5 things you may have figured out about N.J.’s pension mess

nj.com today put up a slideshow of 5 things to know about N.J.’s pension mess which included the usual rehash

  1. It’s a long-time problem
  2. Christie and democrats worked on reform
  3. But there were new problems
  4. The state is $37 billion short
  5. Now we wait

But for those who have really been paying attention they might have figured out that:

  1. The real number on the overall pension shortfall is about $150 billion
  2. Those making the decisions are ignorant of basic facts (such as that the real shortfall is $150 billion)
  3. The media will obediently and uncritically tell you what they have been told to tell you by those making the decisions
  4. That pension study commission turned out to be a bad idea possibly because they came up with ‘inconvenient’ solutions for the decision makers
  5. NJs pension mess is not getting solved



21 responses to this post.

  1. Posted by E Jillian Brontee on January 25, 2015 at 12:55 pm

    Yes those who have been paying attention over the years thanks to your intensive columns on the topic, I do not see a solution in real time.

    What I do see is whenever the crash and burn begins, it will be the unhappy recipients who were promised a lot more than will be delivered and whoever is governor at that time will be blamed for the whole thing unless it is a governor on the blue team and then the blame will be placed on the last red team governor. It will be the people who are still defending and blaming party politics, it will be the people who cannot stand Christie or any red governor, it will be the legislating lifers who got us into this mess over the past 3 plus decades, and the SSC judges who ignored the once 31 Abbotts and the manipulative money tool they allowed the politicians to cash in on, as well as an ever expanding local and county government in the 5th smallest state in the union.

    When does the machine tilt, game over?????


  2. Posted by Anonymous on January 25, 2015 at 2:09 pm

    A shortfall of 150 billion and it still exists. Shows that nobody could even predict that properly. I mean would thing it could surviving going that deep in debt? John, did you?


    • It’s going to survive. No question about that. There are still pensions in the private sector – it’s just that most of them are dinky 401(k) plans. So it will be in the public sector. Pensions will be paid out at levels affordable to taxpayers. But how we get there will be the messy part as New Jersey is demonstrating.


  3. Posted by Tough Love on January 25, 2015 at 3:19 pm

    A judge, ruling in a recent Chicago pension reform case ruled in favor of the Unions/workers, citing Illinois “constitutionally-protected promise”. that pension benefits cannot be “diminished or impaired.” Nary a word from the judge that few disagree that it is financially IMPOSSIBLE for the city to fully honor the pension commitments as currently structured.

    Chicago has appealed that ruling to the Illinois Supreme Court, essentially with the argument that …….. “no Illinois or federal court has ever held that there are super contracts uniquely exempt from the state’s police powers.” The City has submitted a Friend-of-the-Court-Brief” saying …

    “Under the Circuit Court’s approach, pension benefits must be paid, no matter how catastrophic the result for current or future retirees, employees who would be terminated for lack of funds to pay them or municipal residents who would not receive adequate levels of basic services because all revenues are funneled into pensions.”

    Interestingly, after reading that last quote, I believe that the vast majority of NJ’s Public Sector workers/retirees would support THAT outcome rather that accept any truely reasonable pension reforms …… all the while INSISTING that they continue to be paid (and “accrued” on the same, unchanged terms for actives) out of current revenue… on a pay-as-you-go basis once Plan assets have been exhausted.

    We’ll see ………….


    • But California upheld the constituionality of pension cuts. They will fight and claw to hold onto anything that they can. They no nothing else. It will be painful all around.


      • Posted by Tough Love on January 25, 2015 at 9:49 pm

        It was a different situation in the recent CA Stockton and San Bernadino City bankruptcies …. with Local CITY councils not wanting to take-on Calpers,

        In NJ, the first Plans going under will be the STATE Plans. No one the STATE need to fight with. If it Can’t (or Won’t) pay … that will be the decision.


  4. Posted by Javagold on January 25, 2015 at 5:13 pm

    Just more Kick the canoli. Corrupt NJ knows no other way. But they will learn the hard way in 2016.


