Tuesday, August 4, 2009

In The Hole

Following up on today's earlier post, I found this post on NJ's underfunded pensions from Harvard University's Kennedy School of Government lecturer and former assistant secretary in the U.S. Treasury Department Thomas J. Healey interesting:

New Jersey is on the cusp of a public pension crisis that could dwarf the $3.5 billion to $4 billion funding shortfall projected by Gov. Jon Corzine in October. Although the figures are obscured by current accounting rules, a detailed examination shows that New Jersey actually faces a potential $80 billion pension shortfall (not even counting the more than $20 billion in losses from the current stock market free-fall) and $50 billion in unfunded post-retirement medical and prescription drug benefits.

This total unfunded liability of $130 billion is more than four times the state's 2008 fiscal year budget, and represents a shortfall of around $44,000 for every household in the state. It's fair to conclude that sooner or later, someone -- almost certainly the taxpayer -- will be forced to shoulder this staggering fiscal burden.

This Explains A Lot

Barry Ritholtz posts today about a New Jersey firefighter stuck as the only tenant in a Florida high-rise condo. Although Ritholtz focused on the real estate aspect of the story, a few of the commenters on the story itself wondered how exactly a firefighter could afford the $430,000 vacation home. The answer is simple: he works in New Jersey.

According to a public salary database at the Asbury Park Press, the firefighter made $152,210 last year ($117,612 from the fire department plus $34,598 from the town). Even better, the firefighter, now 45 years old, plans to retire in four years. Assuming the standard 25 years of service, he'll pull down 65% of that salary -- or $98,936.5 per year -- in retirement, plus of cost-of-living adjustments (and likely full medical benefits, too).

Obviously, firefighters are putting their lives on the line, so I'm not complaining about them specifically. But when you expand these sort of salaries and benefits to policemen, teachers, and every other state and local employee, it adds up. It's no wonder that, according to the Tax Foundation, New Jersey ranks first out of all 50 states in terms of individual state and local tax burdens, while also having the worst tax climate for businesses in the country.

UPDATED: Included salary breakdown.