My (and Van’s) Plan B

Fourteen public employee unions are now suing Governor Christie over his pension grab yet he insists that there is no “Plan B“:

Visiting Camden, Christie warned that he did not have “a Plan B” to plug the budget shortfall, “and neither does anyone else.”

“Since I’ve announced what the plan was you have heard nothing from anyone else saying they have a plan”
Strangely enough Van Morrison also has no Plan B according to his latest album, no Astral Weeks but a noble effort, yet he gives sage advice in the lyrics to If In Money We Trust:

No substitute
No substitute
You’ve got to think it through again
You’ve got to think it through again
You’ve got to think it through again
You’ve got to think it through again
Got to think it through again
You got to think it through again
Got to think it through again
Got to think it through again’

The financial advice he* has been getting has obviously been disastrous.  I have a better plan that he should immediately implement:

A – Raise a billion dollars by June 30: It’s too late for an amnesty or a millionaire’s tax but it’s not too late to get money out of the rich.   Offer anyone who prepays their 2014 income taxes by June 30 some sort of credit on future years taxes.  The state might lose in the long-run but it would get a rush of money in now and might keep the rich here a little longer to reap their tax breaks.

B – Stop collecting the employees’ portion of contributions to the pension: It only amounts to about $2 billion annually and it would undercut a lot of support for the sue-happy unions.

C- Hire me as the actuary: Blame Milliman and Buck and the actuarial establishment for lying about the real costs of the plan and stop presenting the situation to people as if there were a solution without radical change.  Use the transparency carrot to get public employees on board and go for it.

Failing this, we are on our way to Plan C which people in Prichard, AL, Central Falls, RI, Detroit, MI, and what seems like every city in California can tell you about.




* I mean Chris Christie but Van Morrison has had his financial issues too though this bankruptcy story seems like a put-on, as contrasted to Leonard Cohen’s financial issues which were very real but helped resuscitate his career.

44 responses to this post.

  1. Posted by truthnolie on June 10, 2014 at 1:42 am

    “Failing this, we are on our way to Plan C which people in Prichard, AL, Central Falls, RI, Detroit, MI, and what seems like every CITY in California can tell you about.”

    Again you are comparing CITY plans to a state pension system. You have shrewdly continued to omit the fact that a state plan cannot be compared the examples you give probably to further stoke the fires of those anti-pensioners that post here.

    Care to give an example of a state plan that has gone under or bankrupt (no….because you can’t). So, please, in the future stay away from an apples to oreos comparison.

    Rhode Island tried to severely undermine their state plans but were forced back into bargaining using a federal mediator….same thing will probably happen in NJ and something will emerge similar to what came out of RI, with most states attempting pension reform using that as a road map.

    Go here for full description:


    • Posted by marbs on June 10, 2014 at 9:44 am

      At Least Rhode Island was honest. From their website.

      Aren’t state employees and teachers part of the problem?

      No. The problem is that the system was designed poorly and that legally required amounts were based on bad numbers, leading to no one putting in enough – taxpayers or employees. Decades of relying on unrealistic numbers continually underestimated the true cost of these benefit levels. Using unrealistic numbers means there was never enough put aside. The result is everyone is stuck with a huge, unaffordable bill.

      The failure of the state’s pension system to significantly improve its funding status during the past 25 years is principally due to:

      The system’s investments failing to meet the investment return assumption.

      Inaccuracy of the system’s actuarial assumptions with respect to mortality, salary increases, retirement ages, etc.

      Failure by the state to perform an actuarial experience study until 2000 (for the 1997 pension system year). The state has progressively improved the accuracy of its assumptions since then, but at a substantial cost to the system’s unfunded liability.


      • Posted by Tough Love on June 10, 2014 at 11:18 am

        Quoting … “No. The problem is that the system was designed poorly and that legally required amounts were based on bad numbers, leading to no one putting in enough – taxpayers or employees.”

        What BS. Why not back up further to the ROOT CAUSE of the problem and then address THAT ….. that your Unions bought-off the elected officials who then promised you MULTIPLES greater pensions and benefits that were EVER necessary (to attract and retain a qualified workforce), were grossly unfair to the Taxpayers (responsible for 80-90% of total Plan costs), and clearly unsustainable.

        Of Course such grossly excessive promises are impossible to fund. Why is that surprising anyone?


        • Posted by skip3house on June 10, 2014 at 11:54 am

          Hi TL, And, allowing politicians, and ‘connected’ to enroll…..


          • Posted by Tough Love on June 11, 2014 at 12:50 am

            Keeping them out would have certainly have better-controlled the self-interested decision-making.

        • Posted by marbs on June 10, 2014 at 12:41 pm

          Wow when someone has an agenda they have an agenda. That being screw ALL public employees.


