December 29th, 2010 13:58 EST
Property Taxes Soaring: New Jersey Faces Highest Allowance Gap in Nation
The State of New Jersey disclosed on Thursday that the unfunded pension liability for state government employees grew from $45.8 billion to $53.9 billion in 2009, an increase of 18 percent.
New Jersey public employee pension funds currently cover some 800,000 workers in seven different pension funds impacting a wide range of government employees, including teachers, police officers, firefighters, judges and a mixed bag of bureaucrats.
The Philadelphia Inquirer noted that New Jersey residents have the largest unfunded pension liabilities in the nation.
New Jersey pension funds now have only 62 percent of the funds necessary to pay future promised obligations, down from 66 percent the year before.
To put this in perspective, pension experts generally recommend that state pensions should be funded to at least 80 percent of their current and future obligations.
New Jersey also has an unfunded obligation of $66.8 billion for health-care costs, in addition to the $53.9 billion unfunded pension liability.
Again, to put this in perspective, the entire state budget for New Jersey this year is $29.4 billion.
Gov. Christie recommended a wide range of changes for New Jersey public employment pensions, including rolling back benefits by as much as 9 percent, increasing the retirement age for teachers from 62 to 65, and requiring all state employees to contribute 8.5 percent of their salaries to the state pension system, instead of the 3 percent some public employees now pay.
Still, even these changes might not be enough to make a meaningful dent on the state`s unfunded pension obligations.
State pension crisis pushing property taxes higher
The crisis in state pensions is cascading into a property-tax crisis.
The Wall Street Journal reported that cities across the nation are raising property taxes, largely to cover rising pension and health-care costs for their employee and retirees.
With state revenue continuing to lag behind projections, states are squeezed to meet pension obligations. The problem is that higher property taxes can end up being self-defeating, forcing homeowners with expensive properties to move to states with lower property taxes, with the result that the state ends up collecting even less tax revenue despite the higher tax rates.
State budget crisis faces nation in 2011
In October, the Center on Budget and Policy Priorities reported that to balance their 2011 budgets, states had to address fiscal year 2011 gaps totaling an estimated $125 billion, or 19 percent of budgets in 46 states.
State tax revenues were 8.4 percent lower in fiscal year 2009 than in 2008, and an additional 3.1 percent lower in 2010, reflecting the worst recession since the 1930s.
"States will continue to struggle to find the revenue needed to support critical public services for a number of years, threatening hundreds of thousands of jobs," the center reported.
The center sees no diminishment in budget problems in 2012.
Already 39 states have projected budget gaps that are expected to total $112 billion for fiscal year 2012, a budget gap that is expected to grow to approximately $140 billion once all states have submitted their 2010 estimates.
Even worse, the federal aid to the states provided by the February 2009 American Recovery and Reinvestment Act and to a smaller extent in the August 2010 jobs bill, estimated at $60 billion in 2011, is expected to decline to $6 billion in 2012.
"Taking all these factors into account, it is reasonable to expect that for 2012, shortfalls are likely to exceed $140 billion with only $6 billion in federal Recovery Act dollars remaining available," the report concluded.
ABOUT THE AUTHOR: Jerome R. Corsi received a Ph.D. from Harvard University in political science in 1972. He is the author of the #1 New York Times bestselling books THE OBAMA NATION: LEFTIST POLITICS AND THE CULT OF PERSONALITY and the co-author of UNFIT FOR COMMAND: SWIFT BOAT VETERANS SPEAK OUT AGAINST JOHN KERRY. He is also the author of AMERICA FOR SALE, THE LATE GREAT U.S.A., and WHY ISRAEL CAN`T WAIT. Currently, Dr. Corsi is a Senior Managing Director in the Financial Services Group at Gilford Securities as well as a senior staff writer for WorldNetDaily.com.
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ABOUT RED ALERT: Jerome Corsi`s RED ALERT is your weekly, global financial strategies newsletter. Designed to be your guide to economic trends in the best of times and the worst of times, it is edited by New York Times best-selling author Jerome Corsi, Senior Managing Director of the Financial Services Group at Gilford Securities as well as a WND senior staff writer and columnist. For 25 years, Corsi worked with banks throughout the U.S. and the world developing financial services marketing companies to assist banks in establishing broker/dealers and insurance subsidiaries to provide financial planning products and services to their retail customers. Corsi developed three third-party financial services marketing firms that reached annual gross sales levels of $1 billion in annuities and equal volume in mutual funds. Corsi received his Ph.D. in political science from Harvard University in 1972.
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