Pension Black Magic

What you get out of this discussion on Reporters Roundtable this morning about the scheme to move the New Jersey lottery into the pension system is confusion about how this will save any money:


  • black magic
  • counterintuitive
  • found money

Not really. Here’s the deal…..

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Cost of OPEB (and Apathy)

Union County Director of Finance Lawrence Caroselli shortly before he retired (with free lifetime health benefits).

State governments contributed $18 billion to their retiree health costs in FY2015,  42% of their annual required contributions, according to a new brief by the National Association of State Retirement Administrators (NASRA) and the Center for State and Local Government Excellence (SLGE) which ranks the states based on total Unfunded Actuarial Accrued Liabilities (UAAL) for these Other Postemployment Benefits (OPEB) and Percentage of State Spending with this warning:

FY 15 spending on OPEB in New York and California was below 2 percent, despite both states reporting relatively high UAAL and annual expenditures. By contrast, FY 15 spending on OPEB in Alaska and Hawaii was above 4 percent of spending, despite comparatively lower UAAL and annual expenditures in both states.

No such explanatory footnote for the state that is tops in both categories:
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Rauh Update

Joshua D. Rauh of the Hoover Institution released his second annual report studying 649 public pension systems and here are some excerpts of note:
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Why Lottery Charade

Another stupid pension faux-fix for the New Jersey retirement system:

Broadly, New Jersey’s lottery will become an asset of the pension fund, just like all of the fund’s stocks, bonds and other investments.

The state hired an outside consultant to determine the value of the fund, and it came back with $13.5 billion. That would immediately slash the state’s pension debt. Treasurer Ford Scudder said the valuation will be updated regularly.

Over the next 30 years, the revenue generated from ticket sales would add $37 billion to the pension fund. The lottery would revert to the state budget after those 30 years.

Why the charade?

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This week saw the re-rollout of the Keep Our Pension Promises Act (KOPPA) which will likely go nowhere but it does give us an insight into how a law might get passed these days.

First, start off with a false premise:

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Evading the NJ Pension Issue

Another New Jersey gubernatorial debate (this one for Democrats only) with the pension issue brought up and evaded.
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Breaking News: Automotive Industries Pension Fund Gets MPRA Letter

On September 27, 2016 trustees of the Automotive Industries Pension Fund out of Alameda, CA became the tenth multiemployer (union) plan (and with 25,834 participants the third largest) to file for benefit cuts under MPRA in an attempt to avoid insolvency.  In a letter dated yesterday they got their response:

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