THE DISCOURSE ON PLAINFIELD FINANCES PART 2

I am not sure what a " Pension Payment Defferal Plan is" (see previous blog) but I am certain that the Pension Payment Deferral Plan that was mentioned at the last Council meeting as part of the solution for what appears to be a 2009 budget delaying income shortfall is wrong.

Obviously taxable income this year can be used to balance a budget that is a disaster due to the Administration's blunder in submitting its proposed budget to the state. But this solution is at the expense of the taxpayers starting with the budget for FY 2010 which starts July 1, 2009.That is 5 months from today.

A November 2003 memorandum from the state says in part.

• After a gradual phase-in period that ends this year, local governments will be required to meet the full annual employer pension obligations for both the PERS and the Police and Fire Retirement systems beginning next year.
  
• This obligation requires a total payment of more than $1 billion by April 1, 2009. This payment puts extraordinary pressure on local property taxpayers and local budgets.
• Governor Corzine has proposed a temporary deferral of next year's payment as a practical bridge over today's economic circumstances.
• After next April, the contributions would be phased up again, from 50 percent of the required contribution in 2009, to 60 percent in 2010, and 80 percent in 2011.
• We will again require 100 percent funding by 2012, payments that will then be larger so as to compensate for the lowered level of contributions over this three-year period.

The NJLM has sent out numerous memos regarding the proposal plan pat has been abstracted:

"The Pension Payment Deferral plan represents the only possibility for new municipal property tax relief from Trenton, this year. The deferral will be especially important for municipalities absorbing, for the first time, the annual increase in their PFRS contribution under the property tax levy cap.

S-7 has been positioned for a floor vote in the Senate since December. On Monday, the Assembly Budget Committee released its companion Pension Payment Deferral bill, A-3688, which is now set for a floor vote in the Assembly. Neither version of the bill will insulate those municipalities willing to fully fund their current liabilities from increased pension costs that will likely result from the deferral.

After two conference calls with the State Treasurer, the Governor’s Chief Counsel and the Director of the Division of Pensions, we know that the Administration hopes for Assembly passage on February 5, with final Senate action to follow on February 23. Given that timetable, the Administration sees no opportunity for amendments. Accordingly, the bill, as currently drafted is the bill the Governor hopes to sign prior to his Budget Address to the Legislature in March.

Local Finance Notice 2008-25, issued December 18, 2008 addressed several elements of this issue:Pending enactment of legislation, local units may proceed to introduce and adopt budgets by appropriating the full pension obligation.

For municipalities and counties, the full amount of PFRS costs must be absorbed as part of both caps. If legislation is enacted, the local unit will be able to invest funds as described above, or in whatever manner is provided for in the final law…

Pending FY 2009 Extraordinary Aid and Special Municipal Aid awards will not be made until this initiative is resolved. It is likely that aid awards will take into account any deferred pension obligations. Therefore, any SFY municipality that will not have adopted their budgets in the next few weeks should issue first quarter estimated tax bills in order to ensure cash flow until budgets are adopted.

In the event legislation is enacted, SFY 2009 municipalities that have already adopted their budgets with the full pension amount will follow the procedure above of paying the final billed amount, and reserving and investing the unspent balance.

CY 2009 municipal budgets will be expected to comply with the final proposal. Those local units desiring to introduce prior to enactment may include 100 percent of current pension billings and amend once the final policy is in place. If legislation is enacted prior to the time these budgets can be amended, amendments will be allowed. Otherwise, the policies described above for SFY 2009 municipalities will apply."

It is clear that if and when this plan is enacted, that it represents a band aid which within 3 years would be very costly to our taxpayers. If this is coupled with the use of the residual mandatory budget surplus,which is designed to meet extraordinary unexpected expenses, it is another unacceptable solution to what appears to be Plainfield's fiscal mismanagement.

Is it not ironic that the self serving CEO mentality in awarding themselves large bonuses for destroying their companies, seem to permeated the thought process of municipal officials in trying to meet today's economic crisis.

No they are not taking bonuses, but they are taking advantage of the taxpayer to mitigate problems they created.


Addenendum: I had planned only a two part discourse but today's has be devoted to facts, therefore I plan to write additionally on the budget and proposed solutions as well as perceptions on the citys financial management. I am sure that this will be controversal.