          • Posted by Tough Love on June 10, 2014 at 1:05 pm

            Marbs, I have A:WAYS advocated for pensions and benefits EQUAL to those granted Private Sec tor workers. It is the public Sector workers who demand to KEEP their current pensions (even for FUTURE service) that are TYPICALLY 3x-4x greater in value at retirement than those of comparable Private Sector workers.

            It’s greed on your part …. nothing else.

        • Posted by marbs on June 10, 2014 at 1:42 pm

          TL.I only want the pension that I was promised and forced to contribute to for the job I performed.You can advocate for pensions equal to private sector workers but that’s not going to happen. Did you ever consider that the private worker will be running out of his burning building while the firemen are running in. Or the private sector worker will be running away or cowering behind a desk during a robbery or when they hear shots but the cop will be running toward the incident. The government has chosen to recruit and reward those who can do these jobs with benefits and a pension. I am just about sick and tired of your BS if you are really a taxpayer you will continue to fund these horrible pensions so just suck it up. As for me I am done here you can’t have a meaningful conversation with a moron.


          • Posted by Tough Love on June 10, 2014 at 1:58 pm

            Well Marbs, I’m equally disgusted with your greedy self-adulating “entitlement mentality”, and safety workers are not even on the US Gov’t list of the most dangerous occupations, ALL of which make FAR less money.

            You’re not as “special” as you think, and you’ve gain this great pension/benefit advantage ONLY via your Union’s BUYING the favorable votes of our elected officials. That will change for CURRENT as well as new workers …. because we have no other financial options. And fairness to current actives demands givebacks from current retirees.

            Buckle your seat-belt. You’re in for one heck of a ride.

          • Posted by marbs on June 10, 2014 at 7:13 pm

            TL: You are an as*****. My union which is a local union had nothing to do with any pension enhancements at all. The only enhancement to my pension was going from 60% to 65% after 25 years big deal.

            Yes I am entitled to my pension, that was part of my jobs salary and benefits. At least I am not on welfare or food stamps (they are entitlements).

            I am very special (even my retirement was a special retirement) LOL.I will continue to get my pension and you will continue to pay for it even if the state goes pay as you go which will happen if Christie goes with a split plan.. Thanks You Very much(if you pay taxes). The best thing would be to leave things well enough alone and make the proper contributions.(The Cities do make increased payments already so my plan PFRS Local is much better funded.

            Lets see what happens I have yet to fasten my seatbelt and have no reason to.

          • Posted by Tough Love on June 10, 2014 at 7:47 pm

            Marbs, Where did I use the word “enhancements” let alone as the primary cause? While there have indeed been many Public pension tweaks over the years (with all but the recent COLA suspension) have acting to increase Public Sector pensions, the real problem is that basic pensions are simply FAR FAR too generous.

            They have ALWAYS been far greater than the BEST Private Sector pensions. Three+ decades ago they were perhaps 2x greater than the better Private Sector pensions, but when added to a lower Public Sector “cash pay”, Public Sector Total Compensation was only marginally better. However, over the past 3 decades, boy has that changed. Now,

            (1) “Cash pay” in the the PUBLIC & PRIVATE sectors has equaled,
            (2) Private sector DB Plans have been closed for new workers and either frozen for CURRENT workers or switched to 401K DC Plans.
            (3) Public Sector Pensions have become even richer

            Now, were in a situation where “cash pay” in the 2 sectors is equal (thereby eliminating justification for ANY greater pensions or benefits) and with pensions TYPICALLY 3x-4x greater in value at retirement when considering BOTH the much richer formulas AND the much more generous “provisions”.

            It’s simply unnecessary, unfair to Taxpayers, and unsustainable …. and your demand for “what you were promised” rings hollow. You’re NOT “special” and deserving of a FAR FAR better deal … on the Taxpayers’ dime.

            And let’s not forget your retiree healthcare “promises” worth hundreds of thousands of ADDITIONAL $$$$ in family coverage. Private Sector workers were also promised such benefits long ago …. all since eliminated by their employers. Why should only YOUR promises be kept and for Taxpayers (who don’t get them) to pay for yours.

            Grow up !

    • New Jersey is an example. However you want to call it they are defaulting on 5-10% of promised payments to many retirees. That they theoretically have the money to pay it (and may have to pay it if the judges tell them to) is immaterial. Like Prichard, Central Falls, etc. they did not pay benefits when due. When you make only 90% of a bond payment you are in default.


    • Would it be “repugnant to the Impairment of Contract” provisions of U.S. and NJ constitution to revoke guarantees of Municipal (Teacher, Fire, Police) pensions and make the respective towns responsible for them?

      I submit the answer is no, and that this is what the State will end up doing.

      At such point, the towns will then go bankrupt one at a time, just like in CA.

      That leaves the NJ state employees, which can be addressed differently.


