Journalism as Stenography on New Jersey Pensions

The $86 billion system that funds pensions for public workers, state troopers,  local police and firefighters, and teachers lost ground in the first year public  workers were required to pay more toward their retirements, according to reports  released Monday.  Associated Press 3/4/13

You could stop reading there.  Any story that begins with such a bald-faced lie propagated by actuaries and politicians forwarding their own agendas is more likely to obfuscate than it is to illuminate.  Starting tomorrow I will begin a series of blogs telling the real story behind these actuarial reports but, for now, let’s focus on why the mainstream media reports something so obviously phony starting with the whereabouts of this ‘$86 billion system’ they refer to.

As of 12/31/12 the market value of assets in the New Jersey Retirement system was $71.14 billion.

Go to the historical values and you will find:

6/30/12: $70.11 billion

6/30/11: $73.73 billion

6/30/10: $66.9 billion

6/30/09: $63.2 billion

6/30/08: $77.7 billion

This system never had $86 billion in it and almost certainly never will have $86 billion in it.  A concept called asset smoothing (briefly explained here) accounts for the lie which conveniently allows politicians to pretend an extra $16 billion into existence.  They have their perverted reasons but isn’t there one journalist of a Dunstan-McNichol caliber confident and informed enough to report truths instead of parrot lies?

26 responses to this post.

  1. Posted by Janet on March 4, 2013 at 9:26 pm

    I am an actuary. You don’t know what you are talking about. In Illinois, we have a $96B deficit. We use an interest assumption of 7.5% which, low balls the liabilities. The mortality assumptions reflect mortality improvement. Would you rather we show a lower liability and experience losses in perpetuity?


    • Posted by Tough Love on March 5, 2013 at 2:23 am

      First of all, you meant HIGHER (not Lower) liabilities in your last sentence.

      Do you have a problem with the MORE REALISTIC higher liability figures (calculated with liabilities discounted at a more realistic 6% … or 5.5% which Moody’s will soon be using) ?

      Perhaps if you showed the (much LOWER) Plan funded ratio on a more realistic basis, the Taxpayers might DEMAND, and politicians might actually find the stomach to do something in the direction of addressing the huge problems …. like ENDING FUTURE service pension accruals using the current (grossly excessive) DB Plans.


  2. Posted by MJ on March 4, 2013 at 10:32 pm

    But Christie just put 1.67 billion into the pension fund and they are still short? It should at least last a little while.


    • About two months but I’ll get a better fix after I review the vals


      • Posted by Tough Love on March 5, 2013 at 2:28 am

        Christie must get one heck of a chuckle that he seems to get away with patting himself on the back for fully funding ….. ACCORDING TO THIS ARTIFICIALLY LOW 7-YEAR GRADE-IN HE CREATED.

        It’s amazing he never gets called-out on it.


  3. Posted by eatingdogfood on March 5, 2013 at 12:47 pm

    If The Democrats Didn’t Give ” Sweetheart Deals ” To Your Public Service Union.
    Goon Employees To Get Reelected; You Would Have Plenty Of Money and The.
    Taxpayer would have Some Spare Change in His Pockets! Democratic Hustler
    Politicians + Corrupt Union Goons = BANKRUPTCY BABY! Time To Bring.
    RICO Conspiracy Charges Against The Hustler Corrupt Democrats and the.
    Criminal Unions!


    • Posted by 4everunion on March 5, 2013 at 1:11 pm

      Just in…..

      This week only…..ALPO on sale, buy one, get one free!!!


      • Posted by Anonymous on March 5, 2013 at 4:43 pm

        Why do you visit this blog if you are so confident there will be no major reforms. I think it the information here is starting to sink in with the publics and so is the worry. Perhaps you should stock up on the alpo


        • Posted by Anonymous on March 6, 2013 at 1:45 am

          In case you didn’t notice….that was in response to the poster’s name being “eatingdogfood”


  4. Posted by Wedge on March 5, 2013 at 2:33 pm

    Perhaps a refresher on NJ Pension history is in order. Please read the article and you will see the pension was raided to lower taxes.


    • Posted by Anonymous on March 5, 2013 at 4:39 pm

      They’ve raided the unemployment fund, pension funds, transportation authority funds etc. WHY? Spending and promising way way too much for a system that is mathematically unsustainable . No way to pay for it all and our taxes are already the highest in the country. Looks like significant reforms will be coming. Perhaps union4ever should stock up on the Alpo


      • Posted by muni-man on March 5, 2013 at 5:37 pm

        “Governments spend whatever they take in and then whatever they can get away with.” – Milton Friedman. Uncle Miltie had it right. That’s why it’s important for NJ to continue the underfunding to limit what gooberment ‘takes in’.


        • Posted by Tough Love on March 5, 2013 at 7:49 pm

          It’s also why we need to END the current DB Plans for FUTURE service of CURRENT (yes CURRENT) workers.

          Once less thing (rich pensions) for the politicians to give away to those who contribute to their campaigns.


