Most Generous New Jersey Pension

In one of the sillier broadsides in the propaganda war over the worth of a New Jersey public pension a ‘think’ tank probably funded by unions released a report today claiming that New Jersey’s non-public-safety plans “rank 95th in pension generosity out of 100 top plans nationally” based on criteria they made up:

To rank each pension plan’s overall generosity, we first compare our 100 largest state pension plans on three separate measures of pension generosity:
  • The strength of their automatic inflation protection (assuming 2.5 percent inflation).
  • The amount by which pensions increase with each additional year of public service as a percentage of “final average salary,” an amount commonly referred to as “the multiplier.” (Final average salary is usually calculated as the average salary over the final three or five years of an individual’s public service.)
  • The amount employees contribute to their own pensions. When employees contribute less, we consider their pension more generous.
Overall generosity is determined by giving each pension plan a score out of 100 based on its rank on these three separate dimensions of pension generosity. A pension plan ranked first on one of the dimensions receives 100 points, a pension plan ranked 100threceives one point. Adding up the three ranks generates the plan’s overall generosity score. The 1st-place-ranked and most generous pension plan received an overall score of 225.5. The least generous pension plan by far, with a score of 24.5,covers municipal employees in California’s Contra Costa County. The pension plan ranked 99th, the New Hampshire Retirement System, received an overall generosity score of 74.5, not far below New Jersey’s 85.
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Using their criteria I can easily design a plan that would rank in the top 5 in generosity without costing taxpayers a dime.

New Jersey ranked low because they eliminated cost-of-living-adjustments (COLA) thus getting it 1 point for that part.  I would restore the COLA and make it generous, let’s say 10%, so we get the full 100 points.

New Jersey also ranked low since their average employee contribution rate, recently increased, was 6.93%.  Let’s get another 100 points by eliminating employee contributions completely.

Now on the third part the New Jersey plans have an annual benefit multiplier of 1.67 (1/60 years of service).  Let’s drop that to 0.00 for everybody, retirees included, and accept that 1 point.

This plan design now racks up 201 points and comes very close to that most generous plan of 225.5.  Anyone who would take that NJPP report seriously should have no problem with this line of reasoning.

33 responses to this post.

  1. Posted by skip3house on December 17, 2014 at 9:10 pm

    Gotta admit, Mr Bury is good !

    Reply

  2. Posted by bpaterson on December 17, 2014 at 9:23 pm

    so summarizing your most generous plan if I am reading it right:

    under the bury pension plan (BPP) by criteria process #2, #3, #1: the employee will not have to match anything, not achieve anything substantial until having worked at least 1000 years (1/1000=.1% is almost 0%) and once retired will then receive huge cola increases,

    That does still sound rather generous yet saves the taxpayers a bundle at least for the first 1000 years. I would suggest to offer a cola of 100% ILO 10% in retirement after 1000 years. The publics should be very happy now since its near the top of “most generous”

    Reply

  3. Posted by Tough Love on December 18, 2014 at 12:06 am

    I saw that article earlier today. As Mr. Bury noted, from looking at the NJPP website it was quite obvious that the NJPP functions to support the Public Sector Union/worker greed …. just look at their headline “articles” on the Right Bar (awfully one-sided).

    As to NJ being in the BOTTOM 5% most generous Plans, their approach is set-up for their desired outcome (i.e., that NJ Plans are not “generous”). Some food for thought:

    (1) they are using NJ’s structure as reduced in 2011, but (other than the COLA suspension which looks like it will be reversed by the Courts), the 2011 changes did NOT apply to any workers already on the payroll as of the effective date of the 2001 changes. NJ will be paying the HIGHER pre-change pensions to all CURRENT workers (UNJUSTLY continuing to accrue the higher level benefits from decades to come until THEY retire).

    (2) Table 3 in THIS link: http://www.aei.org/wp-content/uploads/2014/04/-biggs-overpaid-or-underpaid-a-statebystate-ranking-of-public-employee-compensation_112536583046.pdf shows that the average non-safety-State-worker “cost” of their retirement income package is 26% of wages in NJ … just about in the middle of all 50 States shown in that chart. That certainly counters a claim that NJ’s Plans are in the bottom 5 % per the NJPP article.

    (3) Since Private sector NJ Taxpayers are being called upon to pay for 80-90% of the total cost of NJ’s Public Sector pensions (NOT anyone associated with OTHER State’s Public Sector Plans) isn’t it MUCH more appropriate to compare the value of NJ’s PUBLIC Sector Pensions to those typically granted NJ’s PRIVATE Sector Taxpayers? If we did we would find that NJ’s Public Sector pensions are ROUTINELY 3 to 4 times greater in value at retirement than those of comparable Private Sector workers.

    Reply

    • Posted by Anonymous on December 18, 2014 at 12:54 am

      Hey John, wasnt the COLA already reversed by the courts? Also what is your solution again?

