Moody Forecast for New Jersey

Six states decided to cut cost-of-living-adjustments (COLAs) for their retirees as the main part of their recent public pension reforms:
Long_12-15-13_2

 

 

 

 

 

 

As of yesterday, that chart required an amendment.

Notwithstanding pronouncements to the contrary by benighted legislators back in 2011 when New Jersey passed a series of reforms that were either ineffective or susceptible to court challenge*:
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Moody’s does not view pensions as being fixed or saved in New Jersey as the state debt was downgraded again in part because “public workers’ retirement benefits and other costs are climbing rapidly, and that revenue is not growing fast enough to bridge the gap” and…

the state will have little flexibility in coming budgets because Christie and state lawmakers agreed to increase the state’s contribution to the insolvent pension and health benefits funds for public workers, the report notes. This year’s budget included a $1.7 billion payment; next year it is set to rise to $2.4 billion.

To be clear, that $2.4 billion contribution for 2014 represents 4/7ths of an already ludicrously understated contribution requirement developed using the same warped ways and means that got Detroit a 91.4% funded ratio on the eve of their bankruptcy. New Jersey is deliberately underfunding pensions and they are having trouble doing even that and it is becoming noticeable even to ratings agencies.

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* We will get a clearer picture of whether the COLA elimination in New Jersey will stand on Tuesday, January 28, 2014 at 10:00 AM in New Brunswick when oral arguments are scheduled on cases brought by retirees and the NJEA.

15 responses to this post.

  1. Posted by Anonymous on December 18, 2013 at 4:40 pm

    If Sweeney says everything is fixed, why not believe him. Afterall he didnt help himself did he, lol

    Reply

  2. Posted by Anonymous on December 18, 2013 at 4:41 pm

    At any rate according to John and anyone who has a clear picture of what is going on. The COLA reduction or elimination did nothing, right? So why not reinstate it, makes no difference does it?

    Reply

    • Not right. The COLA elimination in New Jersey was the only real savings in the pension overhaul just as Detroit’s imminent slashing of pensions will save real money. All the other changes were minor tweaks that will likely be gamed away within the system.

      If the COLA elimination gets overturned it’s game over for New Jersey pensions right there.

      Reply

      • Posted by Anonymous on December 19, 2013 at 9:37 am

        Okay then why make a 2.4 Billion dollar contribution if you are saying these contributions do nothing. The only thing that does anything is the COLA elimination right?

        Reply

        • Posted by Tough Love on December 19, 2013 at 12:38 pm

          There are OTHER (NOT done) things that would also save plenty… but our self-serving, vote-selling, contribution-soliciting, taxpayer-betraying elected officials won’t do them …..becase they like the Union’s money and election support (they get in exchange) too much.

          Reply

    • Posted by Tough Love on December 18, 2013 at 7:51 pm

      The COLA elimination saves plenty…one of the very few options that materially reduced benefits. While I know NJ’s formula is a bit less generous, adding a 3% annual COLA provision to an otherwise identical Plan W/O such a provision (like virtually all PRIVATE Sector pensions) increases the Plan’s cost by just about one-third.

      Reply

      • Posted by Anonymous on December 20, 2013 at 7:52 am

        But why not root for the COLA to be reinstated. Because then in fact the pension system will collapse even more quickly and you will get what you want more quickly. True?

        Reply

        • Posted by Tough Love on December 21, 2013 at 1:46 am

          Not true at all, With Public Sector workers earning no less in “cash pay” than their Private Sector counterparts, there is ZERO justification for greater pensions and better benefits.

          So…. what I would like to see (for all future, CURRENT and Retired workers) is a reduction in their Public Sector pensions and benefits to a level no greater than that of the typical Private Sector Taxpayer in a reasonably comparable positions, and THAT would likely require a pension reduction of from 50-75% across the board. YUP, THAT’S how grossly excessive, unnecessary, and unjust (to Taxpayers) their pensions are RIGHT NOW.

          Reply

  3. Posted by Anonymous on December 19, 2013 at 4:09 am

    Wow first time I have heard such a wonderful review of COLA elimination. Previously i heard that it did very very little because the unfunded debt for pensions and insurance is staggering. I dont know how to believe anymore. One thing is for sure any money saved on COLA elimination at best is being used to fund pension payments each year. Maybe! lol

    Reply

  4. I retired from a public agency in Pittsburgh in2003. I am still waiting for my first COLA. The fund won’t support it. Likewise,our transit union brothers have not had a COLA since 2007 for the same reason

    Reply

  5. Posted by Maceo on December 23, 2013 at 12:31 pm

    The state assigned the additional employee contributions and COLA elimination to lower the annual contribution of the towns. The money evaporated. The 1/7 contribution escalated to a full payment over seven years just kicked the can further down the road. The towns had to make up for deferred(skipped) payments. The state punted and then patted themselves on the back for saving the system. Some of the reforms were real. How they used them was not. It was a brilliant design though as the governor never planned to be here in year seven. You cannot expect legislators to cut their own pensions. Obvious measures should be: 1. capping pensions at a maximum number (possibly the social security max). 2. completely severing municipal pensions from state pensions (The towns are now floating the state’s liabilities). Separation of the individual funds. (When the first fund fails real reform will be mandated). A graduated path away from defined plans. Making the system sustainable by whatever means necessary is better than trashing the states credit and being the first state to default.

    Reply

    • Posted by Tough Love on December 23, 2013 at 2:41 pm

      Mostly accurate and good suggestions…… except the cap.

      A cap would ONLY impact the largest pensions. That’s not sufficient because ALL Public Sector pensions from the lowest to the highest paid worker are ALWAYS multiples greater in value at retirement than those of their Private Sector counterparts.

      If these Defined Benefit pensions cannot be COMPLETELY eliminated (the BEST course of action….by far) the generous formulas and provisions applicable to all CURRENT workers should be reduced for FUTURE Service accruals by at least 50%……and even then,they would STILL be greater than almost all Private Sector pensions.

      Reply

  6. Posted by Maceo on December 23, 2013 at 5:47 pm

    If you capped pensions you would lower the number of double and triple dippers. The people writing the reforms are double and triple dippers, some with a twist (port authority).

    Reply

    • Posted by Tough Love on December 23, 2013 at 6:25 pm

      The double and triple dippers are annoying,but the real money is in ALL Public Sector workers getting pensions that are ROUTINELY 3-4 times greater in value at retirement than those of their Private Sector counterparts…..all while they make NO LESS in “cash pay”.

      Reply

  7. Posted by Ed B on January 12, 2014 at 7:30 pm

    Let us have no pensions and Roosevelt style socialist security, Only Russian Roulette 401K’s. We already have eliminated what were great pensions in companies like GE, IBM, Kodak, Etc, while top level management perks have skyrocketed. Let us reduce middle class standards of living and secure jobs, and let’s see Real Estate pancake. Who will want to own homes with lack of job and future security Renting will be the only answer when younger people will have to move often for jobs?

    Reply

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