Christie’s Shenanigans


To look at Christie is to suspect that one is viewing a future national leader.  It may not make much sense, but that does not invalidate the feeling……In the long perspective…[Christie] certainly expects that this pension business will attain no status beyond that of a footnote.

Shenanigans by Peter Christensen; (page 11)

That was 1998 and that Christie flamed out but the points made by Peter Christensen, an actuary working for the NJEA, on the New Jersey pension crisis then are worth revisiting:

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Who’s Being Fooled Here?


In boasting about fiscal responsibility New Jersey Governor Christie likes to point out that he has (or by next June will have) put more money into the pension system than any other governor in state history:
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But what he leaves out, which the state’s bond disclosure filing does not, is:

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Expect NJ Pension Panel to Peg Underfunding at $60 – $90 Billion


Detroit had pensions funded at 96.1% but wanted lower numbers to justify benefit cuts and they got them by hiring another actuarial firm to provide those numbers.

New Jersey has the same need to cut benefits and, according to a state bond document filed yesterday, they are using their pension panel to do it (from page I-52):

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Christie: Downgrades “a great referendum on my fiscal policies”


When Chris Christie came into office in 2010 New Jersey’s bond ratings were AA with Fitch, AA2 with Moody’s and AA with S&P (the third highest for all three agencies and, as best I can tell, the same ratings New Jersey long-term bonds had since the last round of McGreevey downgrades in 2002).

That same year of 2010 New Jersey municipalities led the nation in bond-rating downgrades and, according to one story, Christie could not have been more pleased:

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Who Fitch Really Downgraded – Again*


New Jersey’s bond rating have been downgraded seven times during the Christie administration with ratings agencies citing retirement benefit costs each time:

2/9/11 S&P Downgrade: AA- from AA

4/27/11 Moody’s Downgrade: AA3 from AA2

8/18/11 Fitch Downgrade: AA- from AA

4/9/14 S&P Downgrade: A+ from AA-

5/1/14 Fitch Downgrade: A+ from AA-

5/14/14 Moodys Downgrade: A1 from AA3

9/5/14 Fitch Downgrade: A from A+

The explanation of New Jersey’s most recent bond rating downgrade includes:

Above-average state debt obligations are compounded by significant and growing funding needs for the state’s unfunded retirement liabilities. Continued pension funded ratio deterioration is projected through the medium term and full actuarial funding of the required contributions is several years off.

It was the employee benefit liabilities yet only three years  ago the State Senate president assured us:

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that the recent reform ‘clearly fixes the problem.”

Why didn’t Fitch believe him?

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More Downgrades To Come


If governments are allowed to break pension contracts because they don’t feel like paying the costs, then the bond holders are in the cross hairs too.

Richard – comment to Another Downgrade

According to documents filed this week by New Jersey defending the state’s refusal to pay a large portion of an already understated pension contribution, defaulting on bondholders was considered.  Page 4 of that brief makes that fact clear:

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Another Downgrade


Another downgrade of New Jersey’s debt and Fitch blames pensions and OPEBs that the state is incapable of fixing, freezing, or funding.

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