      Reply

      • The COLA was judged to be a contractual obligation but that’s under appeal I guess so we still have a way to go for the retirees to see that money but, for NJPP purposes, it’s convenient to assume it won’t come back (which might be a good possibility).

        As for a solution the steps would be:

        1) get an accounting of the real assets and value honestly the real liabilities.

        2) either pay for it, default on it, or some combination.

        As it is now governments are still spending money on stupid stuff (ie $300 to to sign up undocumented immigrants as voters: http://www.countywatchers.com/?p=12450) since they’re still underpaying for pensions.

        Reply

        • Posted by Tough Love on December 18, 2014 at 1:50 am

          Or as Mike Shedlock said (referring to pension problems elsewhere);

          “Ultimately, bankruptcy is where all these cases are headed. Taxpayers certainly don’t deserve preposterous tax hikes while inept politicians look for ways out, because there are no ways out.

          In the meantime, collective bargaining of public unions needs to go the way of the dinosaur. Public unions and the hack politicians who support unions have wrecked more city and state budgets than the next 10 things combined.”

          ———————-

          Source: http://unionwatch.org/californias-cities-arent-alone-unions-trample-finances-in-scranton-pennsylvania/

          Reply

  4. They forgot the full retirement age, and whether or not the benefits are taxable under state and local income taxes.

    How come they didn’t show the whole list? How come they didn’t show the high plans?

    Reply

  5. Posted by javagold on December 19, 2014 at 12:22 pm

    D E F A U L T

    Reply

  6. Posted by Tough Love for Tough Love on December 19, 2014 at 11:25 pm

    Hey John,
    Do you only cover ‘silly’ articles. How about the excellent Nj Spotlight analysis on comparing state employee health benefits. I have to admit I laughed to see fellow hater Mike Shedlock quoted in comments. Used to be prior to 2008 his blog was critical. Before he accepted ads, drifted way right and decided that unions are one of the causes he hates in life. Hey TL, I miss our chats. Still fantisizing on how your local representatives (that you voted for over the years) conspired to give away benefits to the unions…LOL. Those contracts ARE. (Period) feel like you can skip out? State has a similar contract with you to prevent them from taking your house cause they don’t feel like paying their bills. Folks, keep saying it, the moral decision is about shared pain. Higher taxes, lower benefits, redefined negotiating at the count level. Don’t think so? Fine let the govie’s confiscate 30-40% of your retirement and other assets. What good for the goose and all that…generational sacrifice is about everyone coming to the table to talk. Tough love, you had your chance in this representational democracy we live in to vote for and vote out your local reps if you felt they were giving the store away.
    If you go to a restaurant and eat the food, charge your bill (and your pols) spend the cash that was taken out to cover the liability, get mad at your pols, not at the people who provided you the service months later while you feel the bill is now to big.

    Reply

    • Posted by Tough Love on December 20, 2014 at 12:32 am

      Wow ….forget to take your Meds today ?

      Reply

    • Posted by bpaterson on December 22, 2014 at 2:31 pm

      TLTL-your restaurant analogy doesn’t fit. if you think the restaurant charges too high, then choose a less costly one. That’s the advantage of competition. With the govt, we cannot chose a less costly govt, its a monopoly and we are at its whims.

      Reply

  7. Posted by Tough Love for Tough Love on December 19, 2014 at 11:45 pm

    Almost forgot a Rand(Ian) ending..in my last example…restaurant. Seems to me, that the ‘moochers’, in this example are the people who ate the food, promised payment in good faith (through contracts their local elected reps made) and want to ‘skip’ out on the bill. Get mad at your locally elected reps, or hey even better-run for their office if you don’t like how they negotiate for you. The bill is. You and I know how large it is. It was right there in NJs recent bond offering fine print, the larger issues are those of contract, (which was staunchly and conservatively protected by the founding fathers), generational fairness, and at the end…simply..a way forward.

    Reply

    • Posted by Tough Love on December 20, 2014 at 12:44 am

      I guess that Mike Shedlock is not one of your favorite people.

      Oh, how silly of me …. he really despises you Public Sector “moochers”.

      Reply

  8. Posted by Tough Love for Tough Love on December 20, 2014 at 10:23 am

    Shedlock used to be a critical blog, like ‘calculated risk’ still is. He used to write good housing pieces prio to 08. Then he started accepting ads, veered right and became a hater. Any chance you want to chat about the larger issues of contract, generational fairness, and a way forward? Shedlock isn’t really worth the time any more.

    Reply

    • Posted by Tough Love on December 20, 2014 at 1:13 pm

      Public Sector workers call those who advocates to reform (meaning MATERIALLY reduce) their grossly excessive pension promises …. “haters”.

