New Jersey’s Pension Panel Following Script

The template is Detroit where pension funds that were officially 95% funded (using the flawed methodologies designed to understate contributions that every other public pension plan in the country uses) until the bankruptcy lawyers hired Milliman to provide a more convenient number for them.  Unfortunately New Jersey can’t avail themselves of Milliman’s ‘Ministry of Truth division’ since they already use Milliman to provide other phony numbers for their Teachers’ Plan so a pension panel will have to do.

The Star-Ledger, a propaganda arm of whatever government entity supplies them with legal-ad revenues, did a fluff piece on the panel and its chairman today in which we learned:

Timing and Severity

Thomas J. Healy, a former Goldman Sachs executive who once worked for Ronald Reagan’s treasury department, also suggested that the panel may provide recommendations as soon as mid-October, though it could take longer. The commission’s first report, due next month, will be to explain what’s wrong.“I don’t know yet what the answers are,” Healey, whom Christie appointed to chair the special panel, said in an interview with The Star-Ledger. “It’s a big problem. If we can make that clear, we’ll have accomplished a lot in that first 30 days.”

Who, once they are alerted to it, would think that a $40 billion (admitted) deficit is not a “big problem”? The whole report could be the words “$40 billion deficit”.  The trick is to get public employees to see that their pensions could be cut by 70%, taxpayers to see double-digit tax increases ad infinitum to make up shortfalls, or some combination.

Meetings

“We’ve got a group of people who are very smart,” he said. “We’re balanced. The two meetings and two conference calls we’ve had so far have been enormously apolitical. Which is the goal.”

Four get-togethers and the consensus is that they are all smart and apolitical.  Basically code for saying they will all agree with each other.

Panel Genesis

Healy said he suggested forming a commission after Christie invited him to Drumthwacket last month to ask for his expertise on the pension situation.

“That sounds like an easy way to avoid a solution or push off a problem,” Healey said. “But because pension issues are so complicated, and hard for the taxpayer to understand, a commission can serve to lay out facts in a nontechnical way.”

He was right the first time.

What we will get

In 2012, Healey co-wrote a policy paper for Harvard University’s John F. Kennedy School of Government that examines ways to drastically cut pension benefits for public employees in the U.S. The co-author was Carl Hess, investment executive and actuary with Towers Watson, who was also named to the commission.

One of the paper’s recommendations was to base pension benefits on the average salary earned by an employee over their entire career. New Jersey bases it on an average of the five highest-salary years. That change, the paper said, would slash pension costs and retiree benefits by 33 percent for a typical pension system.

The paper also suggests moving to a hybrid system that would combine a traditional pension plan with a 401K-styled plan, like Rhode Island has — a change Christie has been considering.

We will get that paper with maybe a few of the ‘big’ words taken out.

 

28 responses to this post.

  1. Posted by Anonymous on August 25, 2014 at 3:34 pm

    Its all bullshit isnt it? first let the government pay what they owe which wouldnt have been difficult at all if they had paid all along. then let see how much problem is left. afterall the government did not contribute because they lied and said pensions were funded and courts backed them up

    Reply

    • Posted by Tough Love on August 25, 2014 at 4:07 pm

      Quoting …”first let the government pay what they owe”

      No, FIRST calculate what the Taxpayers contributions WOULD HAVE BEEN if the promised pensions were NO MORE than those TYPICALLY granted Private Sector Taxpayers …. CLEARLY 1/4-1/3 of what they are now when BOTH the absurdly rich formulas are (at least) halved (or quartered for safety workers), the very young full retirement ages are increased to the full retirement ages in PRIVATE Sector Plans, and once all the liberal crap allowed into “pensionable compensation” is removed.

      THEN, taxpayer should fund no more than our “share” of THAT …. and we’ve probably contributed more than THAT already.

      GREED has consequences.

      Reply

  2. Posted by Anonymous on August 25, 2014 at 4:31 pm

    Government said pensions were funded and courts backed them up. Argue with that!

    Reply

  3. Re: Commission

    Has the NJEA commented on the creation of this Commission? If it has I would like to see it. Please advise.

