New Jersey Last Again

This time it is in the Pew Charitable Trusts long-term analysis of how well state revenues matched expenses between fiscal years 2002 and 2015 which concluded:

New Jersey had the largest deficit, with aggregate revenue able to cover only 92.4 percent of aggregate expenses, followed by Illinois (94.3 percent). They were the only two states with aggregate shortfalls exceeding 5 percent of total expenses, and the only ones with annual deficits in each of the 14 years.

 

The Pew report went on to clarify:

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Mercatus Mushrooming Costs

Ranking states by fiscal condition, as the Mercatus Center has done for FY12, FY13, FY14, and now FY15 based on state data reports, gives us a clue as to what an apathetic public might owe for public pensions, retiree health care benefits (OPEBs), and regular debt but since factors for calculating the values of pensions and OPEBs are questionable (and likely understated) while repudiation is probable to varying degrees the public remains mostly in the dark there.

Whereas borrowing by states in the bond market is relatively transparent, benefit costs fall prey to the actuarial/political delusion machine resulting in this trend:

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More on Mercatus Rankings of the States

The Mercatus Center ranking of the fiscal condition of the states included spreadsheets on unfunded OPEB and pension liabilities (using ‘risk-free’ rates) that approach a total of $6 trillion:

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Mercatus State Ranks – 2017

The Mercatus Center just released their 2017 ranking of states by fiscal condition:

Based on the FY 2015 comprehensive annual financial reports of the 50 states, this study ranks states’ fiscal solvency using 13 metrics that assess the extent to which the states can pay short-term bills and meet longer-term obligations. State finances are analyzed according to five categories of solvency: cash, budget, long-run, service-level, and trust fund. These five categories are combined to produce an overall ranking of state fiscal solvency.

New Jersey solidified its hold as the worst of the worst with a per capita debt of $16,821, compared with a nationwide average of $4,272 and $12,118 for fiscal basket-case Illinois, but with an explanation:
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Public Plans Data: 15-Year Trend

When reviewing the numbers collected by the Public Plans Data people from state and local government CAFRs and actuarial valuations you have to consider the purpose of those calculations (to develop low-ball contributions). With that in mind a clear trend is visible over those 15 years.

From the earliest year (2001 in most cases) of data to the latest (2016 for most) the plans went from $40 billion in excess assets to a deficit of $1.33 trillion with the combined funded ratio going from 101.84% to 72.04%.

These plans improved their funding:

  • DC Police & Fire: 91.61% to 110.8%
  • Louisiana State Parochial Employees: 92.29% to 97.21%
  • Oklahoma PERS: 82.6% to 93.2%
  • Oklahoma Police: 91.4% to 98.7%
  • South Dakota RS: 96.4% to 100%
  • TN Political Subdivisions: 90.36% to 98.79%
  • West Virginia Teachers: 21% to 65.41%

While everywhere else the funding situation worsened, led by…..

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Nothing Bold on Horizon

Kudos to Steve Adubato for focusing on public pensions in New Jersey on his State of Affairs program, as in this week’s discussion with Alfred Doblin, Editorial Page Editor of The Record;
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Brickbats for the three-minute time limits and propagating pension newspeak:

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Public Plans Data Takeaway: Bad Actuarial Assumptions

The numbers collected by the Public Plans Data people have the helpful features of an interactive data browser that goes back to 2001 from which we can compare the worst funded plans in 2001 when the total combined funded ratio was 102.02% for the 161 plans in the survey to the latest data (a combination of 2015 and 2016) for 170 plans with a total funded ratio of 74.33%.

There have been several sham explanations for this drop (market crashes, missed contributions) but this fifteen-year period has also seen extraordinary earnings growth (especially in alternative investments) with several public retirement systems actually cutting benefits and most governments putting in their full required contributions.

The real reason…..

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