Pushing Public Employees to Retire

School superintendents are by far the highest paid government employees in New Jersey, making even more than heads of some Utilities Authorities, though they do need to come to work occasionally.

Governor Christie makes $175,000 in salary so in 2010 he imposed that as a prospective cap on superintendent salaries.

In an article today, a purported blowback example is provided in the retirement of Judith Wilson who has 35 years of service with a salary of about $225,000 and is retiring on a pension of $144,000 at age 56 rather than swallow a pay cut.  What that writer is missing…..

Not the Path but the Driver

Yet politicians’ current approach to evading such opposition—that of adopting incremental reforms while repeatedly deferring liabilities—is no longer viable.

The structural defects of defined-benefit plans, as well as their implication in a system of decision making impaired by political considerations, necessitate a wholesale shift from defined-benefit to defined-contribution plans.

Fixing the Public Sector Pension Problem: The (True) Path to Long-Term Reform

The quotes come from a well-reasoned paper by Richard C. Dreyfuss setting out the problem, debunking faux solutions, and offering a five-point plan for comprehensive reform that I too advocate as obvious. The problem is not with the proposed reforms, which are viable, but with those who would be charged with implementing them, like this guy:

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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Don’t Frighten the Children (about Illinois Pensions)

Illinois public pension plans are in critical financial condition and were benefits valued using reasonable assumptions the picture would be even worse.  So what is Illinois doing about this?  Last summer the state hired an outside actuarial firm to “review assumptions and valuations prepared by actuaries retained by the boards of trustees of the State-funded retirement systems….and…recommend changes.”

Recently released was their work product, all 190 pages, though only these three pages are likely to be read and only this line likely to be publicized:

“Cheiron reviewed the actuarial assumptions used in each of the five systems’ actuarial valuations and concluded that they were reasonable.”

Which is what they were paid to conclude. However though Cheiron avers that “the interest rate assumptions for each of the five systems were reasonable at this time…..for three of the systems (TRS, SURS, and SERS), Cheiron recommended that the Boards consider lowering the interest rate assumption in the future.”

Those interest rates are: TRS – 8%; SURS – 7.75%; SERS: 7.75%;
The others: JRS: 7%; GARS: 7%

Though most people aren’t qualified (or inclined) to read through the report and argue actuarial concepts, there are some obvious questions that would give even a child* pause:

Explaining the Public Pension Accrual Freeze Idea

William Baldwin of Forbes wrote of states in a death spiral and, when questioned by Stuart Varney on how states could slow down the spinning, focused on a solution that we at the NJTA had already proposed:

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:

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:

Election Recap: IV + BS = SOS

Mix Ignorant Voters with a Broken System and you get the election results we got last week which changed nothing, chastised nobody, and were a disaster for real public pension reform in this nation.

In Oregon, Montana, New Hampshire, and San Diego candidates who proposed moving public employees into Defined Contribution plans were defeated.  In New Jersey a feel-good public question upbraiding judges passed easily though it will have no significant effect on funding levels.  But the height of irrelevance in reform might have occurred in Illinois where Public Pension Amendment, HJRCA 49 was voted down, 1,748,601 No Votes to $2,213,269 Yes votes.

New Jersey Judges Get Schooled in the Constitution

Put a ballot question to New Jersey voters and it usually gets mindlessly passed*.  Of the 102 public questions since 1980 (as gleaned from this wonderful website), 93 have passed but in only two instances has the margins been as great as  the 83% for 2012 Public Question #2 to “approve an amendment to the New Jersey Constitution, as agreed to by the Legislature, to allow contributions set by law to be taken from the salaries of Supreme Court Justices and Superior Court Judges for their employee benefits”.  In 1984 86% of voters wanted Senior Citizen clubs to be able to run raffles and in 1991 85% of voters wanted to “entitle crime victims to fairness, compassion and respect by the criminal justice system.”

What does this mean for judges in New Jersey?

Eggheads’ Cracked Reasoning

All the good Joshua Rauh and Robert Novy-Marx have done in spotlighting the real unfunded liabilities public pension systems are accruing (albeit through a fallacious riskless rate theory) could be undone as the two professors, in a recent book of essays edited by Aaron S. Edlin and Joseph E. Stiglitz, offer their solution – more debt and a Defined Contribution Plan for future employees – that would be even more disastrous if taken seriously.