    Reply

    • Posted by Tough Love on August 25, 2014 at 5:35 pm

      Here’s where to find it….

      http://www.nj.com/politics/index.ssf/2014/08/christie_pension_commission_chair_says_panel_is_avoiding_politics.html

      Quoting …. “Ginger Goldsmith, a spokesman for the New Jersey Education Association, the influential state teachers union, said the state doesn’t “need a commission to know what the problem is. The state has to pay their fair share. I feel the governor is wasting the commission’s time.”

      Not surprising she says that, ignoring that what she wants is for the TAXPAYERS to pay 80%-90% share of the total costs of a grossly excessive pension (YUP, THAT’s the “share” allocated to Taxpayers).
      ——————————————————

      Quoting …… “Hetty Rosenstein, the New Jersey executive director of the Communication Workers of America, the largest state workers’ union, said the panel has “no credibility.” “We already know what this commission will say,” Rosenstein said. “I think none of the people who have been hand-picked and selected by the governor should ethically participate in this. It’s a fraud.””

      That’s pretty funny coming from this Union mouthpiece whose “credibility” is ZERO in the eyes of everyone EXCEPT NJEA members. Talk about a “fraud”, I wonder if she has a mirror. …

      Reply

  4. Posted by MJ on August 25, 2014 at 5:33 pm

    With the panel recommendations such as maybe switching to a hybrid, averaging out years of service, etc. will any changes apply across the board or only to new employees? It is the current publics who are sucking the life out of us so if changes were made only for new hires, younger workers, etc how would that help solve the problem?

    Reply

    • Posted by Tough Love on August 25, 2014 at 5:44 pm

      The proper and fair change should be BOTH pension and retire healthcare cuts for the future service of all CURRENT workers.

      With the legal complication of cutting pensions for CURRENT workers (even just for FUTURE Service …. legal and ROUTINELY done in Private Sector Plans), the commission should have a fallback option of complete elimination of all retiree healthcare for all actives and all retirees if the future service pension accrual rate of all CURRENT workers cannot be very materially reduced (by AT LEAST 50% ….. STILL leaving them with greater pensions than their private sector counterparts).

      Reply

  5. Posted by MJ on August 25, 2014 at 8:28 pm

    Haven’t we heard that same thing over and over and over about the state didn’t pay????? Why wouldn’t the state just pay if they could?? Because they can’t or they would have. No money……….nobody cares, the pensions are almost insolvent, can’t get blood from a stone. Ain’t much of a private sector left!

    Reply

  6. Posted by Anonymous on August 25, 2014 at 8:57 pm

    They could have in paid more in the past but used the money for tax refunds and property tax rebates, both used to garner votes. Its always about the politicians, not about the people. And keeping us pitted against one another keeps the spotlight off of them, they are doing a masterful job of it. half the country hates the other half and its been that way for years now. And dont fool yourself there are many many rich in the private sector especially in jersey, although you may or may not be one of them.

    Reply

    • Posted by Tough Love on August 25, 2014 at 10:39 pm

      Talk about “garnering votes”.

      Isn’t how your grossly excessive pensions and benefits came to be in the first place ….. by your Unions’ BUYING the favorable votes of our elected officials with campaign contributions and election support ?

      You like it THEN, didn’t you?

      Reply

  7. Posted by Javagold on August 26, 2014 at 12:10 am

    Jus wait until the BANK BAIL INS coming soon. You public takers ain’t seen nothing yet !!

    Reply

    • Posted by Tough Love on August 26, 2014 at 12:30 am

      I believe that on average, it would hurt Public Sector workers LESS that Private Sector workers. While the latter has much of it’s “wealthA” in banks (possibly subject to bail-in”), Publics are mainly PENSION & BENEFIT wealthy.

      Only a equilateral cut to their pensions & benefits would be equivalent.

      Reply

  8. Posted by Rick Dove on August 26, 2014 at 8:05 am

    I may have to retire quickly if they change multiplier to avg of all years for current employees! problem for government would be a mass exodus and major draw down of pension fund!or maybe that’s what they want! Fund gets depleted Christie says “I told you we had a problem”.

    Reply

    • Posted by Tough Love on August 26, 2014 at 9:26 am

      Other than in a “bankruptcy” (a “city”, but not currently a “State” option) reducing payouts to current retirees (possibly excepting COLA) or reducing past service accruals for actives is very unlikely short-term (see below).

      Even “difficult” but VERY necessary to salvage NJ Plans, is VERY materially reducing the pension accrual rate for the FUTURE Service of current workers.

