funds are partly dependent on contributions from active employees to survive.  So, if you set up a DC system for new employees their contributions wouldn't go into the existing pension funds and the funds would go broke much sooner.

And if you keep putting the contributions from new and active employees into the pension funds you are destroying any concept of generational equity, since the active employees will never get the benefits they are paying for.  This is stealing.  

I also disagree with your claim that pensioners "held up their end of the bargain."  The pension contracts were not made fairly in the first place since public employee unions "elect their own boss" and threaten their bosses if they don't give them what they want.  So yes, pensioners put in about 5% while they were working and nominally "held up their end of the bargain," but actuarially they should have been putting in a lot more than that and the "bargain" was corrupt in the first place. 

Also, the pensions NJ is paying out now have been changed many times over the years to make them more generous.  If pension deals can be changed to make them more generous to pensioners, why can't they be changed to make them less generous?  

Runner_Guy said:

spontaneous said:

Any changes to the pension system should be for new employees only. Retirees aren't the only ones who need protection. Someone who has worked for the government and contributed to their pension for over a decade, holding up their end of the bargain, should just suddenly be told that their retirement account is now worthless because governor after governor decided that not paying the state's share was ok and just now realized what what the tab has ballooned into. 

And if they do hit current employees with this, then every governor who participated in this theft should he held legally accountable. 

New employees only?

If the changes only affect new employees then you have to wait decades to see any savings and Atlantic City and many other indebted cities and states don't have the luxury of waiting.  

Your proposal also endangers the pension system itself since the pension funds are partly dependent on contributions from active employees to survive.  So, if you set up a DC system for new employees their contributions wouldn't go into the existing pension funds and the funds would go broke much sooner.

And if you keep putting the contributions from new and active employees into the pension funds you are destroying any concept of generational equity, since the active employees will never get the benefits they are paying for.  

I also disagree with your claim that pensioners "held up their end of the bargain."  The pension contracts were not made fairly in the first place since public employee unions "elect their own boss" and threaten their bosses if they don't give them what they want.  So yes, pensioners put in about 5% while they were working, but actuarially they should have been putting in a lot more than that.  

Also, the pensions NJ is paying out now have been changed many times over the years to make them more generous.  If pension deals can be changed to make them more generous to pensioners, why can't they be changed to make them less generous?  

Your argument is for really doing away with public sector unions, which too often end up in a conspiracy with favored politicians against tax payers.

I can't blame unions for doing what unions do- advocate for their membership. 

The best bet is to close the pension and put in place a program to fund it- yes, that would cost the state (taxpayers) a lot. Your suggestion that new lives are needed tells you everything you need to know about the state of the pension- if you need current cash flows from new employees to pay old ones, you're running a Ponzi scheme.

The decision by governor after governor to underfund the pension is why we are where we are. That underfunding causes a train wreck in slow motion- the politicians behind it have long gone off to whatever job they have after elected life, or given the decades long nature of how this plays out, could even be dead. And so they get the benefit of public union support, and-here's the best part- contemperaneous taxpayers don't have to pay for it! Their kids do! But screw them, by the time they can vote I'm outta here.

So I promise massive benefits, and I own your vote as a public worker as a consequence, and when it all blows up I'm long gone. And current taxpayers don't care because they can't see the wave building. Hey, I don't have to pay it this year? Well then it doesn't matter.

Bad news for everyone reading this thread- you're the later taxpayers- the ones that get to pay the tab.

It used to be public workers got paid below what they could do in the private sector to gain great benefits in retirement. In many cases, they get both now- competitive pay and retirement packages with millions. 

If you're worried about pensions wait till you see how the future healthcare benefits are being funded. 

Christie is right about AC, but he was wrong about AC. Gave a crapload of tax breaks to Revel not long before it went belly up.  

If the bailout of AC is so important to Christie, he should have been in NJ the past several months to get it done.  He's not going to get any sympathy from NJ taxpayers after his horrific campaign for President.

It's amazing how with @Runner_Guy it's always the unions' fault, not the voters who elected politicians running on the platform that I'm going to give you everything you want, plus a pony, all while lowering your taxes.  This goes back to Christie Whitman with her promise to cut the income tax by 30% over three years without cutting services and benefits.  Anyone who believed that was possible and voted for her should have had his or her head examined.  That's where the fault lies - with the voters.

