The lies about N.J.s pension crisis

Mark J. Magyar who used to write some interesting pieces for njspotlight on the public pension crisis is now the policy director for the New Jersey Senate Democratic Office and, among his new duties, is propaganda. In that role he penned an nj.com op-ed in favor of the constitutional amendment to ‘require’ the state to make contributions of its own choosing into the pension system that would be laughable if not for the probability that many of the innumerate and mindless among the nj.com readership might take his piece seriously.

Among the disinformation disseminated:

State laws, Supreme Court rulings and legal opinions have already established that public employees are entitled to the vested pension benefits they have earned.

……

the 2011 law already achieved $121 billion in employee and retiree benefit savings over 30 years — an average of $4 billion a year — by requiring public employees to pay thousands of dollars a year more toward their pensions and health benefits, raising the retirement age, and eliminating cost-of-living increases for retirees for decades. If you don’t think that’s significant, ask someone on Social Security how they would react if Congress tried to eliminate their COLA increase for the next 30 years.

Think about those two concepts that appear a few paragraphs from each other. Was it not the elimination of ‘vested pension benefits’ (in this case COLAs) that accounted for the biggest part of that purported $121 billion savings in the 2011 law? Then ask retirees in Prichard, Central FallsDetroit , and soon San Bernardino how established their benefit protections are.

Pension systems work when they’re funded: New Jersey’s pension systems for police, firefighters, county and municipal employees are solvent because county and municipal governments have made their pension payments, and the pension systems have been earning investment income on that money.

New Jersey’s pension system for teachers and state government workers has a $40 billion unfunded liability that is growing exponentially and is in danger of collapse because governors and legislatures treated the pension system like a credit card that would  never come due.

According to GASB numbers as of 6/30/14 New Jersey’s pension systems for police, firefighters, county and municipal employees have a $32.6 billion shortfall (with the state obligations for their employees, judges, and teachers at an additional $80.5 billion) which nobody outside of politics (or an insane asylum) would have the hubris to describe as being solvent.

Next November, New Jerseyans will be asked to vote on a constitutional amendment to require the state government to make regular quarterly pension payments, which would put the state’s pension system — and the state of New Jersey itself — on the road to fiscal solvency within six years.

Notice the weaselly phrasing.  Magyar does not say that the plan (or New Jersey) will be solvent in six years but rather that it will be on the road to fiscal solvency which means absolutely nothing if whoever is driving the state six years from now chooses to veer off that road since the toll would start at $10 billion annually.

 

40 responses to this post.

  1. Posted by Tough Love on January 6, 2016 at 1:09 am

    Quoting ….

    “According to GASB numbers as of 6/30/14 New Jersey’s pension systems for police, firefighters, county and municipal employees have a $32.6 billion shortfall (with the state obligations for their employees, judges, and teachers at an additional $80.5 billion) which nobody outside of politics (or an insane asylum) would have the hubris to describe as being solvent.”

    If I recall correctly, the Nutcase (aka “BH”) has repeatedly claimed that the Local Plans are in good shape, so in addition to …. “nobody outside of politics (or an insane asylum)” …… we should add, the Public Sector WORKERS/RETIREES riding this gravy train.

    Reply

    • I read the op-ed and continue to love the ongoing statement emanating from the public sector that “the pensions will be paid….” kind of like “the sun rises in the east”. When the SHTF as it will, these plans will be cut substantially since they never should have been this ridiculously generous in the first place. Continuing to repeat the mantra that $120,000 pensions for police captains make any sense at all is irrational to put it mildly. When the funds are not there they are not there and no amount of fist pounding will change that.

      Reply

      • Posted by Tough Love on January 6, 2016 at 1:14 pm

        I just took another look at 2014 Police salaries in Paramus NJ.

        Paramus has 81 Officers at all ranks.

        The Highest listed salary is $211,353

        There are 6 officers with salaries over $175,000

        The average salary of the above 6 officers is $188,526.33

        NJ Police pensions are 65% after 25 years and 70% after 30 years

        With 25 years, those 6 office would have a pension averaging $122,542.11

        With 30 years, those 6 office would have a pension averaging $131,968.43

        All 6 of the above officers have 27 or more years of service.
        ——————————————————–

        At least for Paramus NJ, it looks like your estimated $120,000 pension is too LOW.

        Reply

        • The level of ridiculousness no longer matters. These amounts will only be paid until the well runs dry. By that time most citizens of NJ will be even more destitute than they are now so paying these outrageous annuities will not even be an option.

          Reply

        • Posted by Anonymous on January 7, 2016 at 7:59 am

          Do the salaries include health benefits, pensions and other perks?

          Reply

          • Posted by S Moderation Anonymous on January 7, 2016 at 11:06 am

            No.

            But.

            As previously discussed, Paramus is one of the highest paid police forces in New Jersey.

            Average police pay there is over $120,000 (for all levels.) While according to BLS, average salary for “police and sheriff’s patrol officers” for all of NJ is $88,530.

            Likewise, for all of NJ, average salary for “First-Line Supervisors of Police and Detectives” is $124,360, not $188k plus.

            But, we all need something to aspire to, right?

            Health benefits, pensions and other perks are extra.

            There are undoubtedly some police captains with $120,000 pensions. They are undoubtedly higher than average for the state of NJ.

            “At least for Paramus NJ, it looks like your estimated $120,000 pension is too LOW.” notwithstanding.

          • Posted by Tough Love on January 7, 2016 at 2:35 pm

            SMD,

            As previously discussed, that $88,500 includes officers in the 5-7 year grade-in period to full scale, whereupon salaries of $125+K are quite ROUTINE in NJ many towns and villages after just 5 to 7 years of service.

