Expect NJ Pension Panel to Peg Underfunding at $60 – $90 Billion

Detroit had pensions funded at 96.1% but wanted lower numbers to justify benefit cuts and they got them by hiring another actuarial firm to provide those numbers.

New Jersey has the same need to cut benefits and, according to a state bond document filed yesterday, they are using their pension panel to do it (from page I-52):

In August 2014, the Governor created a non-partisan commission tasked with developing recommendations for how the State can further reform the Pension Plans. As part of its process of analyzing the condition of the Pension Plans and formulating its recommendations, the commission has requested and is expected to continue to request that the State provide to it information regarding the Pension Plans containing data in addition to or different from that presented herein and analyses using assumptions and methodologies which differ from those used herein. As a result the commission may develop for its own internal use or for public dissemination information characterizing the present and projected financial condition of the Pension Plans which differs markedly from that presented herein.

What was ‘presented herein’ was (on page I-58) the same drivel using every actuarial methodology available to understate unfunded liabilities (thus lowering contributions) which resulted in these numbers:

nj pension 2013
However whereas Detroit’s official funded ratio was 96.1% in New Jersey it is 54.2% for state obligations with unfunded liabilities of $37.3 billion. Using back-of-the-envelope estimates that funded ratio could go down to anywhere from 40% with unfunded liabilities of $60 billion to 30% with unfunded liabilities of $90 billion when the panel gets around to carrying out its orders.

13 responses to this post.

  1. Posted by Tough Love on September 10, 2014 at 10:30 am

    John, If I recall correctly, several times in this blog you have shown what the Plan liabilities and Funded Ratios would look like with (a) more realistic (i.e., LOWER) liability discount rates, (b) “Market”, not “Smoothed” assets, (c) adjusting for the likely true value of Alternative Investments, etc. to give your readers a TRUER sense of where we really stand.

    In this article, you appear to be upset with this Commission doing the same thing …. presenting a far more accurate picture of where we truly stand.

    Isn’t that a “good thing”, and if the current promises are indeed excessive by reasonable measure, why isn’t (to the extent it can be legally accomplished) a reduction in promised pensions (especially for FUTURE Service) an appropriate way to address this problem?


    • Here is my latest update which the panel is free to plagiarize if it finds necessary:

      The issue here is not to have a handpicked panel regurgitate these numbers but to have the actuaries for the state admit their truth. This should have been picked up on in Detroit when Milliman came in with lower funded ratios over what GRS was officially reporting. Was GRS lying?

      So it is in New Jersey when the panel comes up with their $60-$90 billion shortfall. The first question (if they take questions) should be ‘Were Buck and Milliman lying?”.


      • Posted by Tough Love on September 10, 2014 at 11:50 am

        The actuaries for the State aren’t going to put themselves in a position to e sued, and it’s like their disclosures meet minimum legal (if not appropriate ethical) standards.


  2. Posted by Anonymous on September 10, 2014 at 10:32 am

    The State of NJ has created a US first, it’s own state-based Great Depression. We will now have one of the largest percentage of poor adults and children comparable to Mississippi. As the rest of the nation moves slowly towards recovery from the 2008 economic crisis, we move quickly towards the averted national economic depression. Maybe firmer Fed Chief Ben Bernanke will lend NJ some of his time and talent to save our state.


  3. Posted by Anonymous on September 10, 2014 at 10:32 am

    Finally in black and white…according to these figures the LOCAL plans are in much better shape than the STATE plans. Christie and this commission should keep their hands off the local plans and allow them to continue as is.


  4. Posted by bpaterson on September 10, 2014 at 10:32 am

    The question is to the motivation of all this, JB1. is it for just kicking the can down the road, bolstering up our state credit rating, ameliorating the residents taxes, forcing the hands of collective bargaining units. These actions by CC and legislators, third parties, et al, are definitely the agents of politics but just why is this happening.

    My self-service wants it to be toward the benefit of the taxpayers.


    • It’s for the purpose of cutting benefits starting with COLAs. The courts are going to finalize a ruling that COLAs are protected so Christie will use the panel’s scare numbers to justify an executive action to not have COLAs return which will set the stage for future arbitrary (and theoretically illegal) benefit cuts.


  5. Posted by Javagold on September 10, 2014 at 11:33 am

    let the Ponzi Pyramid collapse…..Put all Public Takers on Obamadontcare……leave the rest of the taxpayers alone as they slowly sink in their own death spirals


  6. Posted by Anonymous on September 10, 2014 at 12:10 pm

    TL could not care less about the poor, after all it is their own fault they are poor.


  7. Posted by Eric on September 10, 2014 at 4:32 pm

    Prior to any unilateral cost of living adjustment abolition, would not cc cut health benefits first, because, as you said, these are the “low hanging fruit” that are least protected from a legal standpoint or am I wrong?
    Thanks for any insight.


    • Though cutting health benefits for retirees might yield fewer court challenges there is the issue of the constituencies involved. Cut COLAs or even the base benefit and you have a lot of retirees (many now living out of state) mad at you. Cut health benefits and you have those same people mad at you plus all the insurance brokers (Norcross; Hale, et. alia.) who partially fund your campaigns.


      • Posted by Tough Love on September 10, 2014 at 9:36 pm

        A major retiree health insurance premium shift from the employer (meaning the Taxpayers) to the workers would have no or minor impact on the insurance brokers.

        I see that in the cards…… BIGTIME.


  8. Posted by Eric on September 10, 2014 at 9:27 pm

    Thanks. I understand why health care benefits must be preserved for political purposes. It makes perfect sense to me. You are a wise man.
    Thanks again,


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