Steve said:

It's amazing how with @Runner_Guy it's always the unions' fault, not the voters who elected politicians running on the platform that I'm going to give you everything you want, plus a pony, all while lowering your taxes.  This goes back to Christie Whitman with her promise to cut the income tax by 30% over three years without cutting services and benefits.  Anyone who believed that was possible and voted for her should have had his or her head examined.  That's where the fault lies - with the voters.

Scorpion and the frog. Can't blame a union for doing what it was created to do. 

NJ's actuarial rate of return is close to 8%. That is a massive number. Politicians saw the massive returns in the market and assumed that corporate America would take care of the problem by being awesome.

And as mentioned earlier, there is no cost to the (past) politician for being wrong.

Jackson_Fusion said:

Steve said:

It's amazing how with @Runner_Guy it's always the unions' fault, not the voters who elected politicians running on the platform that I'm going to give you everything you want, plus a pony, all while lowering your taxes.  This goes back to Christie Whitman with her promise to cut the income tax by 30% over three years without cutting services and benefits.  Anyone who believed that was possible and voted for her should have had his or her head examined.  That's where the fault lies - with the voters.

Scorpion and the frog. Can't blame a union for doing what it was created to do. 

NJ's actuarial rate of return is close to 8%. That is a massive number. Politicians saw the massive returns in the market and assumed that corporate America would take care of the problem by being awesome.

And as mentioned earlier, there is no cost to the (past) politician for being wrong.

I'm not blaming the unions at all.  I'm blaming the ignorant voters.  And, yes, the actuarial rate of return is an absurd fiction that should be banned under the GAAP or whatever standard they are required to use to determine the funding obligation.

Steve said:

Jackson_Fusion said:

Steve said:

It's amazing how with @Runner_Guy it's always the unions' fault, not the voters who elected politicians running on the platform that I'm going to give you everything you want, plus a pony, all while lowering your taxes.  This goes back to Christie Whitman with her promise to cut the income tax by 30% over three years without cutting services and benefits.  Anyone who believed that was possible and voted for her should have had his or her head examined.  That's where the fault lies - with the voters.

Scorpion and the frog. Can't blame a union for doing what it was created to do. 

NJ's actuarial rate of return is close to 8%. That is a massive number. Politicians saw the massive returns in the market and assumed that corporate America would take care of the problem by being awesome.

And as mentioned earlier, there is no cost to the (past) politician for being wrong.

I'm not blaming the unions at all.  I'm blaming the ignorant voters.  And, yes, the actuarial rate of return is an absurd fiction that should be banned under the GAAP or whatever standard they are required to use to determine the funding obligation.

I'm a pragmatist.  That's all.  

In life many times a good faith lender, who has negotiated a fair contract, doesn't get his or her loan back.  Sometimes the cause of non-repayment is bad behavior by the borrower, sometimes it's the borrower's misfortune, and sometimes it's changes to the overall economy, but there are times when the borrower doesn't have money and the lender doesn't get paid back in full.

This is why we have bankruptcy processes.  This is why we don't have debtors prisons.   

My argument about Atlantic City, and the state's pension mess in general, is that we are at a point where the borrower doesn't have a realistic way to pay back its debts.  I argue that in the example of NJ 's debts the fault is even more the lender's (ie, the unions) because the initial contracts were not fair in the first place, were made under coercion, and they were effectively supposed to be paid back by the children and grandchildren of the counterparty.  In the case of Atlantic City the problem is even worse because not only are the contracts inconsistent with the private sector, they are inconsistent with the rest of the NJ public sector.

So, Atlantic City can't unilaterally declare bankruptcy.  If its debts are excessive it can only eviscerate public safety, libraries, parks, and raise taxes.  If Atlantic City has to do that even more of its residents will leave, the burdens will be even harder to carry for those who remain, and outmigration and property abandonment will increase.  The  vice becomes tighter and tighter and there is nothing AC's own government can do to fix things.  

So the state could step in and effectively pay off AC's debts, but this creates unfairness because some of those debts are for such outrageous things (like lifeguard pensions), the money would be taken out of other essential and underfunded state obligations (like school aid).

There is also the moral hazard.  If the state will step in to cover their debts, what's to stop other politicians from making really dumb bargains that their successors will have to pay off and which would be covered by the state anyway?

Finally, Atlantic City shouldn't be allowed to declare bankruptcy (or just illegally default, like Puerto Rico) either because it would increase borrowing costs for other NJ municipalities, school districts, and public authorities.