  5. Posted by Mike on January 26, 2015 at 12:35 pm

    Although she engineered a large $$ infusion with POBs, the actual sleight-of-hand pension abrogation by NJ politicians began with Christine Todd Whitman. Here is the formula…Step 2 started almost 20 years ago, when the plans were well funded.
    1. Establish pension formulas that tilt to higher benefit levels than private plan benefit levels, relative to salary. Said differently, for whatever reason the State and the employees decided that compensation should be more heavily weighted to deferred benefits than is common for private employers.
    2. Cut taxes, but continue to provide all services that citizens have come to expect.
    3. Stop employer contributions to the pension plans, as the only way to make the math from #2 work.
    4. Wait, but still make little or no employer contribution to the plan. Increase the employee contribution.
    5. Wait some more, and declare a crisis. Declare the pension benefit to be unaffordable, and start pointing out how rich the benefit formula is.
    6. Wait.

    The waiting strategy is implemented using a variety of tactics, including
    1. Use as high an investment return assumption in the valuations as anyone could stomach, in order to paper over the growing funding deficit.
    2. Embark upon increasingly risky investment approaches in order to give cover to the high assumed yield.
    3. Contribute a fraction of the contrived, low actuarially calculated contributions.
    4. Appear to solidify the future delivery of the pension promise, by providing constitutional amendments in lieu of employer $$.
    5. Declare the funding target to be something a lot less than 100%, to be reached a lot longer from now.
    6. A recent technique – “budget” for a contribution and then be “shocked !, shocked !” when a revenue shortfall prevents the contribution.


    • Posted by Tough Love on January 26, 2015 at 12:59 pm

      All BS…………

      E.g., quoting …”Said differently, for whatever reason the State and the employees decided that compensation should be more heavily weighted to deferred benefits than is common for private employers.”

      Public Sector pensions aren’t simply …. “more heavily weighted to deferred benefits than is common for private employers.” …… those FAR FAR FAR richer pensions & benefits are layered ON TOP OF “wages” that for STATE (Non-safety) workers are (on average) only 4% lower than those of comparable Public Sector workers ….. per Figure 6 in THIS study:


      And from Figure 13 of the Same study, once pensions and benefit are included, Public Sector “Total Compensation” in NJ is 34% GREATER than that of their Private Sector counterparts.

      And let’s not forget that this study excludes safety workers (e.g., police, paid firemen, etc.) who by far have the MOST egregious pensions, and if included, the Public Sector “advantage” would have been even greater.

      You appear to be a Public Sector worker with the familiar “entitlement” mindset. Well, where is the appropriate discussion of the ROOT CASE of the pensions mess …….. grossly excessive pension “generosity” ?

      Taxpayers must stay focused on the fact that “funding” requirements FOLLOW from (and directly in proportion to) Plan “generosity”. Not being able to fully fund a very “generous” Plan is usually NOT due to a lack of political will, but due to the fact that the HUGE sums needed to do so are simply not available (while meeting a city’s essential service needs)….. with the ROOT CAUSE of this (incorrectly labeled) “funding problem” being directly traceable to grossly excessive pension/benefit “generosity”.

      “Funding” problems are a CONSEQUENCE of that excessive generosity, not a CAUSE of the financial pension mess many States and Cities now find themselves in.

      To truly “fix” the problem, Taxpayers must address the REAL CAUSE (excessive “generosity”) and must demand either:

      (a) a hard freeze (zero future growth) of all Public Sector DB pensions for the future service of all CURRENT workers. The current absurdly excessive DB Plans should be replaced (for future service) with a DC (401K-style) Plan with a Taxpayer %-of-pay “match” of 3%-5% of pay, just like Private Sector Taxpayers typically get from their employers, or

      (b) If (a) above is not possible (after exploring ALL legal avenues and options to do so), then the pension accrual rate for the future service of all CURRENT Public Sector workers should be reduced by 50% for all non-safety workers and by 66% for all safety workers (with the most egregious pensions) …… and even AFTER such reductions, the resultant pensions would STILL be greater than the pensions granted 90+% of comparable Private Sector Taxpayers.