      Some pension reformers call such Public Sector worker/retirees … “takers”. I believe the word “moocher” much better reflects the Public Sector worker/retiree mindset.
      ————————————-
      SURE … I’m up for a chat about the larger issues of contract, generational fairness, and a way forward, anytime. When you do so, (so as to not waste everyone’s time) please identify exactly WHO at those “bargaining tables” negotiating such contracts was rightfully representing and affirmatively looking out for the Taxpayers’ best interests.

      Reply

      • Posted by skip3house on December 20, 2014 at 2:08 pm

        Just will never seem right to me to leave future generations our bills for services rendered to us now.
        Same logic with Social Security – why was LBJ, etc allowed to use surplus rather than tax for the war, etc…?

        Reply

        • Posted by dentss dunnagan on December 20, 2014 at 3:49 pm

          Just wondering …who negotiated that 9% bump in pensions ….or is that “negotiated” as in bribe ?

          Reply

          • Posted by skip3house on December 20, 2014 at 4:27 pm

            Just the last two weekend Bill Moyers PBS interviews explains most that is wrong in USA, now. Invest 25min. each at BILLMOYERS.com and at least watch 12/20 (Historian Fraser) and 12/13 (Harper’s MacArthur).

          • Posted by Tough Love on December 20, 2014 at 11:41 pm

            That was Gov. Donald DiFrancesco’s boondoggle (leading right up to the 2001 elections), as quoted here:

            http://articles.philly.com/2010-09-13/news/24979240_1_pension-funds-pension-assets-pension-system

            “In 2001, Gov. Donald DiFrancesco effectively increased pension benefits for current and retired public workers by 9.12 percent. The increase was retroactive, which meant that even retirees already receiving pensions saw their pension checks increase. To pay for the increase, lawmakers again revalued the pension assets to reflect their full market value. This time, they added a new twist, using the earlier date of June 30, 1999, even though by 2001, the assets had already lost $2.4 billion in the market. The state carved out “Benefit Enhancement Funds” from the newly inflated market values to pay for the new benefits.”

  9. I’m confused. It is my understanding that there is no constitutional obligation to pay any of these pensions, health benefits, sick day pay outs, etc. so why not just repudiate the unconstitutional debt and reform asap so that it the public workers have time to adjust? For example, why not roll back the 9% as easily as seemed to be rolled out for no good reason.

    Reply

    • Posted by Tough Love on December 21, 2014 at 1:49 pm

      While rolling back PAST Service pension accruals “appears” to have some legal protections (although not “Constitutional” ones) there is apparently no legal protections to reducing the pension accrual rate for the FUTURE Service of CURRENT workers, only a lack of political will.

      Considering the you-scratch-my-back, and I’ll-scratch-yours arrangement between the Public Sector Unions and out elected officials, that’s not surprising. The Unions trade campaign contributions and election support (along with block voting-support from their members & families), and our elected officials trade their favorable votes on pay, pensions, and benefits.

      But the decades-long “sucker” in that arrangement ….. the Taxpayers …. are rapidly wising up. The Unions got WAY too greedy while simultaneously not insisting on funding those absurd promises. Now the funds to pay those absurd promises are VERY seriously lacking (about 35% & 55% funded for State & Local worker Plans respectively per the new GASB pension valuation figures) and the wised-up and abused Taxpayers have ZERO intention of making up for that funding shortfall

      Reply

  10. If I am understanding this blog correctly there is only approximately 35% funding in the plans to pay the current retirees……..there is nothing to pay the health benefits…..the rest can never be made up if using the real numbers so why not reform as opposed to gamble with what will happen down the road. I guess why throw good money after bad.

    Reply

    • Posted by Tough Love on December 22, 2014 at 12:00 am

      Because the MINDSET of Public Sector Unions/workers is that the Taxpayer MUST and WILL pay …….. so no givebacks.

      Well earth to Unions/workers……. get a life, we’re NOT paying!

      Reply

      • Posted by bpaterson on December 22, 2014 at 2:35 pm

        so TL-how do you plan to do your “non-payment”?

        Reply

        • Posted by dentss dunnagan on December 22, 2014 at 4:35 pm

          When the checks stop coming …..You’ll understand .

          Reply

        • Posted by Tough Love on December 22, 2014 at 5:39 pm

          I won’t have to …. our elected officials will see the writing on the wall …… that Taxpayers will vote them out of office unless they support REAL Public Sector pension & benefit reductions for CURRENT workers …. and they will change sides and do so.

          Reply

  11. […] under the New Jersey public pension system should not be cut since they are already stingy, however slipshod the evidence.  Using the NJPP methodology New Jersey would be ranked 8th in generosity among those 100 plans […]

    Reply

  12. […] A bogus figure from a bogus study conducted by New Jersey Policy Perspective (NJPP) with what was undoubtedly union encouragement, both spiritual and monetary, that was debunked here. […]

    Reply

  13. […] bogus and debunked here at the time but it does raise the question of which state does have the most generous benefits and […]

    Reply

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