Steve Sweeney's Pension Loan Plan: File Under "Impossible Things"

Senate President Steve Sweeney has come out with a plan for the Federal Reserve to set up a $1 trillion loan program to assist distressed pension plans like New Jersey's. Sweeney asserts that his loan program would not be a "bailout," since the money would be repaid at 1% interest. He says that saving distressed pension plans is only fair since the federal government put in huge amounts of money to save the financial system and the Detroit automakers.

Sweeney argues that the loans could save pension funds because states could invest the money and earn higher returns than what the interest payments would be.

Assembly Speaker Vincent Prieto has not committed to the plan. However, Wendell Steinhauer of the NJEA has praised the plan. “Math teacher here, the numbers are working.”

Christie has said that the real solution is to reduce benefits for retired public employees. “The simple fact is that we have a system where a NJEA member retiring in just a few years contributes just $126,000 to their pension and health-benefit costs over 30 years and takes out $2.4 million in benefits." Christie, through a spokesperson disagreed on the math. "The math does not work at all. That is the fundamental problem that needs to be solved.”

Carl Golden of NJSpotlight interprets this plan as a more effective way to help Steve Sweeney's gubernatorial aspirations than it is to save NJ's fiscal situation.  Sweeney was the president of an ironworkers union and is disliked by the public sector unions.  After Sweeney said that public sector workers should take a paycut in 2006 he was dubbed a "right wing Republican."  Sweeney supported the 2011 pension reform which reduced pension benefits and increase employee contributions, an act that infuriated public sector workers and which they have not forgotten.

Senate President Steve Sweeney’s idea to overcome the unfunded liability in New Jersey’s pension and health benefits system by borrowing $50 billion from the federal government is likely dead on arrival on Capitol Hill (if it gets that far). 

But the immediate and chief beneficiary is Sweeney himself as he continues to shore up his relationship with organized labor in general and public-employee unions in particular in anticipation of a run for the Democratic gubernatorial nomination in 2017.

Whatever the merits of Sweeney's plan are it has no chance in Washington. Sweeney says this isn't a bailout, but where Senators and Representatives from states more responsible than New Jersey will disagree and reject it.  Remember, the bailout of the finance industry originally was rejected by the House of Representatives and only passed after a cataclysmic drop in the stock market and imminent financial catastrophe.

I have no idea how NJ's pension crisis is going to end, but it's going to be terrible for the schools.