Trust Christie’s Pension Panel – On This

mycentraljersey.com irresponsibly editorialized today not to trust Christie’s Pension Panel report:

Gov. Christie’s hand-picked bipartisan commission on pension reform released the first of its reports last week, and the panel predictably painted a bleak picture of New Jersey’s future benefits burden and the need for significant changes to the system. That of course closely echoes the theme of Christie’s “No Pain, No Gain” middle-class-bashing summer tour, in which the governor emphasized over and over again that public workers need to give back more of their benefits to help the rest of New Jerseyans, including the wealthiest residents in the state.

Next month, the commission is expected to release recommendations on future reforms. Bet on Christie liking most of those recommendations. Public workers will feel differently. That’s what happens when the governor plays with a loaded deck.

As if Christie was manufacturing this pension crisis so he could score easy points by solving it with his preferred policies.  It would be like bringing in thousands of wind machines to replicate Hurricane Sandy so he can don his campaign fleece and anticipate more federal disaster aid to dole out.

If anything the Panel understated the crisis by accepting official numbers though two words (that they even chose to highlight)  in a paragraph on page 5 tells you what they really think (and should be saying more forcefully):

There are many different ways to measure the same underlying unfunded liability. If the market values of assets were used, for example, the unfunded liability as of the end of FY 2013 would have been $42 billion. Similarly, the $37 billion figure reflects a 7.9% expected rate of return set by the State Treasurer. While this figure is within the range currently used by other states, the actuaries for the State’s plans have questioned its use going forward. Use of a lower expected rate of return would tend to increase the plans’ unfunded liabilities because the plans’ assets would be assumed to earn less income in future years. Given the uncertainty surrounding these factors, the best that can be said is that the State’s unfunded pension liability at the end of FY 2013 was likely at least $37 billion.

Pension valuations should be the actuary’s best estimate with an equal likelihood of being wrong either way.  This panel made clear what everyone in the actuarial community understands.  Public pension reports are not any actuary’s best estimate of costs or liabilities.  They are  some actuary’s best effort to lower contributions for their politician-clients by whatever gimmick (asset smoothing, open amortization) to levels acceptable to their constituencies that won’t get them laughed out of the profession.

Yes everyone is being lied to about the severity of the public pension crisis in New Jersey.  It’s not as bad as official sources paint it to be.  It’s much, much worse.

17 responses to this post.

  1. Posted by Tough Love on September 30, 2014 at 2:04 pm

    Of course Public Sector workers will feel “differently”. With the grossly excessive (by ANY reasonable metric) pensions & benefits in place RIGHT NOW, and ZERO possibility of (or any reasonable “justification” for) Taxpayers to fully fund them, BOTH the expectation AND the correct course of action is for the Commission to recommend very material pension & benefit reductions for all CURRENT workers.

    ———————
    And I agree …. the Commission clearly UNDERSTATED the magnitude of this crisis.

    Reply

  2. Posted by Anonymous on September 30, 2014 at 3:05 pm

    blah blah blah, again nothing of substance to help the problem. She has solutions but no FEASIBLE way to arrive at them. By the way Christie hand picked the commission, why do you suppose he handpicked a commission which clearly understated the magnitude of the crisis. Only reasons I can see is that he wants to give the impression that things have improved under his governorship and to also make his lack of contributions to the fund seem harmless at this time.

    Reply

    • Posted by Tough Love on September 30, 2014 at 4:48 pm

      Quoting …. “She has solutions but no FEASIBLE way to arrive at them.”

      The REASON that solutions are so difficult to come by is because not only did NJ’s elected officials grant these grossly excessive pensions and benefits, but structured a myriad of legal “protections” from NECESSARY & JUST reduction … even with respect the FUTURE SERVICE accruals …. that do not exist in Private Sector Pension Plans.

      Reply

  3. Posted by Anonymous on September 30, 2014 at 4:59 pm

    I know several private sector employees who retired around the same time as I did with much more generous pensions. Their companies forgot to speak to you and get approval,

    Reply

    • Posted by Tough Love on September 30, 2014 at 6:08 pm

      Well, I can all but guarantee that if that is true, it is because the Private Sector worker had either MUCH MUCH greater pay or MUCH MUCH longer service, and likely BOTH, because it they had the SAME pay, the SAME service, and the SAME age at retirement, there are almost NO CIRCUMSTANCE whereupon the Public Sector worker’s pension is not AT LEAST 2x greater in value at the date of retirement ….. and MOST OFTEN 3x-4x greater (and 4x-6x if the Public Sector worker is a police officer or paid firefighter).

      Reply

  4. Posted by Anonymous on September 30, 2014 at 6:37 pm

    one of them worked for a japanese shipping company based in the united states

    Reply

  5. Posted by Anonymous on October 1, 2014 at 2:51 pm

    Well at least the soldiers who defend our country dont get paid well at all and they dont get very good pensions or health care, that should make you very happy. Think of all the money you are saving! Most important to you!

