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Many years ago, before some of us reading this were
even able to vote, a special committee of the state
legislature created a Magic Box.
It was a wonderful thing, indeed.
The idea behind the Box was that it would be a
safe place where hard-working people in the state
could put money into from their salaries. Then, years
later, they would be able to take enough money out of
the box to retire with a modest pension. It was a
well-received idea and to make sure it worked the
State put words like “sound financial investments” and
“compounded interest” into the Box as well.
Then the State committee devised a formula for how
the Box would work. Everyone would contribute 5% of
their income every year into the Box. After 25 years,
they could retire on a pension that was worth 55% of
the money they made in the top three highest paying
years of their employment. They would receive that
amount every year for the rest of their lives.
The State also agreed to put in a matching amount of
money into the box each year that equaled the 5% of
their salaries that was contributed by the workers.
This way the Box would always have enough money to
keep its magic.
Then the State Legislature hired a mathematician to
evaluate the Box.
The mathematician liked the box but he had some
concerns. Appearing before the state legislature in
Trenton
he explained, “I believe the Magic Box can work. But
there are four things we have to be careful about.”
He then went on to explain, “First, you have to
make sure that no one ever takes the money out of the
box. If anyone takes the money out of the box, the
box will lose its magic and nothing will be there when
people go to retire.”
“Second, you have to make sure that the State really
does put its matching payments into the box every
year. If it misses any years, that could take the
magic out of the box.”
“Third, you have to make sure that the box is not
abused. I am concerned that some people, when they
are about to retire, will try to bend the rules to
make sure they make a lot more money in their last
three years so that they get to take much more money
out of the box than they ever put in. I’m also
worried that some people will hold more than one state
job at the same time- inflating their pensions. I'm
afraid that both of these abuses could also jeopardize
the health of the Box and take the magic out of it.”
“Fourth, I'm not sure that the figures we’re using
are going to work. What if salaries triple over the
next 25 years because of inflation? What if people
live longer? Or what happens if the box loses some of
its value? I’m not sure that putting in 5% for 25
years can really result in a box with enough magic
that can give us back 55% of the money we make in our
top three years for the rest of our lives.”
The state committee listened to the mathematician's
concerns but concluded that since it was a Magic
Box they really didn't have anything to worry about.
For many years, everything went fine with the Box.
The state economy flourished and no one was concerned.
But then one year the state unexpectedly was faced
with an extreme budget deficit. The Governor and the
members of the legislature decided they needed to get
a lot of money from somewhere quickly. Someone
suggested they take it from the Box. “After all,”
said the Governor, “it is a Magic Box.”
So the state borrowed a lot of money from the
Magic Box. In fact, they emptied it. No one was
concerned except the mathematician, although no one
really wanted to hear what he had to say.
Furthermore, the very abuses he worried about were
starting to take place. Some people who were about to
retire had powerful friends who could give them a lot
of overtime to work in their last three years of
employment so that when they retired they would get
huge pensions that were totally disproportionate to
what they had contributed over the years. Other people
‘double dipped’ with two, three and sometimes even
four jobs at the same time upon which their pensions
would be based.
The mathematician tried to voice objections when he
discovered this, but it seemed that everyone he told
just got angry at him.
Shortly thereafter the State had another budget
deficit and not only did they take more money out of
the box, they altogether stopped putting money into
it.
Then the unthinkable happened. A tragedy hit the
nation and the economy suffered a major setback.
Suddenly the Magic Box, and magic boxes everywhere,
began to lose their magic.
It was a very bad time for this to happen. Many
people who had put their money into the box were just
about to retire. They were counting on their
pensions. And now there was no money in the box.
The politicians weren't sure what to do. The
people who put the money in the box were
understandably upset. It wasn't their fault the box
lost their money. They weren’t the ones who took the
money out of it. And most of the hard-working state
employees did not abuse the system. It was just a few
who did.
But the few people who did abuse the system, along
with the declining health of the box, now created a
real problem. There was no money in the box and
pensions had to be paid. Taxpayers became outraged
when the government proclaimed that it would have to
raise taxes to pay for the pensions. “That’s what the
Magic Box was for,” the taxpayers screamed.
The state legislature went to the mathematician
and asked him if he would evaluate the Box once again.
The mathematician said that he could but it would take
a lot of time. The State said to him, “We will pay
you overtime. How much time do you think it will
take?”
The mathematician was an honest person, but he knew
it would take a lot of overtime. So he told them;
“Maybe an extra hundred hours a week- for a few
years.” He also told them that maybe they didn't
really need him to do all this work.
But the State insisted and the mathematician
finally agreed to work 100 hours of overtime a week
for as long as it took to correctly evaluate the
situation. As it turned out, it took three years. The
last three years of the mathematician's 25 years of
service to the state.
But the mathematician did his work and finally came
up with a solution. He addressed the State
Legislature solemnly. “The solution I see,” said the
mathematician, “is to stop abusing the box, stop
taking money out of it, put the money back into it
that belongs there and come up with a formula that can
sustain the system.”
“The good news is,” he went on, “I believe we can
do it.
New Jersey
is a state with many great leaders, from our mayors
and councils locally to the legislature and the
Governor’s office on a state level. But we need new
ideas, creativity, a clear vision for the future and
we all have to work together as a team. Plus, we’re
going to have to stop thinking about magic and
everyone will have to share in the burden of
rebuilding the health of the Box.” The moment the
mathematician said that last line he was asked to
leave the floor.
It seems that the State wanted the mathematician to
figure out how to put the magic back into the
box, not to give them lectures about how people should
share in the burden of repairing a Box that had no
more magic.
The mathematician shrugged his shoulders and
regretted that he couldn't do a better job of fixing
the Box. But it wasn't a total loss for him. After 25
years of service, with 100 hours of overtime in his
last three years, the mathematician was able to retire
on a nice pension of $100,000 a year. Which he
promptly did, and then quickly moved to the state of
Florida to live out his days. It was almost
like magic! |
