New Jersey’s Pension System Debt Hits $300 Billion just posted a scare-story pinning New Jersey’s total pension debt under the new GASB rules at $170 billion.

They missed some things.

Return of Cost-of-living adjustments

All the official valuation and GASB numbers ignore the eventual return of this contractual obligation.

GASB interest rates still inflated

For both pension and OPEB valuations if you have no assets you should not assume any earnings but GASB fears a 0% interest rate.  Also, allowing plan interest rates to be used until the pension depletion date puts off that depletion date and understates liabilities.

Local OPEB costs wildly off

Localities in New Jersey do not need to follow GAAP rules:

So how transparent can those numbers that New Jersey localities get to make up be:

After taking into account all these real-life factors a more honest liability value would be:


27 responses to this post.

  1. Posted by Anonymous on December 5, 2014 at 4:15 pm

    John, just imagine how what terrible shape the pension system would be in if Christie didnt save it the way he did. I remember in 2011 he said we would thank him!


    • Posted by Anonymous on December 6, 2014 at 5:50 pm

      Lately NJ’ s own prudential has been advertising it’s “risk transfer” program, it remarkably pops up when you Google burypensions. They explain Gasb, talk about taking over GM pensions and how they can provide lifetime income through employer plans. NJ DIVISION OF PENSION AND BENEFITS has several pension related contracts with Prudential, the answer is just a few months away. NJ needs to exit the pension business and employees need relief. TL will need a new rant focus. I believe the existing NJABP providers can save the day, that’s what they do.


      • Posted by Tough Love on December 6, 2014 at 6:18 pm

        Quoting … “NJ needs to exit the pension business and employees need relief”

        Only PART correct………

        Yes, NJ needs to exit the pension business, but it’s the TAXPAYERS who need “RELIEF”, by clearly NOT being held responsible to top-up these seriously underfunded and grossly excessive pensions.

        And I suggest you stop the BS as to what the NJABP can do, as I would be amazed if it can solve ANYTHING with respect the the existing UAAL associated with PAST service accruals.


        • Posted by Anonymous on December 6, 2014 at 7:03 pm

          Nasty aren’t you TL, you know nothing about NJABP or the six providers. You are upset that your assumptions about a private insurer taking over the defined benefits plans for NJ. All NJ public employees are taxpayers. Union members should support the transfer, the unions should have legal counsel in the negotiations start to finish. TL we will all win.


          • Posted by Tough Love on December 6, 2014 at 7:56 pm

            No, just knowledgeable and truthful.

            You must be seriously lacking in common sense if you think a HUGE HUGE HUGE existing UAAL can magically “disappear” (or be “solved” even over time) simply by some from of a pension “switchover” to Private Sector insurers.

            Do you think those insurers are fools?

          • Posted by Anonymous on December 6, 2014 at 10:32 pm

            Having a psychotic episode are you? You can’t handle the possibility that private insurers have transfer risk programs with teams ready willing and interested in providing services to relieve the pension pressure. Contact Prudential, Voya, Metlife etc ask if assistance is available for PERS. Then share.

          • Posted by Tough Love on December 7, 2014 at 12:27 am

            Your delusional. Private Sector insurers price their products with sufficient margins so that the probability of a loss is quite small …. and that’s for FUTURE occurrences/risks.

            NJ’s Plan are hopelessly in the hole for occurrences that have already happened. These are not “risk” that MAY happen. NJ’s CURRENT debts are due to PAST service accruals never funded. No private insurer can or would just give away their money to erase an ALREADY EXISTING debt.

            Screw your head on straight.

          • Posted by Anonymous on December 7, 2014 at 11:40 am

            There is a workable solution and it will happen. Headphone still connected to backbone, thoughts clear. Your rants undermine this blog, there are workable solutions using insurance products. You assume private insurers wouldn’t be interested, I say you are wrong.

          • Posted by Tough Love on December 7, 2014 at 12:01 pm

            Anon, there are “workable solutions” for what is granted employees for FUTURE service.

            Addressing the UAAL for PAST service is a whole different animal. Due to it’s size and the VERY low funding ratio, there are no options that are not VERY painful for SOMEONE.

            And there are ONLY 2 “someones”… the workers and the Taxpayers.

          • Posted by Anonymous on December 7, 2014 at 12:46 pm

            Prudential on its risk transfer website explains what happened when GM retirees were transferred to them. Risk transfer activities might not be widely known but with state and local government facing pension crisis maybe the insurance industry has found a profitable business opportunity.

