Public Pension Bailout Delusion

New Jersey Senate President Steve Sweeney proposed what he said was not a bailout for public pensions in this country.  Rather the federal government will give to those other states who have deliberately underfunded their defined benefit plans $1 trillion so they can consider that money as an asset in determining what is euphemistically called their ‘Annual Required Contribution’ (ARC).

Among the warped thinking that would germinate such an absurd plan, by far the most dangerous is:

As if a federal bailout were a given for anyone feckless enough to need one.

Other disturbing aspects:

Just print the money: As if that would solve all problems.  Can’t afford a job, an education, health care, a yacht? – let the federal government give you the money to buy those things and if you default on their ‘loan’ they can always print more money but at least you have what you want.

Phantom assets for funding: As with Pension Obligation Bonds which similarly were loans to public pensions to be repaid by future taxpayers the plans got to consider that an asset (without a corresponding liability item) to artificially reduce the ARC.

Strategic Underfunding: If a federal public pension loan-bailout procedure is enacted why wouldn’t other states and municipalities choose that route over responsible funding?  Promise all the benefits you want, put in nothing, apply for the 1% federal ‘loans’ when eligible and everyone makes out.  What could go wrong?


12 responses to this post.

  1. Posted by Tough Love on July 30, 2015 at 12:30 pm

    God help NJ with those like Sweeney having a good shot* at being NJ’s next Governor.

    * because the insatiably greedy Public Sector Unions will support him


  2. Posted by Anonymous on July 30, 2015 at 12:53 pm

    True and as far as a Federal bailout, forgetaboutit!


  3. Posted by Jim Buettner on July 30, 2015 at 1:23 pm



  4. Posted by Tough Love on July 30, 2015 at 1:25 pm

    Congress should have to watch this before voting on any such proposals …


  5. Posted by Tough Love on July 30, 2015 at 6:44 pm

    Here is another one:


  6. Posted by Jim on July 31, 2015 at 9:41 am

    John – I’m curious as to what you think is the end-game on all this.


    • For Sweeney’s plan – it’s a non-starter unless he can guarantee that the a good chunk of that $50 billion NJ would get and the $1 trillion that other state pensions would get will be invested to maximize returns for those donating to politicians who give the bailout plan the go-ahead.

      If you mean the endgame for pensions in general in New Jersey, that is almost impossible to predict because 99% of the people charged with making decisions lack the knowledge or inclination (or both) to deal with the problem honestly. They could get talked into anything (ie alternative investments, POBs, arbitrary benefit cuts). The one thing off the table is making contributions to fund them.


      • Posted by Jim on July 31, 2015 at 11:30 am

        I suspect that a lot of them realize these schemes will not work in the long run They are probably focused on getting what they can out of the political system now and hoping their band-aids will hold things together for a while.


        • Posted by Tough Love on July 31, 2015 at 11:39 am

          Ture, and while continuing their tactic to delay the inedible reform as long as possible, more of their career pension accruals fall into the PAST (vs FUTURE) Service column, which is likely harder to cut.

          The Public Sector Union geed is insatiable, and it’s arrogance towards the Taxpayers is limitless.

          Taxpayer need to act NOW.


          • Posted by S Moderation Douglas on July 31, 2015 at 2:41 pm

            Still shamelessly spreading misinformation, I see.

            I am not geedy. And reform is not inedible, for ture.

          • Posted by Tough Love on July 31, 2015 at 3:21 pm

            S. Moderation Douglas,


            But since you mentioned it, yes you’re greedy, and reform is inevitable.

            Hope you liked the cartoon videos ….. sound familiar ? recognize any associates?

      • Posted by George on August 2, 2015 at 10:16 pm

        When will the pension fund start selling assets to make up for shortfalls in state funding, in other words when will the amount the state puts in be less than what is paid out? When will assets in the funds be less than they were the year before?

        Commodities and emerging markets not to mention currencies and precious metals are all down this year so I wonder how that will affect NJ pension assets.


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