Underwhelming Response To Underfunding Revisions

If you can keep your head when all about you are losing theirs, then you just don’t understand the problem.
Evans’ Law

Replace the word ‘all’ with ‘unbiased experts’ and you have the situation in New Jersey where the cost of all unfunded (yes only the unfunded not total) liabilities for public pension and OPEB benefits was pegged at $170 billion and one of the few media outlets that even report reaction notes:

Oddly, both the Christie administration and the unions fighting in court to force the governor to restore billions in payments to those funds have embraced the new figures.

Maybe there would be less acceptance of the status quo by all parties if they only understood:

  1. That unfunded liability is really $300 billion
  2. That’s $300 billion NOW.  We still have more promises of benefits being made and more contracts being executed that obligate taxpayers to either pay or default on roughly triple of what they are now paying in taxes.
  3. Nobody with any expertise is effectively delivering the message as per the same northjersey.com story:

Christie is awaiting final recommendations from a bipartisan commission he impaneled in August to review the employee benefits issue.

…..

Thomas Healey, the leader of Christie’s study commission, said the panel anticipated the new figures because it knew states were required to begin using a more conservative accounting method.

Still, he said the numbers are noteworthy.

“We’re dealing with an even bigger problem than the one we just called dire two months ago,” Healey said.

He also said it’s too soon to say exactly when the panel would release its final recommendations but added that it could be by the end of this month.

Obviously the panel is having some issues with how much truth they intend (or are allowed) to reveal and their may be a need to talk to someone about their troubles.  After stringing this process along for months I would offer the same heartfelt words of encouragement that Rowan Atkinson laid on Jeff Goldblum in ‘The Tall Guy’:
.

13 responses to this post.

  1. Posted by skip3house on December 7, 2014 at 11:05 pm

    No worries here. Least one advantage to age 77. Curious though, so hope news travels deep/high.

    Reply

  2. Posted by hondo on December 8, 2014 at 11:59 am

    Unfortunately, John they believe what the Union leaders tell them. I tried to make them aware but, they think the state will not let it run dry. Well for my family we are planning for the worse and trying to pay down some debt.

    Reply

  3. Posted by skip3house on December 8, 2014 at 12:16 pm

    http://www.njspotlight.com/stories/14/11/20/opinion-high-cost-of-living-vs-low-cost-of-moving-out-of-new-jersey/

    About covers our big trouble if you change local income tax to NJ state-wide school income tax. Same approach to NJ pensions……?

    Reply

  4. Posted by George on December 8, 2014 at 9:33 pm

    lawmakers are preparing legislation for the lame duck session of Congress that would overturn a key tenant of the Employee Retirement Income Security Act (ERISA) and allow drastic cuts to the pensions of current retirees.

    Machinists Slam Congress Over Sneak Attack on U.S. Pension Law

    http://www.businesswire.ca/news/ca-en/20141203006415/en/Machinists-Slam-Congress-Sneak-Attack-U.S.-Pension

    Reply

    • Posted by Tough Love on December 8, 2014 at 10:04 pm

      That change applies to Multi-employer PRIVATE Sector Plans …. nothing to do with Public Sector Plans.

      The Feds have little to do with Public Sector pensions (beyond granting tax-qualified status), unless they become game for reduction under a CH. 9 Bankruptcy. At least us Public Sector pension reform advocates can breath a sigh of relief that with Republicans controlling BOTH houses of Congress, when American City’s Public Sector pension Plans start failing (and they will), there won’t be any Federal Bailouts.

      Reply

      • Posted by George on December 9, 2014 at 1:11 am

        You think they will let police pensions go bust? And by extension fire? But those are the big pensions, if you don’t touch those you end up cutting large numbers of small pensions to people barely making it.

        The federal reserve could bail out pensions by purchasing illiquid assets at preferential prices. In a sense the fed is bailing out pensions now with their QE programs.

        Reply

        • Posted by Tough Love on December 9, 2014 at 1:33 am

          Quoting …”You think they will let police pensions go bust?”

          If you mean , “will assets run down to zero?” …….. yes, I believe that very likely.

          What will happen then, I’m not sure. The retired Police officers will likely say “tough shit” to the taxpayers (perhaps using different words) … pay anyway out of general budget revenues, meaning $5 Billion in new taxes.

          I certainly doubt taxes will be raised anywhere near that.

          Perhaps the politicians will massively cut back on retiree healthcare subsidies (a less-legally-protected benefit than pensions) and use that saving to continue paying their pensions … at least for a while.

          But, we desperately need TRUE STRUCTURAL REFORM, which means either freezing the current grossly excessive and unaffordable DB Plans, or reducing the pension accrual rate for future service by AT LEAST 50%. Without that, we keep digging the financial hole deeper every day, and we’ll NEVER get get his noose off our necks.

          Reply

  5. Posted by hondo on December 9, 2014 at 8:43 am

    TL what about paying them a fair salary and let fund their own retirement?

    Reply

    • Posted by Tough Love on December 9, 2014 at 1:51 pm

      NJ police in the community I live in make (in “cash pay” before overtime) about $110-$125K after just about 5 years of service.

      While police work certainly entails risks out of the norm, policing as an occupation is not even on the US Gov’t BLS list of the most dangerous jobs, all of which (perhaps with the exception of major commercial airline pilots) make far less. Granted, the risk can vary considerably from location to location, and perhaps a Police Officer working in Alpine NJ should be paid less than one working in Camden NJ. That list can be found here:

      http://jobs.aol.com/articles/2014/12/04/most-dangerous-jobs-in-america/?cps=gravity

      Putting “risk” aside, and considering what someone in the Private Sector with similar education, experience, and skills sets would be paid, it’s easier to conclude that even on a CASH BASIS, Police are more likely overpaid than underpaid.

      Even if we accept that their current cash pay is justified (a stretch) there is no justification to layer onto that cash pay, pensions with a value at retirement (even AFTER deducting the officers own contributions) EASILY 4 times greater in value than that of a comparably paid Private Sector worker retiring at the SAME age and with the SAME service years.

      And it is my understanding that their retiree healthcare is free……… a value one study estimated to be worth a level annual 12% of pay. Compare that to the Private Sector today, where if you’re lucky, your employer annually contributes $300-$500 (less than 1% of pay) into a retiree HSA.

      Reply

    • Posted by Anonymous on December 9, 2014 at 2:35 pm

      Or maybe do away with all DB pensions entirely, since the publics are not funding their plans and the privates are increasingly dumping theirs on the PBGC?

      Reply

  6. Posted by Jim on December 9, 2014 at 1:09 pm

    Once a number is beyond a million it’s meaningless to most people. You could say that the unfunded liability is $30 billion or $300 billion or $300 trillion and get the same lack of reaction.

    Reply

    • Posted by skip3house on December 9, 2014 at 3:56 pm

      Likely a lower number, as in a NFL stadium capacity…..
      Could make a science course just out of Volume ignorance.

      Reply

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