    Reply

  6. Posted by Tough Love on October 1, 2014 at 7:36 pm

    BREAKING NEWS ….. per the Federal Bankruptcy Judge in the Stockton CA bankruptcy:

    Quoting …

    ” In a potentially groundbreaking decision, a federal bankruptcy judge today struck down the sanctity of government pensions in California, saying the city of Stockton has the right to sever its contract with CalPERS.

    The verbal ruling from U.S. Bankruptcy Judge Christopher Klein, two years after Stockton filed for bankruptcy, was the decision CalPERS longed to avoid. For the first time, a judge in California has said a city or county can walk away from its CalPERS obligations, the way a bankrupt retail chain can exit a bad lease at a shopping center.

    Source … http://www.sacbee.com/2014/10/01/6752346/calpers-bankruptcy-stockton.html
    ————————————————————

    Wonderful news EVERYWHERE … while a bit harder in NJ with STATE plans (where States cannot file for Bankruptcy … at least not NOW), towns and Cities everywhere have a GIANT stick to beat-down the insatiable greed of the Public Sector Unions/workers and their refusal to materially cut their grossly excessive pensions …… either DO SO or we’ll file for Bankruptcy, renounce the pensions, and leave you with even LESS.

    A WONDERFUL decision for the beleaguered Taxpayer !

    Reply

  7. Posted by Anonymous on October 1, 2014 at 9:44 pm

    hahahhahhaahahahahahaha, omg this is hilarious. She actually believes this will fly in NJ where Christie Whitman single-handedly screwed every taxpayer with her deal made in hell! TL is famous for comparing apples to oranges. Dream on, I doubt even t his decision will be upheld if appealed. What do you think John?

    Reply

    • Posted by Tough Love on October 1, 2014 at 9:56 pm

      Giving it more thought, I DO believe this decision has material implications in NJ.

      If a City or Town’s financial circumstances are dire, with a choice between funding it’s worker’s (yes, grossly excessive) pensions or providing essential services, filing for Bankruptcy and developing a reorganization Plan which INCLUDED material pension reductions would be perfectly consistent with the CA Court ruling.

      It seems to me that while NJ STATE employees may still be protected (because NJ as a STATE) cannot file for Bankruptcy, all non-State employees of towns, cities, etc. ARE at risk for pension reductions in a Bankruptcy proceeding.

      Gee….. I hope NJ’s towns start sharpening some “big sticks” for their next round of Union negotiations.

      Reply

  8. Posted by Anonymous on October 1, 2014 at 9:50 pm

    Whether Stockton would sever its CalPERS contract is another matter. City Manager Kurt Wilson told the Sacramento Bee that there’s no change in the city’s plan to keep paying CalPERS in full and retaining its full pensions.

    Reply

    • Posted by Tough Love on October 1, 2014 at 10:04 pm

      The judge said he will not rule on (whether to accept) the Stockton Bankruptcy Plan today….. and the case will continue on Oct. 30.

      Stockton doesn’t “want to” reduce it’s workers’ pensions, but it may be forced to do so by Judge Klein’s refusal to approve the City’s Bankruptcy Plan without such reductions. And w/o his approval, it cannot exit the bankruptcy process (not a statue any City wants to remain in).

      Reply

  9. Posted by Anonymous on October 2, 2014 at 3:14 pm

    The judge is either bought or being bullied.

    Reply

    • Posted by Tough Love on October 2, 2014 at 4:52 pm

      Bullied ? That’s hilarious. The BIGGEST Bullies are CalPERS and the Public Sector Unions………….. and this judge (being a FEDERAL Court judge and NOT a recipient of Unions campaign contributions, and NOT being afraid-of or beholden-to the Unions) told them BOTH to go stick it !

      BRAVO to Judge Klein !

      Reply

  10. Posted by Tough Love on October 2, 2014 at 11:34 pm

    If all the “Anonymous(s)” Public Sector workers really wish to understand how those NOT working in the Public Sector feel about Public Sector pensions & benefits, I suggest you read the comments attached to THIS WJS article on Judge Klein’s ruling in Stockton’s Bankruptcy case:

    http://online.wsj.com/articles/judge-says-cities-in-bankruptcy-may-reject-pension-contracts-1412202138

    Reply

    • Posted by Tough Love on October 2, 2014 at 11:37 pm

      Forgot to mention …. you don’t need to subscribe to the WJS to get the full article and comments. Just pasted the article’s title into a Google search and click on the resultant link that shows the title … usually the top link.

      Reply

  11. Posted by Anonymous on October 3, 2014 at 1:01 pm

    TL doesnt realize it but she is anonymous as well.

    Reply

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