Restructuring AC's debts, which is what Sweeney and Christie want to do, and Prieto and the Assembly oppose (and apparently Phil Murphy too), seems the least-bad thing to do IMO.

Runner_Guy said:

And if you keep putting the contributions from new and active employees into the pension funds you are destroying any concept of generational equity, since the active employees will never get the benefits they are paying for.  This is stealing.  

  

So if someone paid into the pension system for 10, 20, or even 30 years and suddenly their pension is changed to a 401k then isn't that also stealing?  That is what you are advocating for.

I am saying that if changes are made it should affect new employees only so that they know what they are getting into instead of paying into a system for years and then getting the shaft.

Jackson_Fusion said:

It used to be public workers got paid below what they could do in the private sector to gain great benefits in retirement. In many cases, they get both now- competitive pay and retirement packages with millions. 

If you're worried about pensions wait till you see how the future healthcare benefits are being funded. 

My husband could make more doing the same job for a private entity.  He works in the public sector for the pension and benefits.  The benefits keep getting cut, co-pays are going up, and the percentage being taken out of his paycheck keeps increasing. 

Christie was elected and re-elected in part due to his positions regarding unions and the pension programs. The voters should not be surprised now that Christie wants to renegotiate union contracts as part of the AC bailout.  

I know that this is about public employees in AC, but AC as a whole is a mess.  AC has run off the backs of the poor for years.  When those casinos were turning profits were the employees making a good living, or were they making just enough to get by?  That is why if you walk just one block off the boardwalk (except for the shopping area of course) you see a city that steeped in poverty. It is the same bull***** that is ruining the rest of the country, the belief that large corporations are good for little people, that they will share the wealth by way of employment. Trickle down economics.  Even today some people refuse to belive that large corporations will use their lowest rung employees for until they are used up and pay as little as possible while doing so, tossing them aside when they no longer serve their purpose with no safety net.

spontaneous said:

Runner_Guy said:

And if you keep putting the contributions from new and active employees into the pension funds you are destroying any concept of generational equity, since the active employees will never get the benefits they are paying for.  This is stealing.  

  

My husband could make more doing the same job for a private entity.  He works in the public sector for the pension and benefits.  The benefits keep getting cut, co-pays are going up, and the percentage being taken out of his paycheck keeps increasing.

I work in the public sector too, so believe me, I'm sympathetic, but bankruptcy is bankruptcy and if a debtor doesn't have the money what can you do?  NJ can't raise taxes that high above the level of other states and cut public services before we start to endanger the economy.

So if someone paid into the pension system for 10, 20, or even 30 years and suddenly their pension is changed to a 401k then isn't that also stealing?  That is what you are advocating for.

There's a big continuum between maintaining pensions+COLAs at 100% of the current level and just all of a sudden converting them into 401ks.  I pray that the NJ Supreme Court sustains COLA suspension and I hope that we can do something to simply reduce the generosity of existing pensions so that (even with tax increases) the state of NJ has a chance.  

And like I said before, these pension deals have been made more generous to the public sector workers in the middle of their careers.  Since DiFrancesco made the last big increases in generosity around 2001, no one worked 30 years under the present setup.  No one even worked 20 years.  If someone retired in 2011 (like Charles Ouslander the COLA plaintiff) he worked only ten years under the setup that he's now trying to preserve.  

So people retiring now "didn't know what they were getting into."  They thought they were getting into something significantly less generous than the status quo.  

And you do realize that post-retirement health care benefits have very little legal protection?  If pension reform is gutted the state can eliminate post-retiree healthcare.

I am saying that if changes are made it should affect new employees only so that they know what they are getting into instead of paying into a system for years and then getting the shaft.

Like I said, changing the system for new employees wrecks the DB system for existing employees and retirees because you lose the contributions from active workers. Jackson Fusion just compared the pension funds to a Ponzi scheme.

@Runner_Guy - While I don't know all of the details concerning the AC employee pensions, there is a current theme that pervades almost all of your posts concerning public expenditures.  That is, for anything that impacts you - directly or indirectly - the cost should be lower and others should bear the cost.  As an example, your constant posts about the unfairness of school funding.  While the funding formula is not fair, it is largely the result of cuts to local aid which you probably indirectly supported by supporting politicians who promised to lower your state income tax.  Another example is this thread where you think that it was okay for the state to use AC sourced revenue when times were good, but now that AC has fallen on hard times, the state says "screw you" to the employees?

