Christie To Skip $2.45 Billion More Pension Payments

The low-ball contributions (including the silly 3/7th and 4/7th multiples) that New Jersey was supposed to make for the years ending June 30, 2014 and June 30, 2015 were budgeted to be $1.58 billion and $2.25 billion respectively. That turns out to be inconvenient so those contributions will be $696 million and $681 million respectively (for now):
.

.
The comical rationale is that payments will be made for what is being accrued by active employees (of course ignoring the actuarial gimmickry employed to keep the ARC artificially low and that 3/7th;4/7th phase-in factor) but it must have sounded like something the governor thought he could sell so they went with it.

There certainly should be much more to come on this but what I am most curious about is what this guy comes up with to save a little face.

25 responses to this post.

  1. Posted by Tough Love on May 20, 2014 at 4:25 pm

    John, No REAL addressing of NJ’s HUGE pension problem is going to happen until we hit pay-go, whereupon it’s either big pension/healthcare cuts or HUGE HUGE tax increases.

    So why put off the INEVITABLE. If Christie’s proposed contribution reductions get us to the date of making REAL choices (and hopefully “solutions”) quicker, that’s a GOOD thing.

    Reply

  2. Posted by Anonymous on May 20, 2014 at 4:44 pm

    TL, loving bankruptcy because nobody should ever have to pay their debts on any level. Unless of course its a bar tab!

    Reply

    • Posted by Tough Love on May 20, 2014 at 4:51 pm

      Hitting pension pay-go will force our elected officials to CHOOSE between continued support of the insatiably greedy Public Sector Unions, or a switch to support the interests of all Taxpayers.

      Given the HUGE tax increases paygo will require (w/o very material pension/healthcare cuts), I’m betting that our elected officials will choose the latter.

      Your gravy train will soon be pulling into the last stop.

      Reply

  3. Posted by Anonymous on May 20, 2014 at 5:11 pm

    last call, you dont have to go home but you cant stay here.

    Reply

    • Posted by Tough Love on May 20, 2014 at 5:27 pm

      Will the last NJ Public Sector worker please put out the NJ-Is-Dead sign … after all, you caused it.

      Reply

  4. Posted by Javagold on May 20, 2014 at 5:47 pm

    Ha. Anyone with a high school education could have seen this coming. Of course that leaves out a lot of public takers. And most of all, Steve Sweeney.

    Reply

    • Posted by Tough Love on May 20, 2014 at 6:18 pm

      The early announcement of the cut for the 2-nd budget year (ending 6/30/2015) was a bit surprising ….looks like he is setting the stage for some rather large pension/healthcare giveback demands.

      Bring it on …it’s about time !

      Reply

  5. Posted by truthnolie on May 21, 2014 at 1:38 am

    As I predicted:

    http://www.nj.com/politics/index.ssf/2014/05/njea_says_it_will_sue_to_block_christie_from_cutting_pension_payments.html

    Just a matter of time before the CWA, NJPBA & FOP, FMBA, etc. join in.

    Reply

    • Posted by Tough Love on May 21, 2014 at 8:28 am

      Good, a confrontation on these grossly excessive pensions (which assuredly will drive NJ into insolvency if unaddressed) is EXACTLY what is needed.

      Reply

  6. Posted by Maceo on May 21, 2014 at 8:32 am

    His sins of the past started when he promised to come up to a full payment in seven years. Try telling that to your mortgage company. Another failure on his record.

    Reply

    • Posted by Tough Love on May 21, 2014 at 8:47 am

      No, the sins of the past were the litany of previous Governors and elected officials (everywhere) who gladly accepted Pubic Sector Union campaign contributions and election support in exchange to favorable votes on pay, pensions, and benefits that anyone with a modicum of financial expertise would know were unsustainable …. as well as unnecessary to attract and retain a qualified workforce, and grossly unfair to the Taxpayers who would be called upon to pay for all but the 10%-20% of total pension Plan costs actually paid for by the workers (INCLUDING all the investment earnings on their contributions).

