An Assurance for New Jersey Public Workers on their Pensions

The Christie administration warned potential investors earlier this month that future pension payments — estimated to grow from $1.7 billion next year to about $5.5 billion by 2018 — will drain resources and “create a significant burden on all aspects of the State’s finances.”

“No assurances can be given as to the level of the State’s pension contributions in future fiscal years,” the prospectus reads.

Yet when pension ‘reform’ was passed in 2011 assurances were made and are still being made.

Ill-informed Judgment on Stockton Pensions in Bankruptcy

A judge ruled yesterday that the city of Stockton can go bankrupt.  Next up, what happens to the pensions of Stockton retirees and employees.  Some judge will decide that in the near future without, in all likelihood, possessing the two most pertinent pieces of information.

Defining Actuarial Soundness (a/k/a Making Shit Up)

The Pew Center released a report comparing the pension and OPEB funded status of 61 of the nation’s largest cities in which they continue to insist that 80% funding is fine regardless of what the American Academy of Actuaries might put in an issue brief.

However, in doing research on the study’s numbers, I came across what may be the most outrageous definition of actuarial soundness extant.

New Jersey Pension Reform – A Model for America?

Keith Brainard of NASRA didn’t think so, saying that “New Jersey would make a terrible place on which to base pension policy”:
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whereas our governor in the 30 seconds he devoted to public pensions in his state of the State address sees what New Jersey is doing as a “Model for America”:
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He might be right, but is that a good thing?
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No substitute for ‘whores’

I choose to filter myself here and often thesaurus.com is helpful but when I’m giving a speech I only have about three seconds to decide on my next word before I lose the confidence of the gathering.  So it was last Thursday when I spoke at a New Jersey Taxpayers’ Association meeting and I needed a word to sum up the role of actuaries in the public plan funding fiasco:

The People’s Pension: Designed in secret with bad assumptions

Erica Laursen’s new book about the recent (last 30 years) history of Social Security is a compendium of prior research that provides valuable historical and political perspective on the evolution of a program that is about to abet in the bankruptcy of this country.

As with other books I mark pithy passages as I’m reading and the first three tell a disturbing tale:

Morningstar Misdirection

The Morning Star is a valuable tool to help sailors navigate rough waters but it doesn’t help much beyond providing information.  So it is with the Morningstar, Inc. report on the ‘The State of State Pension Plans’ which helpfully culls data from the actuarial reports of all 50 states.  But then it draws conclusions for you that, if heeded, will lead you right into eye of the tsunami.  For example:

Pension Crisis: Private vs. Public Approach

You really need to be a pension actuary to grasp the full scope of the public pension tsunami about to strike but, even to civilians, the undertow is palpable – so they react.

In the private sector we have Morningstar, Inc., a leading provider of independent investment research, today publishing a  report, “The State of State Pension Plans: A Deep Dive into Shortfalls and Surpluses,” analyzing current data for pension plans administered by all 50 states.  According to an article in Yahoo Finance:

“Our analysis of the fiscal health of state pension plan systems across the country found that creditworthiness varies greatly and is heavily dependent on the funded ratio and the unfunded liability per capita—we look at both key metrics to evaluate each state’s system. We find the UAAL metric useful because it represents the burden on residents, though it isn’t widely used in the industry as an evaluation tool,” said Rachel Barkley, municipal credit analyst for Morningstar. “Not only do state pension plan systems represent the state’s financial obligations, but they are often structured as umbrella plans that also cover employees in the state’s local government bodies. Because pension liabilities represent significant long-term obligations for government entities, pensions are an important element in determining a municipal entity’s credit quality.”

Jeff Westergaard, Morningstar’s director of municipal analytics, added, “We’ve heard much discourse on the subject of pensions over the last few years, resulting in more confusion than clarity on how to view this important area of municipal finance. Our hope is that Morningstar’s analysis will help cut through the clutter and offer logical, clear analysis for investors to understand each state’s situation and the broader implications of their pension system’s financial status.”

Yes it’s a crisis and this private company takes it seriously and has undertaken a project to gather data and educate stakeholders with the goal of seeking solutions.  Contrast that to the public sector where coincidentally the state which Morningstar said has the weakest-funded system, with a 43.4 percent funded ratio and a liability of $6,505 per resident recently came up with their own initiative:

Squeezy’s Gang

As stupid as this might seem to some:
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Squeezy the Pension Python would work if Squeezy were to add some friends to tell the full story.  After all, did the Kroft people send H. R. Pufnstuff out alone?  No they had Witchiepoo, Freddy the Flute and a coterie of overstuffed rodents to flesh out their plot lines which were not nearly as complicated as the pension situation in Illinois* which can be summed up as:

Spineless innumerate politicians, abetted by malleable actuaries, selling out taxpayers and bribing public workers with future benefits so exorbitant as to allow for no possibility of full payment thus creating a crisis necessitating cutbacks in all government services not directly provided by campaign contributors.

Yes Squeezy relates the crisis part but what about a menagerie to tell the rest of the story?

Ding Dong – This Pension is Dead

Hostess Brands, Inc. shut down and I see a scenario where their union pension plans were the reason.  According to a news article there are two major unions at Hostess, IBEW Teamsters, which represents about 7,000 workers, and Bakery, Confectionary, Tobacco Workers and Grain Millers International Union (BCTGM) which represents about 5,000 employees.  I couldn’t find the IBEW plan but the 2011 5500 filing for the BCTGM Multiemployer Pension Fund (This Dead Plan) told me all I needed to know.