You're a one-note pony.  Ironic since you are/were a government employee who expect(s/ed) to receive a government pension.

spontaneous said:

I know that this is about public employees in AC, but AC as a whole is a mess.  AC has run off the backs of the poor for years.  When those casinos were turning profits were the employees making a good living, or were they making just enough to get by?  That is why if you walk just one block off the boardwalk (except for the shopping area of course) you see a city that steeped in poverty. It is the same bull***** that is ruining the rest of the country, the belief that large corporations are good for little people, that they will share the wealth by way of employment. Trickle down economics.  Even today some people refuse to belive that large corporations will use their lowest rung employees for until they are used up and pay as little as possible while doing so, tossing them aside when they no longer serve their purpose with no safety net.

#Preach

it truly is a disaster there. Brand new nice homes a block from the ocean should not cost $200k. Imagine what those homes are worth in a nicer town less than 25 or 30 miles away.

@Runner_Guy - would it be okay if we were speaking about NYC rather than AC?  Would it be okay to gut public employee pensions?

Runner_Guy said:

spontaneous said:

Runner_Guy said:

And if you keep putting the contributions from new and active employees into the pension funds you are destroying any concept of generational equity, since the active employees will never get the benefits they are paying for.  This is stealing.  

  

My husband could make more doing the same job for a private entity.  He works in the public sector for the pension and benefits.  The benefits keep getting cut, co-pays are going up, and the percentage being taken out of his paycheck keeps increasing.

I work in the public sector too, so believe me, I'm sympathetic, but bankruptcy is bankruptcy and if a debtor doesn't have the money what can you do?  NJ can't raise taxes that high above the level of other states and cut public services before we start to endanger the economy.

So if someone paid into the pension system for 10, 20, or even 30 years and suddenly their pension is changed to a 401k then isn't that also stealing?  That is what you are advocating for.

There's a big continuum between maintaining pensions+COLAs at 100% of the current level and just all of a sudden converting them into 401ks.  I pray that the NJ Supreme Court sustains COLA suspension and I hope that we can do something to simply reduce the generosity of existing pensions so that (even with tax increases) the state of NJ has a chance.  

And like I said before, these pension deals have been made more generous to the public sector workers in the middle of their careers.  Since DiFrancesco made the last big increases in generosity around 2001, no one worked 30 years under the present setup.  No one even worked 20 years.  If someone retired in 2011 (like Charles Ouslander the COLA plaintiff) he worked only ten years under the setup that he's now trying to preserve.  

So people retiring now "didn't know what they were getting into."  They thought they were getting into something significantly less generous than the status quo.  

And you do realize that post-retirement health care benefits have very little legal protection?  If pension reform is gutted the state can eliminate post-retiree healthcare.

I am saying that if changes are made it should affect new employees only so that they know what they are getting into instead of paying into a system for years and then getting the shaft.

Like I said, changing the system for new employees wrecks the DB system for existing employees and retirees because you lose the contributions from active workers. Jackson Fusion just compared the pension funds to a Ponzi scheme.

For fear of being misunderstood- in the main you and I agree perhaps more than it appears. Some thoughts, however....

Pension accounting is a massive bear but in their basics they are easy. Contributions from all sources should grow at a rate of return that allows for future benefits to be paid. That's it. If you need new bodies to pay for current bodies you're doing it wrong, either by under contributing or using too high an expected return.

Now, you can keep your current contributions low by assuming a high rate of return. But every year you miss it you become less funded. Eventually there is no escape velocity that is possible and all you can do is cut a massive check, or make sure workers do.

This is why public entities should, from a taxpayer standpoint, get out of the pension business. It's all downside. Over funding a pension means you took money from workers and taxpayers. Underfunding it means you've put a ticking bomb that is only too easy to pass on to future people that will at some point if not addressed explode spectacularly.

I suggest simply throwing a cram down on workers and bond holders both should be undertaken only after all other avenues are explored. It will cost the state a lot more money in the long run if they break those contracts. Workers who have working years left can be laid off, services decreased, etc. A 40 year old worker at least can go get a new gig. A 75 year old retiree is stuck.

regarding the pensions being extravagant when the pensions were set up, it was under the premise that the state was going to contribute 1/3rd and that the state (Whitman), was not going to borrow from it and not repay that borrowed money.

Taxpayers got the benefit from those actions by not having taxes raised. 

It is a contract with the employees and it must be honored.