      In any other venue such activity would be considered bribe giving and accepting.

      Reply

  7. Posted by JM on May 21, 2014 at 1:24 pm

    Would I be correct in assuming that this years and next years contributions that Christie has stolen from are for the plans covering STATE workers and Teachers (as I believe the State pays their pensions not the local school board) and not LOCAL (City, County) employees.

    If I am reading correctly from the State issued reports there is a PFRS Local and State fund that are separate funds and PERS Local and State. The Local entities I believe have been making increased contributions as required by the State (not 100% but more than the State). The local funds according to the NJ Division of Pensions are in much better shape that the State funds.

    I know someone will dispute this but I am going on the figures supplied by the State that indicate that PFRS Local although not 100% funded is or is very close to being somewhere near 75% funded which is considered to be acceptable, again according to State figures that they will have to justify but they are the figures I am privy to..

    The Division of Pensions separates these funds for reporting purposes they just put all the money in one pot and invest and disperse the payments. Basically they are managing these funds. While I do not advocate total separation from the Division of Pensions maybe there should be more transparency in reporting and concessions if any should be made only by the funds that are very underfunded.

    Tough Love please do not answer this post I would prefer someone (Preferably Mr Bury) who knows what they are talking about to either confirm or deny my assertions.

    Reply

    • In the next blog I will try to figure out where the $696 and $681 million come from. Not an easy task when you have so many revisions and 3/7ths and 4/7ths factors and interest adjustments applied but I have all the Normal Cost exhibits printed out and they’re going into a spreadsheet now.

      I presume Chrisite is only welshing on state obligations and the PERS local and PFRS local contributions to be made by the localities are still going to be made.

      Reply

    • Posted by truthnolie on May 21, 2014 at 2:15 pm

      “Tough Love please do not answer this post I would prefer someone (Preferably Mr Bury) who knows what they are talking about to either confirm or deny my assertions.”

      Hahaha……ZING!

      Yes the PFRS Local System is separate from the State PFRS. As you stated, Local PFRS is 70-75% funded at this time but Fatso Crispy has done a masterful con job convincing the uneducated public (people like Tough Love, Javagold, etc.) that the whole system is one big pot and the sky is falling.

      Reply

    • Posted by Tough Love on May 21, 2014 at 3:06 pm

      JM, I’m sorry, but if I feel that I have something relevant to add to the conversation (for anyone following it), it is appropriate for me to do so to balance the misinformation from those who refuse to acknowledge that pension reform (i.e., benefit reduction) is both necessary and appropriate based on the EXTREME generosity (and hence cost) of Public Sector pension promises relative to the pensions of comparable Private Sector workers. And I suppose we’ll have to agree-to-disagree whether I know what I’m talking about.

      For example, you said that 75% funded is “considered to be acceptable”. No it’s not per the American Academy of Actuaries, here:

      http://www.actuary.org/files/Pension%20Funding.pdf

      In addition, whatever “official” Public Sector Pension Plan funding ratios you see published vastly understates a more appropriate measure of the Plan’s true funding level. Moody’s has developed a procedure to re-state published Public Sector funding ratios to what they would be if calculated using more appropriate procedures and assumptions. You can read about it here (in the Sub-Section titled HOW DO LOWER RATES OF RETURN AFFECT ORANGE COUNTY’S UNFUNDED PENSION LIABILITY?):

      http://californiapolicycenter.org/are-annual-contributions-into-orange-countys-employee-pension-plan-adequate/

      Essentially, With Moody’s assuming the appropriate interest rate for discounting Plan Liabilities (NOT the assumed return on assets …. although Gov’t Plan valuations use the same rate for both purposes) to be about 5.5%, the follow multipliers need to be applied to the “official” Plan rate to arrive at a reasonable estimate of a true funding level:

      If the Plan uses an 8.00% rate, multiply the “official” funding ratio by 0.74.
      If the Plan uses a 7.75% rate, multiply the “official” funding ratio by 0.76.
      If the Plan uses a 7.50% rate, multiply the “official” funding ratio by 0.78.
      If the Plan uses a 7.25% rate, multiply the “official” funding ratio by 0.81.
      If the Plan uses a 7.00% rate, multiply the “official” funding ratio by 0.83.