    • Posted by Tough Love on March 6, 2013 at 12:10 am

      At least to me, the word “raid” strongly suggests that funds were taken out. Well, that never happened …PERIOD. Sure, she juggled the formulas to reduce contributions. Certainly not wise, but neither was promising such rich pensions & benefits (by earlier administrations) in the first place. These pensions were unnecessary (to attract and retain a qualified workforce) and excessive from day one. They were simply a way to buy the votes of the Public Sector workers.


      • The pensions are also to enrich the politically connected who ‘retire’ from their elected/appointed posts after manipulating highest pay and years of ‘service,’ qualifying for crazy/high pensions and free medical to death.
        Examples could be that retired Middlesex mayor a few years back, various legal, and just medical for Port Authority member Susan Bass Levin, who got a ‘no-show’ NJ committee appointment from Corzine to build up the years necessary Part of the deal she needed to accept that terrific position.


        • Posted by Tough Love on March 6, 2013 at 11:03 am

          The crediting of “service years” based on meeting a modest pay level (I believe it was raised to $7.500 a few years ago) is a huge Taxpayer ripoff. Pensions should be based on FULL TIME years of service, not Part Time. In Private Sector Plans, this is managed by NOT crediting a year of service until you have 1,000 hours of paid service in that Plan year.

          THAT’S what the definition should be in ALL Public Sector Plans.


      • Posted by MJ on March 6, 2013 at 8:06 am

        TL,, I agree, the word raided is one used by the publics to try and convince the rest of us that they somehow were cheated of their just dues. They cooked the books and fudged the numbers b/c the spending and overly generous promises to publics would never be able to be paid for. Unwise, yes indeed, but hold those responsible who did this, not the taxpayers. The publics don’t seem to realize that they have been played in exchange for a bunch of empty promises. There is no honor among thieves!


        • Posted by muni-man on March 6, 2013 at 10:22 am

          You’re absolutely right. The private sector has no responsibility at all to ensure the public sector has a comfortable retirement, yet that’s what this rigged ‘I’m entitled to’ game they’ve devised has morphed into over the last 25 years, to the substantial financial detriment of the former. Publics are responsible for their own damn financial well-being like everyone else, not by riding on the backs of private sector TP’s, especially thru ridiculously costly benefit packages. Their entire pay/benefits scheme is totally out of whack with the services they provide, largely because it’s protected by their political/union cronyism and monopoly environment where benefits can be raised w/o any competitive concerns to levels far above what the employment market would normally call for. Most publics have zero knowledge of the competitive work world, so they’re always on career autopilot in their cozy job cocoons and just expect the economic manna to rain down on them forever with no questions asked. If anything, the much greater inherent job security of publics should call for lower comparable wages/benefits to offset that job security premium, which is no small thing especially today. But, their gravy days are over. What’s beginning to strangle them is the continuing lousy, very lousy, economic growth in the country which is capping tax bases. That’s not going away. Lousy private sector growth and high unemployment are gonna be around for years to come and the publics are gonna feel its’ effects bigtime. NJ should just continue to underfund the plans until they are forced to reduce benefits and convert to DC plans.


        • Let us not forget the 8% increase in retiree pension payments done about year 2000 agaist all common sense.


  5. Posted by eatingdogfood on March 5, 2013 at 3:45 pm

    Isn’t It Time For The Abused Taxpayers Of New Jersey To Leave In Masses.
    In Order To End This Unholy Conspiracy Between The Totally Corrupt.
    Democrats And The Equally Corrupt Public Service Unions? It Is Really.
    The Only Way To Finally End This Criminal Activity! Did Anybody Ever.
    Hear Of RICO?


  6. Posted by Anonymous on March 6, 2013 at 2:14 am

    In regards to MJ’s comment above… Christie did NOT just put $1.67B into the pension fund. He put nothing $0 in his first fiscal year. He put in $484M this past 6/30/12 (last day of Fiscal year 2012). He is scheduled to put in $1.1B this upcoming 6/30/13. The $1.67B you are reading about in the papers would not be paid into the pension funds until 6/30/14!


    • Posted by Tough Love on March 6, 2013 at 3:07 am

      The cumulative ADDITIONAL underfunding from this 7-year grade-in is just about $15 Billion. I hope that’s sufficient (when added to the existing underfunding) to kill these grossly excessive and unjust (to Taxpayers) Plans for good.

      Switch ALL Public Sector workers to 401K-style DC Plans with a taxpayer “match” comparable to what Private Sector workers get from their employers … 2-4% (plus Social Security).

      What makes them so “special” and deserving of (multiples) greater Pensions and better benefits …. on OUR dime? The Taxpayers are TIRED of being suckered.

      Greed HAS consequences !


    • Posted by MJ on March 6, 2013 at 8:02 am

      Anon—Hard to keep a track of it all. If what you say is true, then the demise and need for major reforms should happen much sooner. Much more irresponsible to keep the publics hanging on empty promises then to reform and allow publics to adequately plan for the future. Sounds to me like it is a matter of time.


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