  2. Posted by Tough Love on June 10, 2014 at 2:02 am

    Qouting truthnolie…”Rhode Island tried to severely undermine their state plans but were forced back into bargaining using a federal mediator”

    Yes, and it looks like just about 5% of the original (quite large) reductions MAY be given back … big woop !


    • Posted by Anonymous on June 10, 2014 at 4:26 am

      TL buys the cost savings estimates? Have you looked at the assumptions used in the runs? You have disability that ends at the old NRA, you extend the NRA, but you don’t add disability decrements in the interim. Hmmm…


  3. Posted by Anonymous on June 10, 2014 at 3:39 am

    TL puts her trust in the government to come up with a fair solution for taxpayers. Good Luck Sucker!


  4. Posted by Anonymous on June 10, 2014 at 4:28 am

    John, I’m with you on transparency, but do you really have the experience to do these plans? I’m thinking an RFP for a no-holds-barred actuarial audit would be the way to go. Could go more forensic and look over multiple years, but really it’s not paying the ARC that has been the main issue. Even if the actuarial work is weak and/or wrong, getting to that story isn’t going to happen since they aren’t paying regardless.


    • Posted by Tough Love on June 10, 2014 at 11:26 am

      Quoting … ” but really it’s not paying the ARC that has been the main issue. ”

      No, the main “causative” issue is that the promised pensions are grossly excessive ….TYPICALLY 3x-4x greater in value at retirement than those of comparable Private Sector workers…… and for safety workers, OFTEN 4x-6X greater.

      FULLY fix THAT and we will begin to fix the entire system. Don’t fix THAT and Plan failure is assured.


  5. Posted by skip3house on June 10, 2014 at 4:30 am

    ‘John Bury for NJ Actuary’, or Treasurer. Proof facts do lead to the solution.


  6. Posted by Anonymous on June 10, 2014 at 1:19 pm

    geez TL., you really don’t have a life, do you?


    • Posted by Tough Love on June 10, 2014 at 5:16 pm

      When the truth (and the proper, necessary, and FAIR solution) will hurt you, it’s real tough to accept, isn’t it ?


  7. Posted by Javagold on June 10, 2014 at 1:30 pm

    That’s what happens when you give your vote today , for an IOU in 20 years. If you dont hold it in your hands, you do not own it. Dopes !!!


  8. Posted by bpaterson on June 10, 2014 at 5:59 pm

    rhode island is right about unrealistic programs and forecasts. Nearest example is the social security plans funded by the worker and the company (and indirectly by the govt). They take 6% from ones salary over a longer span of 45 years and yet the most one will get is $25 to 30k year, not the $40 to 80k the imminent govt pensioners expect for working 25-35 years.

    And even the SS program is in continual jeopardy.


    • Posted by Tough Love on June 10, 2014 at 6:07 pm

      The 15%-20% of all workers who are PUBLIC Sector workers will get more (in total) in Public Sector pensions than the other 80%-85% of Private Sector workers will get (in total) from Social Security …….. and with the Taxpayers paying 80-90% of the total costs of PUBLIC Sector Plans.

      What an outrageous financial “mugging” of PRIVATE Sector Taxpayers !


      • That only works when the people are forced to stay put and pay those taxes….Think about Detroit and the razing of houses – a neighborhood of houses in good condition = healthy tax base, a neighborhood of houses in bad condition = unhealthy tax base, a neighborhood of former, now missing houses = NO tax base.

        Camden and Trenton and parts of Newark are the canaries in the coal mine…..


  9. Posted by bpaterson on June 10, 2014 at 6:01 pm

    BTW JB1, you say to hire you as the govt actuary, its a little late now isn’t it. You get hired, come on board and say they really have a $150 billion shortfall not a $65 billion one.

    Now what?


  10. Posted by Pat on June 10, 2014 at 8:16 pm

    John, do you still advocate the freezing and end of the programs, as per the link to your past posting? Any changes or additions to your opinion since then?


    • More than ever. Termination and setting us a DC plan is a no-brainer for me and it gets ever more so with every stupid ‘reform’ proposal from NJ politicians and every Union County freeholder meeting I attend. Politics as practiced in NJ can’t fix this.

      If there’s been any change it may be a stronger feeling that the entire electoral process needs to change first.


      • Posted by Tough Love on June 10, 2014 at 8:55 pm

        Hey Marbs, Well, you don’t believe me that this is necessary. Perhaps you’ll Mr. Bury that it is indeed.

        So who is the “moron” and the “as*****”, as you have called me in your above comments?

        I don’t call Public Sector worker names. I very strongly advocate for NECESSARY (and JUST) change.


        • Posted by Anonymous on June 10, 2014 at 9:13 pm

          You are a liar! You most definitely do call public sector workers names and quite often. Thankfully you wont lift a finger unless it involves a glass of alcohol.


