Truth on NJ Fiscal State

Truth in Accounting released a report today on the Financial State of the States based on data provided by the states.

New Jersey came in last based on the numbers but we have two, if not entirely unique at least exaggerated, burdens to bear here that put us in a much worse fiscal position:

1. A property-tax cap that exploded local debt: To keep gravy trains fueled after a 2% tax-cap was enacted in 2010 localities looked to repay campaign bribes with debt that is now sinking Atlantic City with other cities (Roselle) about to follow.
2. Our politicians: Unlike Illinois and Connecticut where politicians are struggling to find solutions (however misguided) to their pension crises, in New Jersey we have a fairly reasonable way forward gathering dust and key positions in government staffed with assholes and miserable pricks (per opening arguments).

Though tragic on its own, this is not the whole story:

What NJEA Bought

On Thursday I witnessed seven of eight Union County politicians, against the will of the majority and common sense, repaying their campaign donors.

Today nj.com focused on the cautionary tale of New Jersey Senate President Stephen Sweeney who crossed the teachers’ union and has wound up fighting against their money. In his defense (and including an astounding admission):

Breaking News on NYS Teamsters Vote and MPRA Update

In checking the US Treasury’s MPRA website today we find that The Western State Office and Professional Employees Pension Fund withdrew their application on August 11 and the result of the New York State Teamsters Conference Pension Fund vote on suspending benefits was released. My prediction had been:

My guess, since there seems to be an effort to get ‘no’ votes, is 10,000 against, 5,000 for, and 20,000 not voting which means the benefit cuts get approved overwhelmingly, 25,000 to 10,000.

How close did I get?

Hedging Bets

New Jersey’s next governor, Phil Murphy, in a facebook town hall had some thoughts on the state’s retirement system investing in hedge funds:
.

.
Without those inflated values that Alternative Investments get to make up the funded ratio of the New Jersey retirement system (by one measure the lowest of any state at 30.9%) would be even lower. And then there is the issue of what hedge funds are into. We got a peek this week.

“Biggest Pension Event In My Lifetime”

My quote from a Reuters article on the voting by participants in the NYS Teamsters Pension Fund to accept benefit cuts:

The vote is “probably the biggest pension event in my lifetime,” said John Bury of Bury and Associates Inc of Union, New Jersey, who advises pension plans.

Here is the reasoning behind that statement.

Daily News Cost: $1 Plus…..

According to the New York Times article:

The Chicago Tribune reported on Monday that Tronc purchased The News for just $1, plus the assumption of liabilities.

….

Under the terms of the deal, Tronc assumes control of The News’s operations, its printing plant in Jersey City and its pension liability. Tronc will also receive a 49.9 percent interest in the 25-acre property overlooking Manhattan where the printing plant is. It was not immediately clear what The News’s pension liabilities were; however, previous reports indicated that they were worth more than $30 million.

As of the end of 2015 the Daily News itself sponsored a 401(k) plan for 1,371 of its employees (1,082 of whom participated) who made total 401(k) deferrals of $6,315,775 which were matched by modest company contributions of $453,476. There was also a Cash Balance Plan with a funded ratio of 105.23% that was closed to most new employees after 1992 and only had 184 active participants. Not much of a pension liability there.

But then it gets murky since it was reported that there were 10 separate unions covering Daily News employees who likely were in multiemployer plans with massive unfunded liabilities. In a prior blog we came up with a list of multiemployer plans sorted by name taken from 5500 filings for 2014. Contributing employers to multiemployer plans are listed in Part V of Schedule R which would make it easy to search efast data except for the fact that Schedule R – Part V information, for some reason, is excluded from what you can download. You have to go to each plan filing individually, guessing at which union Daily News employees might be in, and then seeing if they appear in Part V. Here is the best I could come up with:

Bankruptcy Dominoes: Murrary → UMW → PBGC

Last year Murray Energy was warning of a possible bankruptcy citing the Obama Administration’s war on coal.
.

.
Last week it got closer:

The Trump administration has rejected a coal industry push to issue a rarely used emergency order protecting coal-fired power plants.

The U.S. Department of Energy has decided the order is unnecessary, and the White House agrees, according to The Associated Press.

The Energy Department says it considered issuing the emergency order sought by companies seeking relief for plants it says are overburdened by environmental regulations and market stresses.

President Donald Trump had committed to the measure in private conversations with executives from Murray Energy Corp. and FirstEnergy Solutions Corp. after public events in July and an early August rally in Huntington, according to letters obtained by The Associated Press.

The letters from Murray Energy and its chief executive, Robert Murray, said failing to act would cause thousands of coal miners to be laid off and put the pensions of thousands more in jeopardy. One of Murray’s letters said Trump agreed and told Energy Secretary Rick Perry, “I want this done,” in Murray’s presence.

The pension referred to above is the United Mine Workers of America 1974 Pension Plan which as of June 30, 2016 had 57.5% of its remaining $3.14 billion of trust assets  in alternative investments while running annual payment deficits of over $610 million.

Whereas the Pension Benefit Guaranty Corporation (PBGC) takes over troubled single employer plans (and then goes after 30% of the net worth of the sponsor) with mutiemployer plans they keep the zombie plan propped up so as to be able to keep sucking money out of past employers. That tactic falls apart when bankruptcy enters the picture.

Here are the dominoes: