State of New Jersey Pensions

On February 26 I will present a brief Powerpoint slide show to the Union and Somerset County chapter of the New Jersey Retired Policemen & Firemen’s Association, Inc  trying to explain to them the real state of their pensions.  The charts and videos from that presentation are stunning and I summarize and present, respectively, them below for comments and suggestions:

What one California city had to do:
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Yes, it’s California (Vallejo, Stockton, San Bernardino) but other places (Princhard, AL; Central Falls, RI; Detroit, MI) are worse:
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With New Jersey near the very bottom.

The NJ Division of Investment reports having $76.67 billion in pension assets.

Comparing the status of the New Jersey plans over the last twelve years from official actuarial reports tells a sobering tale, especially when looking at only the totals page.  Liabilities have doubled yet assets have dropped by 13%.

Were all 284,000 retirees getting $8.4 billion annually annuitized the plans would still fall over $50 billion short and that does not even take into account:

  • Pension Obligation Bonds to be repaid
  • Employees’ own contributions that have not been returned to them
  • Questionable values placed on 38% of the fund in Alternative Investments
  • 475 thousand non-retirees

All this might still be overcome if not for the fact that the sponsor happens to be in the worst fiscal condition in the nation while living in a state of denial….
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20 responses to this post.

  1. Posted by bpaterson on February 18, 2014 at 1:23 am

    JB1, kep in mind a lot of police when they retire get to keep their guns.

    if there are no more entries after february 26th we will know why.

    Reply

    • Posted by Tough Love on February 18, 2014 at 2:10 am

      John’s just the “messenger”.

      Reply

    • Interesting slant that is 180 degrees from my main worry after I reviewed the finished presentation: that I would be taken as a Christie operative being sent out to these retiree meetings to thin the retiree population. I was thinking of having them exclude anyone with a history of heart problems from that part of the event or at least alert EMS to be on standby.

      Though seriously, that chart comparing 7/1/2000 to 7/1/2012 numbers was scary even to me. It’s shocking that assets dropped 13% in dollars for a plan that accrued benefits (fairly substantial benefits) during that period. I found a chart which I don’t believe I had previously used and had to go back to those 7/1/2000 reports and double check the numbers. It’s true:
      http://www.state.nj.us/treasury/pensions/actuarial-rpts-archive.shtml#2000

      Reply

  2. Posted by Anonymous on February 18, 2014 at 2:27 am

    TL voted for Chris Christie, would have been smarter to move out of NJ, dont ya think. When are you going to face reality, it is gonna only get worse even if without pensions. NJ isnt going to get better magically.

    Reply

    • Posted by Tough Love on February 18, 2014 at 3:27 am

      I’ve though of moving out, but that seems like a cop-out vs strongly advocating for the material Public Sector givebacks necessary to make NJ a financially affordable place to live.

      I like NJ … I just don’t like unnecessarily overpaying to support the overstuffed pensions and benefits granted ALL of it’s Public Sector workers.

      What’s so amazing is that the Public Sector Unions/workers seem willing to resist even minor changes right up until the checks stop coming. Maybe us pension reformers need a few psychiatrists on call to help unravel such self-destructive Public Sector worker behavior.

      Reply

      • Posted by Anonymous on February 18, 2014 at 7:18 am

        You have fought the good fight but I think you are missing the point. about NJ. Doing the right thing is not in the cards, pensions or no pensions.

        Reply

      • Posted by bpaterson on February 21, 2014 at 1:22 pm

        I agree with tough love, moving out never crossed my mind; to me that’s just cowardly thinking. I was here before the contrived system of bad politics for self-enrichment was created, and hopefully will be here when it folds. If not, it was indeed a good fight and I sleep with a clean conscience knowing I tried to help my neighbors. The sun comes up the next day no matter what.

        This is reality not some fairy tale, evil can win for periods of time, with examples throughout history.

        Reply

  3. What is your aim with this presentation?

    If it’s only to get them to take seriously the possibility of pensions getting cut, okay, but these people are going to have to figure out what to do in light of that possibility.

    I don’t mind simply freaking out fellow actuaries with public pension stories, because we’re the ones who were supposed to see these disasters coming. Also, for most of these disasters, we’re third parties and not the people whose benefits are getting cut.

    But what to tell the people who will be directly affected? Yes, one first has to get them to take the danger seriously (to knock them out of the “But we’ll always get paid! It’s unconstitutional to cut!” rants), but if one cannot tell them something more substantive than “sucks to be you”…that’s not terribly kind.

    I think there are helpful things to tell people, to protect themselves, but it involves getting other jobs and/or boosting savings (including saving some income from the pension while it lasts, if they’re already retired.)

    Reply

    • There is an ulterior motive that I would gladly divulge to this group if given the time.

      This may be unique to New Jersey and maybe even Union County (I hope it is) but we have an inordinate amount of sanctioned corruption. Just check listings of campaign donors and all the thousands of dollars provided need to be repaid a hundred-fold so we get non-essential building projects and high-priced consultants cashing in. A lot of these retirees are well aware of the tax money being wasted but keep quiet because they don’t want to endanger their pensions. Were they to realize that their silence was what is endangering their pensions maybe we will wind up in a better place.