          • Posted by Tough Love on December 7, 2014 at 4:00 pm

            Quoting …”maybe the insurance industry has found a profitable business opportunity.”

            Yes they have, and they price it accordingly (so THEY make a profit) …. which NJ cannot afford to pay for.

          • Posted by Anonymous on December 7, 2014 at 6:33 pm

            Employees would be buying a premium attached to a group policy. You will not win TL sorry.

          • Posted by Tough Love on December 7, 2014 at 7:42 pm

            The fact that any transfer would be via a group policy has “nothing” to do with paying off the EXISTING debt. That premium is for FUTURE risks.

  2. Posted by hondo on December 5, 2014 at 8:12 pm

    John i hope to god you are wrong! I have been telling everybody about your blog to check it out. However, most people think its all lies! I even forward some links. I believe if the monthly pension check drops 50% or more those that can retire will stay. I like to say great work John! You and TL are really educating us.


    • Thank you. It’s still early but I have not seen any criticism of the GASB numbers. The headlines seem to take them as the new gospel though they forget to make the connection that they have been lied to for all these years (and continue to be even by the new GASB numbers).

      It’s weird in a way. Someone has been telling you that you owe $117 billion one week and then someone else comes along and says it’s $180 billion (though it’s really $300 billion). Where is the outrage at the ones who were lying about that $117 billion number for their own selfish interests?

      And it’s a two way street. My main reasons for doing this blog, in alternating order depending on how I feel, are to (a) get my thoughts together and (b) learn from comments and feedback. TL and others have been very helpful in that and I wish there were more.


  3. Posted by Anonymous on December 5, 2014 at 9:25 pm

    Sadly some things are stated as fact about state workers are not true. I started at 5.25 per hour and finished at 15.35 per hour after 30 years. I was paid substantially less than my counterparts in the private sector, who made more then twice what I made. Where I worked just about everyone had a low salary and there were similar workplaces across the state. I am not sure where TL gets her facts about State Workers getting paid as much as private sector. she also states that all workers get free health insurance when they retire, that also is not true. I am not sure why John is unable to find out the true facts when it comes to salaries and insurance for state workers for the past 30-40 years, it is not a secret. All salaries and pensions are public knowledge.
    TL constantly say that my pension of 1400 per month should be cut in half. I lost my job due to chronic pain and I am not on disability but if she get she way, I suppose I will have no choice.
    TL will say that she doesnt believe me and that will be her proof.


    • Posted by Tough Love on December 5, 2014 at 10:22 pm

      Quoting …”I am not sure where TL gets her facts about State Workers getting paid as much as private sector. she also states that all workers get free health insurance when they retire, that also is not true.”

      (1) the following is the source from a recent comment I posted. Note that NJ State-specific Wage and Total Compensation date is provided:

      (2) No. I said that SOME NJ retirees get free retiree healthcare, specifically mentioning Police and teachers with very long service.

      Quoting …”TL constantly say that my pension of 1400 per month should be cut in half. ”

      Other than Police, which as an occupation unto itself, where I clearly consider their Total Compensation” (wages plus pensions plus benefits) grossly excessive, I rarely address other “specific” occupations.

      Forget what I say …. the study quoted in (1) above concluded that non-safety NJ State Public Sector workers are (on average for all occupations combined) compensated at a level 33% greater than their Private Sector counterparts (from Figure 14 of that study).


      • Posted by Tough Love on December 6, 2014 at 12:06 am

        Ooophs …. It’s Figure #13 (not #14 as I stated above) and it’s 34%, (not 33%).


        • Posted by Anonymous on December 6, 2014 at 5:20 am

          if it is 34 percent why cut 50 percent, why not cut 19 percent. and why treat everyone the same. Is it that difficult to cut fairly?


          • Posted by Tough Love on December 6, 2014 at 10:41 am

            The 34% was “Total Compensation” … wages plus the annual value of pension accruals plus the annual value of OPEB (“Other Post- Employment Benefits”, which is primarily retiree healthcare). not just the “pension” component.

            Actually, I advocate for AT LEAST 50% reductions in FUTURE SERVICE “pension” accruals, and doing away with almost all retiree healthcare subsidies. Doing so would (in most cases) STILL leave the Public Sector worker with a Total Compensation “advantage”.

            But in some of the worst financial cases (into which NJ unfortunately falls), to avoid unfair tax increases, I also support intelligently-structured reductions in PAST service accruals for current actives and, if need be, for retirees as well. For what it worth, I wouldn’t support the reduction of a $1400 monthly pension to a FULL-CAREER, FULL-TIME worker.

      • Posted by Pat on December 6, 2014 at 8:57 pm

        Biggs tries to quantify job security, including it as part of the compensation in the Figure 13 percentages. Figure 13 also does not seem to reconcile well with Table 4, which shows an education-based penalty for all levels, especially higher education levels such as professionals, which suffer a -37% penalty. The chart goes on to show that pension and other benefits make up for the penalty, but it remains significant for higher education levels. These highly educated people are asking at my office why they are paying 7% into a pension that they will never collect. I expect a lot of them to bail to the private sector as the economy improves.


        • Posted by Tough Love on December 7, 2014 at 1:50 am

          A few comments:

          (1) Table 4 shows the distribution of wages, benefits and total compensation by education level (WITHOUT State-specific splits), and Figure 13 shows the Total Public/Private Compensation differential for each specific state (WITHOUT Education-level splits). Since each shows DIFFERENT data breakdowns without overlapping, a “reconciliation” of figures is not even possible. There is no inconsistency.

          (2) The relevant line in Table 3 is the last row labeled “Public-private compensation differential”. The 2 lowest education-level groups show a significant Total Compensation “advantage” for Public Sector workers. The middle 2 education-level groups show comparable Public/Private Sector total Compensation, and the highest 2 education-level groups show a significant Private Sector advantage. What can’t be seen from that Table, but what is relevant (and can be found in Table 1), is that those 2 highest education-level groups (Professionals and PHDs) represent only 3% of the Private Sector workers and 10% of Public Sector workers. And assuredly, SOME of the Private Sector individual worker contributors to that study-data (most likely in the 2 highest level educational groups) earned Millions (or 10’s of Millions annually). As such, I believe a comparable compilation using MEDIAN compensation for each group (rather than MEAN compensation) would show a much smaller Private Sector Total Compensation advantage for the Professional & PHD groups.

          (3) The 37% Professional Group “advantage” figure (from the first row of Table 4) is ONLY wages (and does not include pensions & benefits). That 37% drops to to 17% on a “Total Compensation” basis, and is likely much smaller if calculated using MEDIAN instead of MEAN compensation as I described in (2) above.

          I’m sure there are some highly educated Public Sector workers that make less than they would in the Private Sector (Physicians in high-paid specialties would be a good example), but I don’t believe it is as common in frequency (or differential amount) as some would lead us to believe.


    • Posted by bpaterson on December 10, 2014 at 7:23 pm

      my guess is that anonymous at 12/5 time 9:35 says he was making $5 and finishing with $15, that sounds like a crossing guards wages, IMO.


  4. Posted by dentss dunnign on December 6, 2014 at 7:11 am

    Where were the unions in all this ,how could they let their members pay into a system but look the other way when the state refuses to pay into the pension for all those years ,and continue till this day …..If they were so good at bargaining as all the members say they are why not refuse to put members money into the pension until the state pays first …..Why not threaten now to hold back money now …put it into escrow until the state pay ……something is very wrong here .Talk about Sheep being led to slaughter .


  5. Posted by Eric on December 6, 2014 at 11:03 am

    The unions did sue. The teachers were told that so long as you were receiving your retirement checks, you have no standing to sue to complain about how the pension money is or is not being invested by the state. This is the corrupt court system in New Jersey at its best. It turned another “blind eye” towards corruption since justice is blind.
    Now the teachers who pay part of their health care insurance in retirement were told to use the cost of living adjustments to assist in defraying or offsetting the rising costs have been lied to and had their contracts with the state breached with no consequence. The statutory law was ignored.
    As John said in a prior post, the cost of living adjustments, although part of the non-forfeitable right statute, will never return due to the “back room” deals of imbecilic and disgraceful politicians. It is mob rule in the Garden State. Good luck selling your bonds!
    Thank God I work in private industry!


  6. Posted by George on December 6, 2014 at 2:30 pm

    Congress cuts pensions for generals, admirals that ballooned during wars

    , “Officers affected by the new rules, which were agreed upon by the House and Senate Armed Services Committees, will be capped at top active-duty pay of $181,501 at the end of the month, the newspaper reported. Pensions for currently serving officers will be grandfathered.”

    Read more:
    Follow us: @washtimes on Twitter


  7. […] Jersey may be an extreme case in the level of their unfunded pension and OPEB liabilities and the ham-handed approaches taken to ignoring responsibilities and ‘fixing’ problems […]


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