      So for example the 75% “official” funding ratio you noted above is (per Moody’s) really about 75% x 0.76 = 57% assuming the “official” #s were basis on a Plan rate of 7.75% (which is what I recall the NJ’s Plan’s use). And to put that in perspective, a 57% funding ratio is considered SO POOR in Private Sector Plans regulated by ERISA, that the granting of additional pension accruals would need to stop until that ratio grew to 60+%.
      ——————————————————————————————–

      For what it’s worth, I believe NJ’s Local/Municipal Plans have funding ratios higher than an “official” 75%, so a more realistic funding ratio (using Moody’s methodology) is likely a bit greater than the 57% I calculated above ….. but still VERY poor and supportive of the need for very material benefit reductions for the future service of CURRENT workers.

      We need to IMMEDIATELY stop digging the hole we are in deeper every day.

      Reply

      • Posted by JM on May 21, 2014 at 4:15 pm

        As usual nothing relevent. Thanks TL

        Reply

        • Posted by Tough Love on May 21, 2014 at 5:09 pm

          Weli I think a reader not riding this gravy train might disagree with you.

          Reply

          • Posted by JM on May 21, 2014 at 5:52 pm

            Ignore TL button hit

          • Posted by Tough Love on May 21, 2014 at 6:16 pm

            JM, Denial is not an option nor a solution.

            While I understand that you cannot get yourself to accept anything I say, the following is a rather heady analysis of why NJ’s Pension Plans are doomed (from a well recognized expert on Public Sector pensions):

            http://www.publicsectorinc.org/2014/05/jersey-pension-system-beyond-saving-at-any-reasonable-cost/

          • Posted by truthnolie on May 21, 2014 at 8:05 pm

            Gee, what a shocker – your link is to a post written by another Christie crony…look at his bio on this sycophant at the bottom of article page:

            “About Steve Malanga

            Steven Malanga is City Journal’s senior editor and a Manhattan Institute senior fellow. He is author of Shakedown: The Continuing Conspiracy Against the American Taxpayer, about the bankrupting of state and local governments by a new political powerhouse led by public-sector unions. He writes about the intersection of urban economies, business communities, and public policy. He has been cited as one of New Jersey Governor Chris Christie’s intellectual influences (BusinessWeek, August 2010)”

            “about the bankrupting of state and local governments by a new political powerhouse led by public-sector unions.”

            Think he may be a bit biased????

            One of Christie’s “intellectual influences” huh…..lol. Did he also advise him on the benefits of closing the GW Bridge???

          • Posted by Tough Love on May 21, 2014 at 8:58 pm

            Well truthnolie, we’ll just have to let the readers judge Mr. Malanga’s capabilities and whether what you call bias, he considers to be factually-supported conclusions.

            The following is a link to his FULL bio . Note that it takes several pages to just list the hundreds of mostly scholarly articles and studies.

            http://www.manhattan-institute.org/html/malanga.htm

  8. Posted by Maceo on May 21, 2014 at 1:43 pm

    During the 2011 reforms the locals tried to firewall their funds from the state employee funds but…. A labor attorney told me “If you had a four family apartment and one tenant made their rent payments, would you let them leave?” Local taxpayers had to make up for missed payments on behalf of local employees. The state says the missed payments are not their problem. Then they took the extra employee contributions and COLA money to lower the accrued liability i.e. the reform money never made it to the system. Now the blowhard said it did not put a dent in the problem. Duh. Why do we have an income tax? One of the reasons was to support the teachers pension fund which is not subject to local contribution. The local taxpayer is now subsidizing the states responsibilities. State aid is a funny term isn’t it?

    Reply

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: