GASB68 vs Politicians’ Pension Numbers in NJ

Now that the 6/30/14 GASB68 valuations are out comparisons can be done with the official valuations for the New Jersey pension plans upon which recommended (and often ignored) contribution amounts are calculated.  Putting everything into a spreadsheet we find:

GASB68:

gasb68

Official Valuation:

njval14

Liability Comparisons

liabcomp14

Other states will not likely see the same 40% increase in liability values since most other states are not as woefully funded as New Jersey – which is a major factor in determining the GASB68 blended interest rate – but many states are close.

Another interesting difference is that the GASB68 asset values do not exactly match the market value amounts reported in the official valuation reports:

assetcomp14

32 responses to this post.

  1. Posted by Tough Love on December 23, 2015 at 5:16 pm

    Quoting ….

    “Other states will not likely see the same 40% increase in liability values since most other states are not as woefully funded as New Jersey – which is a major factor in determining the GASB68 blended interest rate – but many states are close.”

    That point should be well taken by better-funded OTHER States even more so than NJ.

    The GASB basically “caved-in” to accommodate the desires of Public Sector Plan Administrators (and the Public Sector Unions ?) with it’s final structure. Essentially, a Plan that is now fully funded (USING the 7.9% for discounting Plan liabilities in that determination) can continue to use the 7.9% discount rate assumption in future-year financial reporting. Plans ONLY have to use the lower discount rate on the share of total liabilities NOT supported by actual assets.

    However, very few financial economists believe this approach to be OTHER THAN ridiculous …. and that ALL liabilities should be discounted at a rate (INDEPENDENT of investment return assumption) that appropriately reflects the strength of the guarantee that the promises reflected by those liabilities will actually be paid. And, it is (essentially) THIS approach that is REQUIRED by the US Government in the valuation of America’s PRIVATE Sector pension Plans.

    Why is a methodology that results in far a more ROSY picture ….. even under the new GABS standards…. allowed for PUBLIC, but not Private Sector Plans? Because the Plans/Unions were terrified of the consequences of being HONEST about the HORRENDOUS financial position of almost ALL Public Sector pension Plans, and would have to show new Taxpayer contribution requirements SO HIGH that Taxpayers would assuredly DEMAND that these Plans be immediately FROZEN (with zero future growth). So they “caved” …. HIDE the truth.

    My best guess is that the 42.46% overall funding ratio under the new GASB Standards would drop to 30%-35% if valued using the PRIVATE Sector Plan requirements. And under those PRIVATE Sector requirements, a Plan with a funding ratio under 60% (almost DOUBLE my best guess of the average of NJ’s Plans) is considered SO POOR that no pension accruals would be allowed by Government Regulation.

    Reply

    • Posted by Pat on December 23, 2015 at 5:38 pm

      Curious as to how the “Alternate Investments” are valued and what % are they of the total assets?

      Reply

    • Posted by Anonymous on December 23, 2015 at 8:41 pm

      For someone who almost literally posts on here daily, your lack of knowledge on PFRS pension Benifits I found to be shocking. Not knowing about the 9% bump, etc. Your not as smart as you like to make yourself out to be. And for god sakes, you really do need to get a life. I will get one of these PFRS pensions starting in a few years, and I don’t obsess about it as much as you do.

      Reply

      • Posted by The Resident Nutcase on December 23, 2015 at 9:52 pm

        She simply wants to lump them all together…. Come up with a nice round number….. Cry equal and fair…. Then walk around thinking she championed something….

        Each plan is different and unique. And should be treated as such.

        From what I hear…. TL has been crying about this for over a decade. Not much has changed….
        Good luck to you and may you enjoy a long pension which you earned!!

        Reply

        • Posted by Tough Love on December 23, 2015 at 10:25 pm

          Little man …. with a little mind.

          Reply

        • Posted by Anonymous on December 24, 2015 at 1:50 pm

          Thank you RN. God willing I will. Merry Christmas my friend. TL, Merry Christmas to you as well. As well as all the bloggers here, including you John. Best wishes for a great 2016.
          Peace.

          Reply

          • Posted by Tough Love on December 24, 2015 at 3:53 pm

            Likewise, I have no issues with honest, hard working Public Sector workers ….. but I strongly object to over-compensating them at taxpayer-expense.

            Happy holidays !

      • Posted by Tough Love on December 23, 2015 at 10:23 pm

        I don’t claim to have expertise on the nuances of NJ’s PUBLIC Sector pensions, but all Fain Average Salary pensions have very similar design characteristics and funding approaches …… of which I am very familiar (including the detailed mathematics) with experience on the PRIVATE Sector side.

        Yes you may START getting one of these PFRS pensions in a few years, but what are you going to do a few years later WHEN (not IF) your Plan’s assets run out and taxpayers aren’t willing to increase taxes by $10 billion so your checks keep coming?

        And your problem will likely be compounded by the fact that BEFORE that happens, your retiree healthcare subsidy will likely be eliminated (or at least halved).

        Reply

  2. So what does this mean in everyday terms? And if John can analyze it why can’t the dopey politicians?

    Reply

    • Posted by Tough Love on December 23, 2015 at 10:30 pm

      What does it mean?

      Here is the menu of ONLY bad choices… pick one or several:

      (1) Absolute HUGE tax increases …$10 Billion
      (2) Massive reductions in services
      (3) VERY material reduction in FUTURE service pension accrual for actives AND VERY material reduction in healthcare subsidies for both active and retired workers
      (4) And a VERY REAL possibility that PAST service pension accruals of both actives and those already retired must also be reduced
      —————————————–

      Reply

    • Posted by The Resident Nutcase on December 24, 2015 at 10:35 am

      It means that new amendments will placed on the NJ constitution –
      1) Ensuring the state pays its bills as to not make this problem deeper
      2) Ensuring the state pays its bills On Time!
      3) Seeking claw backs of all the money that was earmarked for pensions but went elsewhere. (TL calls it a tax increase….. Others call it a paying back what was not yours)
      4) Seeking creative ways to ensure the pensions are funded.
      5) Finally separating the pensions into local and state plans when considering reforms…. With the obvious more stable funds like the PFRS to be used as a model of what works.
      6) After all pensions are made whole…turning over the funds to the membership to manage.

      *At the end of the day…. You can use whatever numbers you want…. These people deserve their pensions…. And if the STATE HAD MADE ITS PAYMENTS ALL ALONG….. MOST OF THE FUNDS WOULD BE 80-90% FUNDED TODAY!!!!!!

      Reply

      • Posted by Tough Love on December 24, 2015 at 12:48 pm

        Delusional …. as usual.

        Reply

      • Posted by Anonymous on December 24, 2015 at 1:56 pm

        Governor CC, Koch disciple began implementing his Masters desires at the very beginning of his administration. Attack teachers, police, firefighters, public employees, unions and benefits. Pretend to support pension reform, subcontract the pension investment dept. to political backers for $600-900 million dollars, vilify NJ public workers across the nation for the purpose of eliminating the public sector middle-class. The “toolbox” of evil, anti-American worker/ middle-class.

        Reply

        • Posted by The Resident Nutcase on December 24, 2015 at 2:21 pm

          Of course the KB and CC did that. The nations public employee pensions are a gold mine…… IF , they can turn them into a 401k type plan…. They stand to make millions upon millions. This is why they back politicians with a hard line stance against public employees!!!! It has nothing to do with TL’s cry of fair and equal….. It’s all about how they can make more and more money!!!!
          It’s brilliant!!! You pit public against private…… While you sit back and rake in the millions!!!!
          What TL fails to realize….. Is we are all losers in the end!!!!

          Reply

        • Posted by Tough Love on December 24, 2015 at 3:42 pm

          No, not “attack” anything or anyone…… but rightfully “address” a VERY clear problem, the GROSSLY EXCESSIVE, unnecessary, unjust, unfair (to Taxpayers) and unaffordable Public Sector pension & benefit “promises” ….. BOUGHT from prior NJ Elected Officials with Public Sector Union campaign contributions and election support.

          Reply

          • Posted by Anonymous on December 24, 2015 at 7:21 pm

            Stick a cinnamon stick in it and chill TL, what you propose is in conflict with existing state laws governing public employment and the ethics code.

          • Posted by Tough Love on December 25, 2015 at 1:01 am

            Sorry, but the ship has sailed….. and “money trees” exist only in “fairy tails” (and the delusional minds of Public Sector workers).

      • Posted by Actuary on December 27, 2015 at 3:06 am

        You can’t claw any of this money back. The general budget is fungible. The alternative would’ve been severe cuts in state services, or substantial tax increases.

        How are you going to impose retroactive cuts in state services? You can’t pick 10% of state employees, lay them off retroactively, and tell them to return their salaries for the last ten years.

        How are you going to increase taxes retroactively to pay for the money that we *should* have put into the pension? You can’t send the National Guard down to Florida, point guns at New Jersey emigrants, and force them to pay retroactive income taxes.

        You *can* raise the taxes of *current* New Jersey residents. That means they’ll have to vote for politicians who will raise taxes. They won’t do that.

        Reply

  3. Posted by Anonymous on December 24, 2015 at 11:24 am

    Nutcase—it aint’ gonna happen. Dream on little dreamer

    Reply

    • Posted by The Resident Nutcase on December 24, 2015 at 2:23 pm

      Pay close attention to the next 6 months!!!
      It will happen….. Everything public workers are due…. Will be gift wrapped and handed to them.

      Reply

      • Posted by Tough Love on December 25, 2015 at 12:57 am

        Oh they are indeed going to get ……”what they are due”.

        Think VERY material reductions in BOTH their pension & healthcare “promises”.

        Reply

      • Posted by Sean on January 2, 2016 at 6:57 am

        So, do you want your IOU wrapped in red, or blue? Either way, you should probably keep the wrapping paper, since it will be worth more than the next round of “gifts” your next Santa Claus will be promising you.

        Poor Santa, he just can’t seem to create the cash needed out of thin air.

        Reply

      • Posted by Sean on January 2, 2016 at 7:25 am

        Nutcase: “Pay close attention to the next 6 months!!!”

        I guess that since you added three exclamation points, we should probably pay triple close attention during the next six months.

        Actually, there is no need to pay any attention whatsoever to the next six months, politically speaking. What about all the Santa Clauses put into office in the past? How well has that worked out? And you believe a new and improved Santa is on his way, this time coming into office with tons and tons of CASH, because…?

        No. What you should be paying attention to is funding levels.

        Ask yourself: IF, after a bull market of seven years, the funding levels are this bad, how bad will they be after the next downturn in the markets? (Answer: very, very, very bad. After a bull market like we’ve just had, a healthy fund would be at least 100% -125% funded.)

        Ask yourself: If the funding levels are this bad, using bogus accounting and rosy projections, how bad would they be if REAL accounting and projections were used? (Same answer: very, very, very bad indeed.)

        So, my question to you is: Knowing this, what the HELL difference do you think the next six months, and a new set of clowns, is going to make, and how are they going to create the CASH (not promises, the CASH) necessary to save these fantasies?

        Never mind. Just hang on to the hope that in six months, the new guard will make this all go away.

        Hope is a wonderful thing; it’s just not a very good investment strategy.

        Reply

  4. 7 days to go! tic-tock, tick, toc

    Reply

    • Posted by Tough Love on December 24, 2015 at 3:46 pm

      Look out a few years further……………

      There’s that “cliff” where Plan assets hit zero and your pension ???????

      Better have a Plan “B” … or don’t retire.

      Reply

  5. Posted by Anonymous on December 24, 2015 at 3:19 pm

    Nutcase—You won’t be getting it from me. I moved out of NJ and to the south to get away from people like you. Good Luck

    Reply

  6. […] « GASB68 vs Politicians’ Pension Numbers in NJ […]

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  7. […] GASB68 vs Politician's Pension Numbers in NJ | Burypensions Blog […]

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  8. […] to GASB numbers as of 6/30/14 New Jersey’s pension systems for police, firefighters, county and municipal employees have a […]

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