Archive for the ‘New Jersesy Pension’ Category

Reason For New Open Space Preservation Tax

The Reason Foundation, in a new policy brief, wonders why, with Pension Costs Soaring, Should New Jersey Commit Billions to More Open Space Preservation?

The New Jersey Legislature is currently considering a bill—Senate Concurrent Resolution 84 (SCR84)—that would amend the state Constitution to dedicate six percent of the state’s Corporation Business Tax revenues from FY2016 to FY2045 for the purpose of open space, farmland and historic preservation, and it would send this amendment on the ballot for voter approval in the next general election (presumably November 2014).

The new funding stream would be used to cover loans or grants for: (1) preserving land for recreation and conservation purposes under the state’s Green Acres program (as well as to expand the “Blue Acres” program to purchase lands in flood-prone areas, or lands that buffer such properties, and demolish all structures and improvements thereon); (2) preserving farmland; (3) preserving historic properties; and (4) covering the administrative costs associated with these efforts.

Yet the state government already owns nearly 15 percent of New Jersey’s total land area outright and, altogether, it has set aside nearly one-third of its total land area as protected open space, according to state figures. That is on par with the amount of total state land area already developed.

It is unclear why additional land preservation is needed when a significant portion of the state is already off-limits to development. Nor is it clear why there is a rush to lock in three decades of massive funding for land preservation when far higher spending priorities—primarily, rapidly rising government retiree pension and debt service costs—loom.

Look at how county Open Space taxes are being spent now and the answer becomes obvious.

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No Governor Schmuck

Every month New Jersey governor Chris Christie goes on the radio to answer selected listeners’ questions.  Yesterday’s program featured the pension issue three times and the clear impression left by the governor was that something big was coming but he could not say what it was though he did hint:

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Pension Padding Payment Perversions

NJ Watchdog has yet another story about an elected official getting a job on the government payroll to obtain the 3 years of higher salaries that would greatly increase their pension.  This is particularly damaging to the New Jersey pension system since it creates massive additional late-service accruals which were not anticipated and, due to the simplistic way contributions are split among localities by overall salary, will not be properly funded.

There are several examples of this scam being played out and though I do not have the particulars on benefits that would be payable to former assemblyman and current Division of Motor Vehicles employee and Christie-backer Larry Chatzidakis there is the example of a former Union County freeholder that would serve just as well.

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Employees Paying For Their Own Pensions In New Jersey?

Alicia H. Munnell, director of the Center for Retirement Research at Boston College, in a WSJ blog believes that benefit cuts for New Jersey retirees should not be considered  in part because “New Jersey benefits for current employees are now significantly below the national average and employees pay most of the costs.”

This statement strikes one as odd since the latest valuation reports show employee contributions at $1.93 billion while government contributions are at $2.98 billion but Ms. Munnell is obviously referring to the annual accrual of benefits known as the Normal Cost which, according to the July 1, 2013 actuarial reports, does show employee contributions covering 65% of that Normal Cost for the five largest plans ($1,874,252,148 out of $2,897,259,254 in this spreadsheet).  But there is a reason for that.

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Doing Nothing For Pensions

At another of New Jersey governor Chris Christie’s town hall meeting on Tuesday it was reported:

Christie compared New Jersey to bankrupt Detroit, saying for the first time the state will be spending more on benefits for retirees than for current employees.

“We are paying more for people who are doing nothing than people doing something,” he said.

Christie said he plans to introduce a plan to address the pension system but did not elaborate.

“We have to worry about the greater good. And wishing it away is not going to make it go away,” he said. “We are going to have this conversation. I am going to force the conversation.”

Two points demand to be made.

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Misbashing Christie

The current issue of the New Yorker magazine leads off with 12 pages of a searing attack on New Jersey Governor Chris Christie that portrays him as a back-stabbing opportunist unqualified for the positions he wheedled or bullied himself into though it does include a couple of obligatory sentences about the ‘good’ things he has done:

Before the bridge scandal, Christie was known as a governor who transcended New Jersey’s reputation for toxic politics and toxic dumps. He took on the exploding costs of the state’s pension system, reformed property taxes, and worked with his opponents in the legislature, and he provided decisive leadership after the devastation of Hurricane Sandy.

If all that were true then this might be more funny than disturbing:

It’s not on all counts.*
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What Dean Baker Got Right and Government Flunkies Get Wrong

Dean Baker on Fox Business makes two excellent points about the public pension crisis (not the one where he denies there is one) when he explains why retirees need to be protected and the dangers of hedge funds:
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New Jersey Politicians Amusing Dean Baker

In a wide-ranging and often insightful interview on Fox Business economist Dean Baker argues the theme that there is no pension crises though when the topic of New Jersey is broached:

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Did New Jersey Actuaries Break the Law?

Look through the recently released July 1, 2013 valuation reports for the New Jersey pension plans that Buck Consultants prepared and you will find an additional Appendix at the very end of each titled “Revised Results of the July 1, 2012 Actuarial Valuation” which, for the State Police Plan for example, starts off:

Chapter 78, P.L. 2011 increased member contributions from 7.50% to 9.00% of salary. Effective with the July 1, 2012 actuarial valuation, the determination of the State’s normal cost contributions have been revised to reflect the use of all member contributions as an offset to the gross normal cost. This was the methodology used to determine the State’s normal cost contribution prior to the enactment of Chapter 78, P.L. 2011 and is consistent with the methodology typically used by contributory public-sector retirement systems to calculate the employer’s normal cost contribution.

No argument that this methodology is generally used for public plans but one of the selling points of the 2011 pension reforms in New Jersey was that the additional contributions that public workers were told to make would go to reduce the deficits the plans had run up, hence the variance in the methodology.

The move has been called devious and disturbing and worse:

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Impeachable Offense?

We have a law in New Jersey that the pension contribution for the fiscal year 7/1/14 – 6/30/15 will be the ARC multiplied by 4/7ths.  The ARC is calculated by added an amortization portion of the unfunded liability to the Annual Cost of benefits accrued in a year and reduced by Employee Contributions up to the percentages deposited prior to the 2011 law change that raised employee contributions.  Those additional contributions are not included in the formula so they can help reduce the underfunding.

This calculated state contribution was set to be $2.4 billion based on July 1, 2012 valuation reports.  Governor Christie in his budget address of February 25, 2014 promised to included the full pension contribution of $2.25 billion without explaining where that reduced figure came from.  The actuarial reports for July 1, 2013 were presented on February 27, 2014 and we now know.

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