Editing Out the Punch Line

Three years ago I expected a letter published in the Star Ledger to be my last.  It wasn’t as today a letter I edited based on a blog I put up on Friday appeared in the paper.  At least most of it appeared in the paper:

N.J.’s pension follies: Letter

A letter writer wants our leaders at the Trenton Statehouse to reform the public-employee pension system so that it is fair to all. (Tony Kurdzuk/The Star-Ledger)

Letters to the Editor/The Star-Ledger By Letters to the Editor/The Star-Ledger
on May 13, 2014 at 9:00 AM, updated May 13, 2014 at 9:36 AM

Another New Jersey budget hearing and another stupid idea as state Treasurer Andrew Sidamon-Eristoff considers delaying the state’s pension contribution a week to balance the current budget (“Jersey may hold pension payment,” May 9). Of course, the $1.58 billion payment is far less than what is needed to cover the escalating liabilities, but in this fantasy fiscal world, where any number will do as long as it is small enough and you follow proper procedures, there are a few details to address.Will there be a one-week interest adjustment on the late payment, since the payment due June 30 was adjusted for interest from the July 1, 2012, valuation it was based on?
The current budget year may be balanced, but where does this payment fit into the 2014-15 budget, which already includes a $2.25 billion pension payment?

Senate President Stephen Sweeney threatened to “shut down government if Chris Christie reneges on pension payment,” yet he kept quiet as that payment was reduced by $94 million through actuarial gimmickry and now will be severely reduced, if not for 2013-14, then certainly for 2014-15.

John Bury, Kenilworth



It ends there. Of course I am grateful to get the issue of New Jersey’s dysfunctional pension/political system more attention but there is more to the story.  The last line edited out by the Star Ledger:

At this point what should be shut is his mouth as he has become an enabler of Chrisitie’s delusion of fiscal competence.



7 responses to this post.

  1. Posted by Tough Love on May 13, 2014 at 12:17 pm

    Unfortunately Sweeney’s song has changed.

    A year or 2 ago he worked with hand-in-hand with Christie on some pension reforms (not really much, but more than anyone else would have done) recognizing that what’s good for PUBLIC Sector Unions (MORE, MORE, & MORE) is not good for his PRIVATE Sector Steelworkers Union … as no money left to fund construction projects (since it all has to go to pay for Public Sector pensions & benefits) means few construction jobs.

    Now, with his sights on NJ’s governorship, his song has changed. Knowing that he needs the Public Sector Union vote to ramp up his chances, he’s now supporting that shoveling of NJ taxpayer’s money to support these overstuffed Public Sector pensions, just like all the other politicians …..

    Perhaps one day someone will stand up to the Unions and say:

    “We’ve got one heck of a problem with your PAST service accruals, and we’ll need to address that, but it’s clear that your pensions are unaffordable, so heretofore. FUTURE service accruals STOP. You’ll now be getting 3% into a 401k-style DC Plan and Social Security …. just like 95+% of the Taxpayers who are on the hook for YOUR pensions”

    Oh to dream ……….


  2. Posted by George on May 13, 2014 at 9:15 pm

  3. The Transit Union in Pittsburgh hasn’t had a COLA since 2003. Of course there fund is at 87 funded. In good shape.


    • Posted by Tough Love on May 14, 2014 at 10:26 am

      Well, maybe it’s not really in such good shape…..

      Moody’s current methodology uses the following formula to adjust the PV of Plan Liabilities calculated at the (universally high) “official” Plan discount rate (typically around 7.5%) to a more reasonable level (around 5.5%)

      [ PV x ( 1 + official %i ) ^ 13 ] / ( 1 + adjusted %i ) ^ 13 = Adj PV

      If we assumed we have $87 in assets and $100 in PV of “Official” Plan liabilities, giving the “Official” Plan funding ratio of $87/$100=87% that you noted, and we recalculate the PV of Plan liabilities using Moody’s formula (and going from 7.5%* to 5.5%), we have:

      [ $100 x 1 .075 ^ 13 ] / ( 1.055 ^ 13) = Adj PV

      From which Adj PV = $100 x 2.560/2.006 = $127.62, and
      giving us an Adj. Funding Ratio of $87/$127.62 = 68.17% … pretty crappy.

      * I don’t know what the Pittsburgh Transit Union Pension Plans use for discounting Plan liabilities, so I am using 7.5%


      • Posted by Anonymous on May 15, 2014 at 12:29 pm

        My God, you have too much time on your hands…………..


        • Posted by Tough Love on May 15, 2014 at 1:07 pm

          Telling the truth and being honest doesn’t take much time.

          It’s when you lie or delude yourself (like saying that the Plans are well funded when they’re really near the edge of the cliff), that you set the stage that needs great time to fix …. if fixable at all.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: