Will New Accounting Rules Force NJ to Put Billions More Into Pension Payments?

That’s the headline on a story posted today on www.njspotlight.com which recounted some interesting funding history that should have made the answer to the headline question obvious:

No way in Hell is New Jersey going to fund their pension properly!  The money isn’t there to fund it and the will isn’t there to face the true liabilities.  The state will  ignore contract law before they put in more than they feel like contributing, which is the practical translation of this paragraph from the article:

Pratt said the state would comply with GASB reporting requirements, but that the amount of money the state will put into the pension system in future years will be determined, as always, by the state treasurer.

The situation is summed up well at the end of the article:

Douglas Forrester, the former New Jersey Division of Pensions director who ran as the GOP candidate for governor in 2005, praised the Governmental Accounting Standards Board for setting out the new standards for adoption later this month.

“To the extent that there are public standards of accountability, that’s good for everybody because it forces us to face the truth,” said Forrester, who now serves as president of Integrity Health. “Part of the problem of the 1990s and the last decade is that there weren’t standards that forced everybody to face the truth. It’s an ugly truth, no doubt about it. The state did not put in the amount of money that it was obligated to pay, and they hid behind accounting and actuarial details that bore no relationship to reality.”

Forrester noted that New Jersey had a pension funding system in place where the state paid the same percentage of payroll into the pension system every year. “We went off the rails in 1994 and never got back on,” he said, referring to a series of actuarial pension changes made by the Republican Whitman administration.

“I’m not sure that the state will ever gain stability until it faces the difficulty of actuarial liability,” Forrester said. “Everybody is always focused on the asset side, but the problem is in the definition of liability. The systemic underfunding of the pension system occurred not just because the state hasn’t put in much money, but because it defined what liabilities were in such a fantasy world way. It is an enormous problem, and it’s a sad situation because planning for the future has become almost unmanageable because a system that was adequate was abandoned 20 years ago.”

 

 

12 responses to this post.

  1. […] Will New Accounting Rules Force NJ to Put Billions More Into … Comments […]

    Reply

  2. Posted by briandin on June 14, 2012 at 9:24 am

    What exactly do you mean by “ignore contract law”. Bankruptcy specifically allows the debtor to get out of all “executory” obligations (i.e., get out from having to perform that which remains to be performed). This is why there is a pension benefits guarantee corporation that pays pennies on the dollar to cover the pension benefits of private sector workers whose employers (or former employers) go bankrupt.

    Why should the promises made to govt workers be put on some sort of pedestal? What makes their contracts sacrosanct (to say nothing of the ponzi schemes that are medicare and medicaid – which will also be “means tested” – i.e., theft from the people forced to pay into them over a lifetime of working)????

    NJ is toast, just like CA and IL, unless the decision is made to just jettison public pensions and retiree health care benefits once and for all.

    Reply

  3. Posted by Tough Love on June 14, 2012 at 9:24 am

    Unless the economy is roaring along (in which case failure may be pushed well into the future anyway), when this dog fails there is a big fight looming between the workers & Taxpayers for limited revenue.

    Reply

  4. Posted by Javagold on June 14, 2012 at 10:42 am

    The new law of the land will be if you do not hold it in your hands , you do not own it. Public Takers should prepare instead of keeping their heads in the sand with a worthless contract in their hand.

    Reply

  5. Posted by Anonymous on June 14, 2012 at 1:57 pm

    John please tell these people that if the day comes where the pensions systems fails that is not necessarily a good sign for the taxpayers.

    Reply

    • Posted by Tough Love on June 14, 2012 at 2:08 pm

      Seems like soon enough (especially as the 1/7, 2/7, … funding grade-in wears-off and the new GASB regulations govern) our legislators will have to choose between:

      (1) a HUGE increase in taxs so that “promised” pensions (excessive ???) will be paid in full, or
      (2) a reduction in the (excessive ???) “promised” pensions or a HUGE increase in employee pension contributions
      (3) a HUGE reduction in public sector services and employee headcount

      I think the Taxpayers are best off with (1) … although realistically, it will likely be a combination of all 3.

      Reply

    • That day is past. It’s only a matter of people noticing.

      As for taxpayers, if the judge in this youtube is correct, they’ve got an out.

      Reply

  6. Posted by Anonymous on June 15, 2012 at 1:27 am

    Lack of pension contributions or lack of any pension payments will not under any circumstances save the taxpayers. The politicians know this. For instance, money was taken from the unemployment fund for other uses and now that fund is empty. In other words politicians wont and cant spare the taxpayer, have they ever?

    Reply

  7. Posted by Anonymous on June 15, 2012 at 1:32 am

    Again, the judge says the state cant pay the pensions if there is no money. However years ago a judge say we cant force the state to make contributions unless they are unable to pay the pensions. sound like a real crock doesnt it?

    Reply

  8. Posted by Dave S on June 17, 2012 at 11:58 pm

    The State is not the same as an individual and ultimately the taxpayers will bear a greater portion of the pension obligation. Only time will tell if the trial judge’s ruling will hold. Ultimately the state has to do a real pension reform by reducing benefits to new hires or even phase out future pensions altogether. Even in a phase out, equity requires that the burden be borne by the state as a whole and not soley by career employees. The trial judge’s ruling does not meet the equity standard in that the burden is not reasonably shared.

    Reply

    • Posted by Tough Love on June 18, 2012 at 1:43 am

      You sound more like someone riding this pension gravy train (and who doesn’t want it derailed) than a practicing attorney knowledgeable in the subject.

      Reply

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