Pension Panel Report Released

Late this afternoon the report came out and concluded:

This problem is dire and will only become much worse if meaningful steps are not taken quickly. (page 32)

There are useful charts and some veiled scathing criticism that is never made overt in the report so I will do it here.

Two of the charts are identical (pages 7 and 19) and they compare the official Annual Required Contribution (ARC) amounts calculated by the actuaries to what was eventually deposited during the administrations of six governors from 1995 through 2015.  Add up the numbers and you have our current governor (the one trying to repent for the sins of his predecessors) skipping $14.9 billion in payments over his five budgets while the prior five governors over sixteen budget years skipped a combined total of $12.6 billion.

Previous attempts at reform were acknowledged but dismissed as ineffectual as to health benefits:

In 2007, the State Employee contribution provisions changed to require a contribution of 1.5% of salary regardless of benefit plan or level of dependent coverage selected, an approach that eliminated any meaningful financial incentive for employees to select a less expensive plan. (page 23)

and pensions:

One of the reasons the reforms described above have had little impact on the unfunded liability is that many of them do not apply to all current employees. Efforts to use changes in plan structure to reduce unfunded liabilities in the near term resemble trying to use a very small tail to wag a very large dog.  Illustrating this point, virtually all of the $11.5 billion savings in pension costs effected by Chapter 78 are due to the one reform with the greatest reach beyond new employees – the temporary suspension of COLA payments. This change, of course, was almost immediately challenged in court following the enactment of Chapter 78, and remains on appeal. (page 18)

As to what this panel will recommend there were two hints:

  1. One conspicuous holdover from pre-reform years, however, is the minimal per-year penalty for early retirement. A newly-hired State employee who retires five years early, at age 60, would have his or her State pension benefit cut only 3% a year, or 15%.  In contrast, under Social Security, for a person born after 1960, retiring five years early – at 62 instead of 67 – would result in a 30% reduction in benefit.  Early retirement has a multiplier effect on both pension and health benefit costs. (PAGE 18)
  2. All of of page 21 with examples of what other public pension systems, who all happen to have gone to some sort of hybrid plan, are doing.

As dire as this report pretends to paint the situation there are four obvious omissions (that I will get to tomorrow) that make the recommendation of a hybrid plan (that they will come out with explicitly in a couple of months) ineffectual.

 

 

6 responses to this post.

  1. Posted by Tough Love on September 26, 2014 at 1:11 am

    ANY Plan that has a materially lower benefit accrual rate (than current Plans) is a step in the right direction, and virtually all hybrid Plans have a lower overall cost structure. The key to having MEANINGFUL savings in the near-term, is for the change-over to include the future service of all CURRENT workers.

    It will be interesting to read the “omissions” that you believe will make the recommendation of a hybrid Plan ineffectual.

    There will be a BIG battle with the Public Sector Unions/worker/retirees no matter what the Commission recommends (other than tax increases or the sales of State assets).

    Reply

  2. Posted by Anonymous on September 26, 2014 at 9:31 am

    Blah, blah, blah, blah, blah, blah, blah, blah. Nothing of consequence said.

    Reply

  3. Posted by Anonymous on September 26, 2014 at 9:34 am

    you have our current governor (the one trying to repent for the sins of his predecessors) skipping $14.9 billion in payments over his five budgets while the prior five governors over sixteen budget years skipped a combined total of $12.6 billion. Yet people are dumb enough to think Christie has done wonders

    Reply

    • Posted by Richard on September 26, 2014 at 3:11 pm

      Yes, that would be about 3.7 times the skipped payments per year. Obviously, inflation would make a difference as would the time value of money. But not 3.7 times.

      Reply

  4. Posted by John Dorne on September 27, 2014 at 2:23 pm

    This of course is all bull. We had to pay into the fund ;NO CHOICE; in return we were promised we would receive COLAs to give us a livable wage. Meanwhile each governor dipped into the fund and spent like drunken welfare recipients. Starting with Christy Whitman. They kept saying well we would be brought up to standards as soon as the fund got to X amount. I kept saying to our PBA Reps., ” It’s never going to happen this crook is going to keep dipping into the fund.” I wanted her brought up on charges of embezzlement ; no body would listen ; what the hell were we afraid of , we are cops that is our job.
    Well now I’m 71 ( soon to be 72) I’ve had 6 cancer operations ( little present from Vietnam) I’m still at $24,000 and change (you can’t live on that) How about you just bring me up to poverty level , hell welfare recipients and illegals do better than that.

    Reply

    • Posted by Tough Love on September 27, 2014 at 2:52 pm

      Gotta love the “we” and the “us” in your first sentence.

      Yup, with likely less than 1% of employer-sponsored pensions including any COLAs, you guys (Public Sector workers) are “special”, entitled, and deserving of a FAR better deal …. and 80-90% on the Taxpayers’ dime.
      ———————————————————

      Taxpayers are wising up quickly… and in short order will be shutting this pension/benefit pig-fest.

      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: