By Chief Political Correspondent Michael Aron
NJ Today
Could a Detroit-style bankruptcy happen in Camden, the second poorest city in the nation?
Could it happen in Newark, which has experienced chronic budget shortfalls in recent years?
No, say the experts, because within the Department of Community Affairs in Trenton there’s a division whose job it is to make sure that never happens.
Marc Pfeiffer was its deputy director for many years.
“The easy answer is that it can’t happen here because of the oversight process that state has had in place for just about 80 years,” Pfeiffer said.
The Division of Local Government Services and its companion, the Local Finance Board, reviews every municipal budget every year.
It limits the amount of debt towns can incur. It licenses municipal finance officers. And if a town does get into fiscal trouble, the division steps in with financial assistance.
“We’ve had a program in since the late ’80s where we can provide supplemental state assistance but that’s accompanied with state oversight. The current program, called transitional aid, involves memorandums of understanding which include state monitors and controls on how municipalities spend their money,” Pfeiffer said.
At the state League of Municipalities, Government Affairs Director Mike Cerra ticks off a similar list of safeguards.
“And also the local budgets are subject to review on an annual basis by the state, the Division of Local Government Services. So if there are any red flags, the state can interject on the front end of the process long before bankruptcy is even an option,” Cerra said.
“You may remember, Michael, in the late ’90s, Mayor Milton Milam of Camden. At one point, he marched down to federal bankruptcy court and attempted to file bankruptcy for the city of Camden in order to avoid state supervision of the city. That resulted in the federal bankruptcy judge throwing him out and sending him back to the state,” Pfeiffer said.
But if bankruptcy is unlikely, are the pensions of public agency retirees in New Jersey in any jeopardy the way they are in Detroit?
Former State Pensions Director Fred Beaver said today, “Under the constitution, pensions are firmly protected. There have already been court rulings that you can’t diminish benefits that have accrued to date.”
“Any problem that may occur are usually headed off early on,” Cerra said. “Detroit can’t happen here.”
Since 2003, Cerra said, 20 local and county governments in the nation have declared bankruptcy. And although we used to hear sometimes that the state was bankrupt, under the federal constitution, localities can declare bankruptcy but the 50 states cannot.