      I used to think that if they rooted out all the waste, fraud, and abuse in the system they would be able to pay the promised pensions. It may have been only when I put this presentation together but I don’t think that now and not because New Jersey has cleaned up but because the liabilities are truly staggering. Maybe 5 years ago these pensions could have been saved but not now. These public employees should be told that.

      Reply

      • Posted by Tough Love on February 18, 2014 at 1:20 pm

        If you carefully explained this to 100 Public Sector workers, AND all 100 understood you, the response of 99-100 would be that NJ will simply have to find a way to pay their full pensions on a pay-as-you-go-basis out of current budgets.

        Nothing will change that mindset until one group (even a smallish one) has a material benefit reduction (well beyond a COLA elimination) forced upon them and upheld upon legal challenge …….. as was the case in Rhode Island.

        Reply

        • …until the money runs out.

          I think the NJ pensioners need to learn how dangerous is it to have pensions paid on a pay-go basis (cf Prichard, Alabama)…esp if said pensioners live in TX or FL, and no longer have any direct political clout in NJ. And esp if current public employees have no pensions… no solidarity.

          If it requires total disaster before they realize that yes, their pensions will not be paid in full, then I guess total disaster is what they will get.

          Reply

        • Posted by bpaterson on February 21, 2014 at 1:39 pm

          toughlove, its human nature to just keep on keeping on, even in the face of impending bad news….nothing happening at this minute so just keep moving along. That goes for both sides of the fence. That’s why you and I and the 8 million other residents are still just going to work, paying the taxes, playing with the kids, shopping, oblivious to what is on the horizon. Even those that may become informed that the pensions are in trouble, or that taxes will have to double to cover burdens, we still fall back on that feeling of hope that someone else, maybe our elected officials, maybe a savior, a miraculous windfall grant, maybe some bureaucrat toiling in the bowels of Trenton will come up with the perfect solution as to to avoid impending doom. Of course the easy out is just always push it into the future. Hey, after all, we made it this far going year by year. And so we kvetch or roll-over and so nothing changes, until………..

          Reply

          • Posted by Tough Love on February 21, 2014 at 4:17 pm

            The end result often looks like Detroit. As taxes rise and services get cut, the PRODUCTIVE citizens and business WITH the ability to pay more, WON’T.

            They move away leaving the death spiral to run it’s course.

  4. Posted by Anonymous on February 19, 2014 at 7:37 am

    The problem with even modest reforms is that it will fought legally and Money wasted and round and round until the proposed reform is next to nothing.

    Reply

  5. Posted by Anonymous on February 20, 2014 at 1:19 am

    Nj and detroit perfect together, ha!

    Reply

  6. Posted by Anonymous on February 20, 2014 at 11:52 am

    It continues to go round and round, but where will it all end. I have said this before, but our taxes are already through the roof to the point where taxes are higher than mortgage payments. According to another article NJ is 6.6 billion deeper in the hole. I’m not understanding how these pensions and health benefits will be paid. Everybody in NJ is going to simply say ok sure I’ll work until I’m 85 to pay for your retirement at 55 and generous health plan. Really? Something is seriously wrong there.

    Reply

    • Posted by Tough Love on February 20, 2014 at 12:12 pm

      Quoting..”Everybody in NJ is going to simply say ok sure I’ll work until I’m 85 to pay for your retirement at 55 and generous health plan. ”

      Unfortunately, most Public Sector workers feel adamant that they are entitled to 100% of what has been promised them (ignoring the Union/Politician collusion that generated these promises), and if that’s what it takes to honor them, than so be it.

      Reply

  7. […] plans are $50 billion short of being able to annuitize only (yes, ONLY) benefits for […]

    Reply

  8. Posted by Anonymous on November 1, 2014 at 9:07 am

    To the anti-pension crowd like some posting here:
    You ignore the fact that the pension problem was created by the leaders of this state, not the workers.
    You disregard the fact that the magnitude of the problem is exacerbated by the level of service that the taxpayers have come to expect, and without paying for it. Everybody expects to have their parks maintained, their roads plowed, their children taught, their streets safe, but they expect “the govt” to provide it without cost.
    I have never heard anyone complaining about the $30 million television salaries that we all must subsidize at the checkout lines. Did you actually think that “the networks” paid for that and not you?
    The definition of greed is wealth without work. For someone to expect their 401k’s to increase in value while they do not provide labor toward it certainly falls under this definition.
    For someone to expect their investment holdings and their home values to make them “rich” at the expense of the US Dollar, provides insight into their self-centeredness.
    If you would consider having Police and Fire Fighters dealing with this ungrateful society until age 65, or be forced into unemployment at age 50 because they were foolish enough to sacrifice their productive lives and career opportunities for you simply because you are deserving of it, then you don’t need to have a few psychiatrists on hand. What you need is to take a long look in the mirror. You will have your sinister inner self looking back at you.

    Reply

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