Media’s foggy filter on pension issues

The Newark Star Ledger again editorialized about the dire funded status of New Jersey’s public pension plans and again they disseminated false information.

There was the promulgation of that understated $54 billion shortfall that no independent actuary would ever sign on to as well as the claim that “Christie and Sweeney would both reduce pension benefits” when there has been absolutely no movement toward touching benefits already accrued which represent the real problem.  However, another lie propagated was more subtle:

In his state of the State address Governor Christie did claim that there was an independent study that  said New Jersey would be one of eleven states whose pension plans would run out of money by 2020:

That reference was to a study by Joshua Rauh of Northwestern and Robert Nowy-Marx of the University of Chicago.  New Jersey was indeed on their list. They were tied with Illinois for third with a projected bankruptcy date of 2018.

Had Governor Christie claimed that New Jersey was on a list of 40 states whose pensions would run out of money by 2030 (another ‘true’ statement) would the media be using a 2030 drop-dead date for New Jersey?

How about if the state legislature passed a law to raise the interest assumption to be used for funding from 8.25% to 10%.  Would state and local pensions then be underfunded by at least $24 billion?

This is not to suggest that the Star Ledger should leave off editorializing on the dire state of the state pension but rather that some context be provided, perhaps through a footnote along the lines of:

The numbers herein are provided by politicians, through their paid stooges, who have powerful incentives to lie about them.  We do not possess the wherewithal to refute their distortions nor the inclination to call them out as liars for fear that they will pull their legal ads from this paper.

7 responses to this post.

  1. Posted by skip3house on March 6, 2011 at 2:56 pm

    Hey, I used your name in a comment posted in this “empty’ editorial by Star-Ledger, a lot earlier today.

    Reply

  2. Posted by eric blair on March 6, 2011 at 5:28 pm

    Dear Mr. Bury,

    Have you contacted the Star Ledger to lay out your case for the NJ pension system becoming depleted by about 2014 (I think this was your time frame assuming no major contributions by the state)?

    Also, do you have any idea why the editorial made no mention of the health care liability (which I think is also nearly $55 billion)?

    Reply

    • That 2014 date was my wild guess as to when the assets remaining in the plan would all be attributable to the employees own contributions (including those for retirees who haven’t received full repayment). That’s my definition of bankruptcy. By another definition, when the money left can only pay retirees, we’re already there. The 2018 date that professors Rauh and Nowy-Marx reference is when all the money (including employee contributions) are gone.

      I occasionally send in letters to the editor but the Star Ledger is a business for whom the state pension is just another issue that might sell papers. It’s no different to them than covering Snookie at the Jersey Shore except for the level of expertise they bring to the topic.

      Health care is a separate issue for several reasons. As regards putting a number on it, the value is impossible to predict especially since there is no fund. It could cost $5 billion this year but it’s not as if there is money set aside earning interest to pay for next year’s liability. It’s all new taxes to pay prior workers. That’s why you can’t think in terms of some big present value number. You need to think in terms of how much of the tax base will have to be siphoned off each year to pay for nothing (no new services).

      Reply

  3. Posted by muni-man on March 6, 2011 at 6:00 pm

    I want CC to start dingin’ them for 30%+ of their healthcare premiums NOW. That’s the major driver of property tax increases.
    Give them a BASIC plan only with an annual employer contribution cap of $6K (individual plan) and $8K (family plan). They pay the rest of the freight.

    Forget about the pension plans. They’re toast and someone will be forced to ‘fess up to that eventually (unless of course they’re gonna try to raise property taxes on everyone by 500% or so for a decade to fund them). That’ll have legs for sure. Develop an exit strategy and close them down before they hit death spiral status.

    Reply

  4. Posted by brooklyn91941 on March 7, 2011 at 6:09 pm

    I guess when the first check bounces they’ll recognize the crisis. This game of chicken will go as long as the public elects people that just pander.

    Reply

  5. Posted by speedo on October 8, 2011 at 7:24 pm

    I have read where quite a few hedge funds have lost 50% or more last year .I know our pension gave some money toa hedge fund do you know which one ?

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: