Municipal bankruptcy rumors have been swirling in past years, as some parts of the country struggle more than others with the slow pace of recovery from the recession. But Detroit's move to seek bankruptcy protection has reignited fears about the likelihood of such an event taking place in other locations where cash is short and problems long — such as New Jersey.
It's not likely to happen here. While critics like to point out how many jobs and companies have left the state in recent years, it's nothing like the decades-long bleeding in Detroit, where the departure of auto manufacturers has compounded other urban blight issues, shrinking the city to roughly half its 1950s peak. New Jersey doesn't have as many eggs in a single basket, making it more resistant to a downturn; its cities haven't contracted to the degree that Detroit has; and it aggressively manages its funds.
Still, there are warning signs out there that New Jersey would do well to act upon. Chief among them is the staggering cost of pensions. On the private-sector side, generous pensions have long been identified as a big cost driver for automakers that hastened the industry's decline. On the government side, future costs — and how they'll be met — have people in New Jersey and the country as a whole nervous.
The good news is, Chris Christie has helped take a huge step forward in this area, stemming from his 2011 reforms and benefits cuts that he pushed through the Legislature. Those cuts are projected to save $130 billion over the next three decades, and while they generated plenty of kicking and screaming from employees on the state payroll, they are vital to the future fiscal health of the state. If you look at what the Chapter 9 filing in Detroit is going to cost, you get a real sense of the value of bringing such foresight to the table.
Ultimately, though, the state is going to need to seek more concessions from its public-sector workforce, and not as far in the future as we might hope. We hope the Legislature keeps this conversation at the forefront, rather than settling to kick the can down the road as so many past governors have done.
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