According to the state Supreme Court, New Jersey now needs to make pension contributions based on how much it can afford which means those mini-payments that a corrupted political/actuarial cabal comes out with can be completely ignored….and they will be. So where do we go from here?
Here are the four big questions with my gut-guesses at the answers?
Will there be an appeal to the Supreme Court of the United States?
Yes but I do not think the court will hear it.
What does this mean for the COLA case?
The New Jersey Supreme Court will likely hear it now and those Christie appointees will find an angle to again reverse.
What does this mean for a Christie presidency?
It changes nothing. He will enter the race in a couple of weeks, provide some entertainment value undermined by the seriousness of the problems he exacerbated, and bow out after making a deal with the Republican front-runner for a DC job.
When do the plans go bust?
A more complicated answer since there is one fund where assets are split among the separate plans theoretically. Those plans that the state has responsibility for funding (PERS-State, PFRS-State, State Police, Teachers, and Judges) will see negative assets with a receivable item from the other plans (PERS-Local and PFRS-Local) for a few years until all the assets are exhausted and it becomes pure pay-go if taxpayers can afford the $15 billion annual payments by then. They can’t.
As for a timeline we can look at the first plan likely to zero-out: the Judicial Retirement System (JRS). In that plan’s July 1, 2014 actuarial report (page 18 of 36 in the pdf) there is a drop-dead date:
As of June 30, 2014, the market value of assets is less than the actuarial liability attributable to retirees. Furthermore, if the assets contained in the Annuity Savings Fund (ASF) of $50,759,400 are excluded, the funded ratio of the remaining market value of assets to the actuarial accrued liability for retirees is 43.6%.
As of June 30, 2014, the ratio of market value of assets to the prior year’s benefit payment is 5.0. This is a simplistic measure of the number of years that the assets can cover benefit payments, excluding future increases in those payments, State and member contributions, and investment income. This ratio decreased by 3.8% from the previous year’s ratio of 5.2. If ASF assets are excluded, since they represent accumulated contributions from active and inactive members, the ratio is 4.0.
With assets of $250 million, annual payouts of $50 million, and annual employee contributions of $4.5 million while investment earnings are likely to turn sharply negative after the collapse of those alternative investments that leaves the state responsible for augmenting the assets in amounts that the court says is completely up to their own discretion. So July 1, 2018 looks like a solid date as to when the only assets in the JRS plan will be what remains of the employees’ own contributions. July 1, 2019 is when those too are gone.