      And clearly, retiree healthcare promises are the “low hanging” fruit.

      ———————

      All that being said, when NJ’s Plan hit “pay-go” in 3-5 years (because Plan assets have been exhausted), annual payments to retirees must come from annual revenue (taxes & fees). That would require a tax increase in the neighborhood of $9 Bilion.

      Since I consider that to be about 99% unlikely, pension and/or retiree healthcare reductions are almost a certainty ……. and leaving employment now won’t help.

      Reply

  9. Posted by Anonymous on August 26, 2014 at 8:33 am

    Christie I told you we had a problem! I also told you that I had saved the pensions for public employees and they would e thanking me in the years to come. I also told you I would make the payments and it would be the law that I would make the payments! I told ya, I told ya, I told ya. I cant get over how stupid you people are to people what I told ya! And I will do it again and again and you will still believe me!!!!

    Reply

    • Posted by Tough Love on August 26, 2014 at 10:00 am

      Yeah, but what he didn’t tell you was that you stupidly/greedily believed in the pension “tooth-fairy”.

      Reply

  10. Posted by Endalimony4ever on August 26, 2014 at 11:45 am

    Since our elected representatives do not have the intestinal fortitude nor do they play well in the sandbox to do what is right, this is how this is going to play out. The pensions are going to go “belly up”. By the time the whole fiasco unwinds, NJ citizens will be looking at modest tax hikes and the pensioners(both present and future) will be taking haircuts of 50 – 70%. It’s already a done deal between repubs and dems, they are just assembling the cover story to make it happen, which is what this panel is all about.
    This problem was not Christies doing nor Corzine, or even McGreevy. This started 30 or 40 years ago, with mainly democrats selling out the citizens for large block votes of the unionized public workforce. All along the pol’s knew the pensions were in trouble but with competing “needs” the pensions were used like personal trust funds for various different governments.
    Like any ponzi scheme(and that is what NJ’s pensions are), Those who withdraw first, end up best off. Those last in the ponzi are the ones who get screwed. We are now drawing ever closer to the point where the ponzi collapses and the state workers who were counting on their oversized pensions are going to be very sorely disappointed.

    Reply

    • Posted by Tough Love on August 26, 2014 at 2:49 pm

      Quoting … “This started 30 or 40 years ago, with mainly democrats selling out the citizens for large block votes of the unionized public workforce. ”

      BINGO ….. you get the prize !

      For decades,Taxpayers have been UNFAIRLY allocated an 80%-90% “share” of these grossly excessive Public Sector pension promises (TYPICALLY 3x-4x greater in value at retirement than those of their Private Sector counterparts). Thank goodness we (the Taxpayers) have put in A LOT lees than that “UNFAIR share” … and in short order we we very likely be reneging on the balance we owe…. because we don’t now, and will NEVER have the money.

      Blame yourself Public Sector workers ….. for being insatiably greedy.

      Reply

  11. Posted by RealRep on August 26, 2014 at 12:49 pm

    Required reading. S&P goes up 29% and Christie’s clowns brag about a 12.9% return. We are all on the hook for his shenanigans, not just public employees. http://www.ibtimes.com/gov-christie-shifted-pension-cash-wall-street-costing-new-jersey-taxpayers-38-billion-1667622

    Reply

    • Posted by Tough Love on August 26, 2014 at 2:54 pm

      Do you think it would have been prudent to put 100% of Plan assets in equities, rather than a more balance portfolio of equities, real estate, bonds, etc. ……….. especially given the large annual payouts vs contributions?

      Reply

      • Posted by RealRep on August 26, 2014 at 3:07 pm

        Or Revel? Touche.

        Reply

        • Posted by RealRep on August 26, 2014 at 3:09 pm

          Typical managed funds manager excuse when they lag the S&P=diversification. Balanced portfolios is not what high growth managers do dimwit.

          Reply

          • Posted by Tough Love on August 26, 2014 at 4:21 pm

            Clearly you know ZERO as to what investments are appropriate for pension fund assets.

        • Posted by Tough Love on August 26, 2014 at 4:20 pm

          If you think the Revel investment was illegal, pursue it. Not all investments work out …. but you’re correct in one respect ……… those that require State money to move forward are the most shaky (because Private Sector money knew better).

          Reply

  12. John:

    When will the court issue its decision on the COLA question

    Reply

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