      • Posted by S Moderation Douglas on January 27, 2015 at 2:04 am

        Four percent lower wages is probably close to accurate. It’s a fairly objective process of crunching numbers. The important thing to remember here is that this is an average. There are still a lot of state workers for whom the discrepancy is much greater.

        “34% more” is also an average, and much more subjective. To be taken with a large grain of proverbial salt. Addito salis grano.

        “10% value of job security as a percent of wages” is highly disputable, and the 23% total compensation advantage is only slightly less so.


        • Posted by Tough Love on January 27, 2015 at 2:22 am

          Quoting S Moderation Douglas …..

          ““34% more” is also an average, and much more subjective. To be taken with a large grain of proverbial salt. Addito salis grano” and “10% value of job security as a percent of wages” is highly disputable, and the 23% total compensation advantage is only slightly less so.”

          Why, because YOU, a retired Public Sector worker, using every opportunity to challenge any and all pension reform comments, says so ???


    • Posted by javagold on January 26, 2015 at 1:25 pm

      Cut taxes !!!!!!! LOL LOL

      You public takers sure are some lying parasites.


  6. Posted by dentss dunnigan on January 26, 2015 at 2:54 pm

    More ban news for the union parasites….U.S. top court rules for employer in retiree benefits fight….http://news.yahoo.com/u-top-court-rules-employer-retiree-benefits-fight-162318837.html


    • Posted by truthnolie on January 26, 2015 at 8:00 pm

      Another idiot posting a snippet of info that doesn’t apply to most – from the article:

      “Thomas wrote that “when a contract is silent as to the duration of retiree benefits, a court may not infer that the parties intended those benefits to vest for life.””

      ALMOST ALL public safety/public worker contracts specify that retiree medical coverage extends to age 65 or the age of Medicare, SO, they would not be “silent as to the duration of retiree benefits”……but, nice grabbing at straws.


      • Posted by Tough Love on January 26, 2015 at 8:35 pm

        Is it “grabbing at straws to say that virtual ALL safety workers (police, fire) can retire and collect free or heavily subsidized retiree healthcare benefits at age 55, 50, even 45 at HUGE cost to the Taxpayers ?


        • Posted by truthnolie on January 26, 2015 at 9:32 pm

          It would not be grabbing at straws to say that most ALL public safety workers at some point in time gave up either salary increases (which saved towns money at that time and going forward (since raises are normally calculated using the previous salaries; i.e. a percentage increase)) or gave up/did not increase other contract benefit areas in order to incorporate such health benefits into their contracts.

          This argument is all but forgotten but I know of many towns where a 0% raise was taken for one or more years (at a time when increases were in the 5 – 6 % range) in order to obtain retiree healthcare. Not only that but AT THE TIME the municipalities were more than happy to make such a deal seeing it as arresting salary growth and reducing the eventual amounts of payouts (vacation, sick time, comp time, etc.) as same would be based on the employee’s last year salary amount…..therefore, they saw it thinking that it would reduce the progression of the salary increases and save them money in the long run in payouts and general yearly salary costs. No one had a crystal ball at the time to see that healthcare premiums would get to where they are now…..in short, they chose (thinking they were getting it over on employees) and they lost…..oh well……you pays yer money and you takes yer chances….


          • Posted by Tough Love on January 26, 2015 at 10:59 pm

            That BS of “giving-up” raises hold water ONLY if their wages are indeed materially lower than what their education, skills, knowledge and experience would pay in the Private Sector. The link in my earlier comment and the conclusions from study say it’s not’ so.

            We’re just hearing the Union BS to try to justify these outrageous pensions & benefits …… just as you constantly try to do.

            Give it a break ….police in sleepy NJ bedroom communities with VERY little crime earning just base “wages” $110K-$125K after just 5 years as a lowly patrolman … and layering the HUGE pensions & benefits ON TOP OF that …PLEASE ????

  7. Posted by Eric on January 26, 2015 at 4:08 pm

    Does your $150 billion figure include unfunded post-retirement health care benefits or is it all unfunded pension obligations?


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