          • Posted by Tough Love on June 10, 2014 at 9:16 pm

            Rarely more than “greedy”, and I’d hardly call that name-calling.

  11. Posted by Anonymous on June 10, 2014 at 10:34 pm

    Another bold faced lie! Have you ever thought of running for office?


  12. Posted by Sam on June 11, 2014 at 5:11 pm


    Any thoughts on the plan b, c, and d approach of Phoenix?

    I think there were seven actuaries present at the meeting:


    • I tried to look over some of the background and gave up. Some notes:

      For a plan 64% funded using typical public plan assumptions means a lot more needs to be done and
      putting new people in DC plans (that may actually cost more than DB for the younger ones) won’t do it.

      Cash Balance makes some sense but it doesn’t address the current funding gap which will only get worse.

      A helpful study might have been to take an example of a few participants at different age and salary levels and look at the impact the change would – though that would likely be too much transparency. The idea of these reforms (like 401(k)s in the private sector) is to trick participants into accepting them.

      This is being voted on? Most voters make no effort to learn the names of the candidates – how much effort are they be going to make to cast an intelligent vote?


      • Posted by LGreene on June 18, 2014 at 1:43 pm

        What do you think should be done in Detroit? and what do you think of the ” Grand Bargain?


    • Posted by Tough Love on June 11, 2014 at 9:42 pm

      Politicians (almost always beholden to the Public Sector Unions for election money and support) RARELY have to stomach or strength of character to implement the FULL and NECESSARY pension changes ….. which means a hard freeze to the current DB Plans of all CURRENT participants (ZERO future growth).

      Doing THAT would at least stop digging the financial hole we are in deeper every day. ….. and we’d still be left to address IF and HOW the unfunded liability for PAST Service accruals can be addressed..


      • Posted by anon on June 12, 2014 at 12:17 am

        Even a hard freeze does not address the fact that a cost has been incurred and has to be paid up. The idea of “savings” from most pension reforms (excluding stopping accruals and removing granted COLAs and the like) is really absurd. It’s not savings, it’s paying part of the cost in a different way, often in the form of current employees receiving less significant benefits. And if you take away a deferred compensation amount that was part of the negotiated contract, seems very likely the total compensation will not change and the employer will just be stuck providing part of the total compensation through a method that is less efficient for them. So not only will most “savings” not be savings, they can actually be costs as providing a dollar of salary is more expensive.

        The conversation that should be having is looking at what are the risk factors that led to the current challenging situation and taking action to manage that risk. The existing cost has to be paid — reforms don’t undo that. If a reform “saves,” you likely are paying elsewhere.

        Also, there is no plan c or d in any of the Phoenix scenarios, so not sure what the original poster was looking at.

        Personally? I’d love to see a reform effort where the stakeholders start addressing all the characteristics of risk and reward related to retirement benefits and security and first decide on what the desired characteristics are. Then they can look at how to achieve that.


        • Posted by Tough Love on June 12, 2014 at 12:37 am

          Baloney. What your saying would only be true if “Total Compensation” (cash pay + pensions + benefits) were equal in the Public and Private Sectors.

          That far from the current situation where cash pay is just about equal but Public Sector pensions and benefits are ALWAYS MULTIPLES greater than those of their Private Sector counterparts.

          A VERY material decrease in Public Sector Pensions and benefits for all CURRENT workers is eminently justifies WITHOUT any offsetting change in other elements of compensation.


          • Posted by anon on June 17, 2014 at 11:35 am

            If that is true, why are more people not going to public sector? And driving costs down there? Do you really think that a negotiated contract can have a component just removed and be accepted without any impact on retention and recruitment?

          • Posted by Tough Love on June 17, 2014 at 1:07 pm

            Quoting …”If that is true, why are more people not going to public sector?”

            Where have you been ? For every opening there are 50 applicants … and for Police/Fire opening with the most egregious pensions, hundreds apply for each open position..

            ALL of the Public Sector employers need to cut pensions & benefits by 50+%. When they do there will be no retention or recruiting problem because their total compensation will STILL be greater than that of comparable Private Sector workers.

  13. Posted by George on June 14, 2014 at 1:32 pm

    Can’t the police just give out more tickets? Maybe after any fender bender give out a careless driving citation (not that NJ cops would ever do such a thing).

    N.J. could eliminate high school, that would get more people in the workforce. That would save a bundle and produce more tax payments without increasing rates.


    • Posted by Tough Love on June 14, 2014 at 4:52 pm

      Not matter what cuts Gov’t entities make, unlike in the Private Sector, rarely does anyone lose their job. even when the job has no longer has any work assigned to it. Corporate America know that THATS where the real savings come from (head count reductions) … and they act accordingly.

      Gov’t has morphed into an employment service for the unneeded, the incompetent and marginally employable.


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