Ramblin’ Guvs

New Jersey has a pension funding crisis and the local media is providing venues for discussion. In the last week outgoing governor Christie and incoming governor Murphy got a chance to weigh in on the issue though they most obviously were not asked about the numbers or anything that would give context to the the conversation.

Watch these video excertps and see if you can make out any trace of a cogent strategy in any of them.
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Pension Relief and A Circumcision of the Heart

I am at my local SB, as I often do before going to my office.  I love sitting and watching out to Ventura Blvd (in winter), as my City of Angels wakes.

I have recently moved into my fifth decade, not retired but closer than I ever thought I would be.  I have neither want nor hunger.  My present and future are secure.  I know I am blessed and see so few can say the same.  When I travel the nation I find many that have been good citizens; voted, given an honest day of labor for a wage, and pay taxes only to have their retirements wiped out.  Can any financial, economic, or academic credential help to sympathize?

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Lame Pension Legislation in NJ

S3620 is being fast-tracked in the New Jersey legislature:

Identical Bill Number: A5322

Cunningham, Sandra B.   as Primary Sponsor

12/11/2017 Introduced in the Senate, Referred to Senate Budget and Appropriations Committee
12/14/2017 Reported from Senate Committee with Amendments, 2nd ReadingIntroduced – – 11 pages PDF Format    HTML Format
Committee Voting:
SBA  12/14/2017  –  r/Sca  –  Yes {9}  No {2}  Not Voting {1}  Abstains {1}  –  Roll Call

Sarlo, Paul A. (C) – Yes Stack, Brian P. (V) – Yes Beck, Jennifer – No
Bell, Colin – Yes Bucco, Anthony R. – Yes Corrado, Kristin M. – No
Cunningham, Sandra B. – Yes Diegnan, Patrick J., Jr. – Yes Greenstein, Linda R. – Yes
Madden, Fred H., Jr. – Yes Oroho, Steven V. – Not Voting Thompson, Samuel D. – Abstain
Van Drew, Jeff – Yes

According to nj.com:

The bill comes as New Jersey’s public-worker pension system faces nearly $90 billion in unfunded liabilities, according to a report released by a state commission this month. It is one of the worst-funded in the U.S.

But Democratic leaders told reporters Thursday that the fiscal impact of the bill will be minimal because it benefits so few people.

Those few people who would benefit:

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ALEC Has It At $6 Trillion*

The American Legislative Exchange Council (ALEC) came out with a report this week based on reviewing the latest available actuarial valuations of more than 280 state-administered pension plans and adjusting the discount rate from an average of about 7.37% to a ‘riskless’ rate of of 2.142%.

I disagree with the methodology since I believe the funded status of a particular plan should be considered when adjusting the wishful discount rates that the plan actuaries who politicians hire are ‘encouraged’ to use.  That is, a plan closer to full funding should be able to use a rate closer to that 7.37% while a pure pay-go plan (Puerto Rico) should use a rate closer to 0% since that is about what they are getting for the few days any money stays in the trust.

Nevertheless there were some nice charts ranking states by Funded Ratio, Unfunded Liabilities, and Unfunded Liabilities Per Capita.  However, I did not see where they had the underlying data so, based on those charts, I decided to extract some other numbers.

Here is the spreadsheet sorted by state and totaled which yields:

  • Total Accrued Liabilities: $9.08 trillion
  • Total Assets: $3.06 trillion
  • Unfunded Liabilities: $6.02 trillion
  • Average Funded Ratio: 33.7%
  • Average Unfunded Per Capita: $18,676
  • US Population: 322.4 million

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* Basically slight rewording with link and spreadsheet updates from a blog last year.

Fitch Rates State Pensions

So which state has the highest pension burden among all 50 states?

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Pension Relief, Reforms and the Federal Reserve (Part 2)

In part 1 I looked at common myths, such as does the Federal Reserve print money?  NO, Treasury does.

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Pension Relief, Reforms and the Federal Reserve (Part 1)

Last night I received a call from a commenter.  He was able to tell me where my theory needed more explanation.  Any commenters are welcome to call anytime.  This caller was convinced that anything he did not know was immaterial, a dangerous yet common belief.

We are facing some hard and complex problems, not the least of which is a tremendous amount of false information.  Let’s start with clearing up wrong information.

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