Two scariest numbers from New Jersey’s 2012 Pension Reports

You might have your own but based on this spreadsheet created from totaling pertinent valuation data from each of the July 1, 2012 actuarial reports for the New Jersey retirement system here are mine:

$77,933,097,738: Value of benefits payable to retirees

$74,150,625,343: Market value of assets

Even using phony assumptions to value the liabilities which Milliman in the cover letter to their report admitted:

“In compliance with New Jersey statute, this actuarial valuation is based on an investment return assumption of 7.90%. The investment return assumption is specified by the State Treasurer. Based on our most recent analysis, this assumption is outside our reasonable range. If the investment return was lowered, the actuarial accrued liability and statutory contributions would increase and the funded ratio would decrease.  Determining results at an alternative investment return assumption is outside the scope of our assignment.”

and inflating the market value of assets (reported to be 70.11 billion as of 7/1/12 from the historical data) with accruals including over a billion dollars they are hoping to get from the state, these plans do not have enough money to cover benefits for current retirees.

474,305 public employees have nothing in their pensions but IOUs and their $1.8 billion in annual contributions are going into a black hole that Christie is not about to plug.

15 responses to this post.

  1. Need the big difference amount……….

    Reply

  2. Posted by Anonymous on March 6, 2013 at 8:06 pm

    Hey, do you really think the federal government wont fail before NJ? If so I think you are really in denial. Lets talk about federal numbers

    Reply

  3. Posted by Tough Love on March 6, 2013 at 8:36 pm

    Quoting from the Millman cover letter …”Determining results at an alternative investment return assumption is outside the scope of our assignment.””

    Oh please, the interest rate for valuing Plan liabilities is an input in what’s likely a PC-based model. Changing that to another rate (or 2 or 3 ) and re-running the model is essentially instantaneous.

    What Millman REALLY meant to say is …. “Determining results at an alternative investment return assumption wasn’t done because, using ANY reasonable rate, the Plan results would be so incredibly poor that ending these DB Plans for future service accruals would be the ONLY realistic option”

    Reply

    • I interpreted that differently. Of course with computers revaluing benefits is easy but when you’re not checking inputs or selecting assumptions so is doing the valuation itself for which they get $250,000. They could have quoted an extra $50,000 to rerun but I don’t think that’s what they meant.

      I take ‘scope of our assignment’ to mean understating liabilities and contributions and overstating assets by whatever means, the more opaque the better, fall within the tether of actuarial soundness as currently practiced for public pensions.

      Reply

    • Posted by muni-man on March 7, 2013 at 9:18 am

      I agree, I think they simply didn’t want to piss off the pope so they decided obfuscation was the prudent course of action.
      I guess the info isn’t available, but what I’d find interesting is what the average payout is for recent retirees (say within the last 5 years). According to the spreadsheet the average for all teachers is $38.8K, local cops/fire-$50.3K, state police-$55.9K and judges-$86.3K. I’ll bet those figures are at least 50% higher across the board for recent retirees which suggests cops are now routinely zeroing in on $80K+ and judges $130K+ pensions. Totally asinine payouts. The whole thing has just completely run amok and should be shut down, but I think economics will have to bring it to its knees before the pols acknowledge anything and act.

      Reply

      • Posted by Anonymous on March 7, 2013 at 10:26 am

        Most people don’t make those amounts while working full time jobs not to mention the lifetime health benefits. They will kick the can as long as they can. Much more irresponsible to keep the lies going than to majorly reform now. Publics will whine and scream but will adjust.

        Reply

  4. Posted by gthhju on March 7, 2013 at 12:38 pm

    “$1.8 billion in annual contributions are going into a black hole that Christie is not about to plug.”

    At this point aren’t all payments going in, being paid out immediately to their retired brother and sister workers?

    Reply

    • Posted by Tough Love on March 7, 2013 at 2:30 pm

      It amazes me why the younger lower service “actives” put up with this. If they were really the “Best & Brightest” they’d realize all THEIR contributions are simply going out the door to pay the excessive pensions of current (and soon to be ) retirees leaving little or nothing form them.

      Pretty dumb on their part to assume the Taxpayers will continue these rich pensions on a pay-as-you-go basis (for them) when the Plans run out of assets.

      Reply

      • Posted by Anonymous on March 7, 2013 at 2:43 pm

        Not to mention the abuses. Christie isn’t plugging the black whole b/c all of his cronies are double dipping, spiking, etc. that’s why we never heard a word about it during the last election when there was a chance to vote out some Dems. And have the chance to make some real reforms.

        Reply

        • Posted by Tough Love on March 7, 2013 at 4:29 pm

          The politicians don’t have the “stomach” for real reforms … because it necessitates reducing Public Sector pensions to a level comparable to those typically granted in the Private Sector … 50%-75% lower that those currently granted Public Sector workers. It not just the FORMULA that’s too rich. It’s the myriad of pension provisions (very young full retirement ages, unsurprised early retirement factors, completely absurd definitions of Disability) and what’s included in “pensionable compensation” that contributes to this huge difference.

          Without question, even though fair, appropriate, and NECESSARY, the Public Sector workers would consider such reductions the ultimate betrayal.and throwing all the Public Sector worker’s (pensions) under the bus.

          Too bad. It’s coming anyway. Wouldn’t it be better to make the needed changes in an orderly fashion rather than under a fiscal emergency … and likely imminent insolvency ?

          Reply

          • Posted by Tough Love on March 7, 2013 at 4:31 pm

            ooophs ………”unsurprised” was supposed to be “under-priced”

  5. Posted by Javagold on March 7, 2013 at 5:09 pm

    all ponzi scams , always come to an END !!

    Reply

  6. […] This is a long overdue update of a 2013 blog that made exactly the same point. Please, play around with the spreadsheet and find your own scary […]

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