            Hence the $88,500 is misleading, just like it is misleading to quote “average” public Sector pensions that include:

            (a) short career workers
            (b) part-time workers
            (c) workers who retired long ago on lower salary scales and under lower pension formulas
            (d) 50% survivorship beneficiaries of deceased workers

            But “misleading” never bothers you …. does it ?

            How many Private Sector occupations with the educational, experience, knowledge, and skills requirements of Police Officers have a BASE PAY of $125+K after only 5-7 years ? And don’t put your foot in your mouth by claiming it’s a high-risk occupation …. as source-of-choise (the BLS) says otherwise.

          • Posted by S Moderation Anonymous on January 7, 2016 at 7:29 pm

            “salaries of $125+K are quite ROUTINE in NJ many towns and villages after just 5 to 7 years of service.”

            Is misleading. It is “truish” with the ambiguous words “ROUTINE” and “many”, but misleading nonetheless.

            And ” choise” is not a word. Spellcheckers are still free.

          • Posted by Tough Love on January 7, 2016 at 7:57 pm

            SMD,

            Why don’t we let the readers decide for themselves ….

            The website for NJ and some Federal salary and pension information can be found here:

            http://archive.app.com/section/DATA/DataUniverse

            Clicking the link for …. “Public Payroll” and “NJ Public Employees and Police” (and thereafter clicking “2014”to get the updated 2014 data) will take you to THIS web-page:

            http://php.app.com/NJpublicemployees14/search.php

            From the drop-down box labeled “Pension Fund” choose … “Police and Firemens retirement System” and then pick any of the many NJ cities, towns, villages (or even entire counties) for which you want to see employee-specific data.

            Unfortunately, it’s a bit difficult to compile for an entire town (as I did with Paramus, NJ) for the following reasons:

            (a) you are only shown 10 names at a time
            (b) the year of entry into the retirement system is not listed. To get that you need to click each individual name to find it
            (c) The salaries shown are actually in “text” format, so even if you bother with dropping (10 names at a time) into a spreadsheet, a conversion of certain fields to a “numerical” format is necessary to do any calculations

      • Posted by MJ on January 7, 2016 at 5:16 pm

        They were promised 🙂 ha ha ha ha

        Reply

  2. Posted by Anonymous on January 6, 2016 at 7:05 am

    useless drivel as usual.

    Reply

  3. Posted by skip3house on January 6, 2016 at 1:39 pm

    Was Mr. Magyar part of Gov Whitman’s crew who cut full pension funding?

    Reply

  4. Posted by Benn on January 6, 2016 at 2:23 pm

    There is a lot of confusion here. An amendment to the NJ constitution would do nothing to help state retirees, even if it were strongly worded to require full funding as determined by actuaries. The reason for this is that the legislature MIGHT have legal authority to reduce so-called vested benefits. The answer to this awaits the outcome of the current court case protesting the elimination of the COLA as being vested benefits. If legislation is upheld that reduces benefits that are considered “vested”, then all that the legislature needs to do is to reduce the vested pension payments themselves. Reduction of the required state contributions will them follow, since the actuarial estimates will also become reduced.

    So if there is any amendment to the NJ constitution, it must provide that benefits currently specified by statute (that is, “vested”) cannot be reduced.

    Reply

  5. Posted by Tough Love on January 6, 2016 at 3:49 pm

    For all the Public Sector worker “deniers” ……

    Per United Van Lines 39-th annual National Moving Study, which tracks customers’ state-to-state migration patterns over the past year, NJ had the MOST outbound moving traffic of any state.

    And you think that taxes can be increased (to fund your grossly excessive pension & benefit promises) without negative consequences ?

    Reply

    • Posted by skip3house on January 6, 2016 at 4:50 pm

      Congrats on reaching 300 ! ‘You and 299 0ther….’

      Reply

    • Posted by dentss dunnigan on January 6, 2016 at 5:37 pm

      Don’t get caught in the trap ,don’t be one of the last few to leave …http://newjersey.news12.com/news/new-jersey-ranks-no-1-in-people-moving-out-of-the-state-1.9768730

      Reply

    • Posted by Anonymous on January 6, 2016 at 6:02 pm

      Oh please, why we’re the people moving out?

      Reply

      • Posted by Tough Love on January 6, 2016 at 8:04 pm

        The high cost of living now (with worse to come) ….. materially contributed to by the grossly excessive Public Sector worker pensions & benefits.

        Reply

        • Posted by S Moderation Anonymous on January 7, 2016 at 1:52 am

          How can Public Sector worker pensions & benefits contribute to the high cost of living if the state hasn’t been paying that cost for the last two decades?

          Reply

          • Posted by skip3house on January 7, 2016 at 6:30 am

            SMA, My thought exactly, also. The retired people I know left NJ for Property taxes, 62% of which is school tax.
            NJ has retirees going out, new families, kids, coming in, some attracted by schools with good programs for special needs kids. No kids out, many kids into NJ. Property taxes go up more.
            All said, why isn’t Property tax the main issue? Replace ‘residential’ school property tax with added NJ Income Tax, based on ability to pay. Certainly would cut expenses for those wanting to retire in NJ.
            Examples of $85K income, $8200 prop Tax, support this. Eliminate property tax $5K, and increase NJ Income tax about 2/3, and total taxes are reduced about $3000/yr.
            Need graphs showing more, and consider the small number of families, high income, that will pay according to ability, back into the system that allowed creation of that much higher income.

          • Posted by MJ on January 7, 2016 at 8:07 am

            Salaries and benefits still have to be paid for all public employees including layer upon layer of administration. Look at your property tax bill, school taxes typically take up about 80% and it isn’t going to the “kids”

          • Posted by skip3house on January 7, 2016 at 11:01 am

            MJ You are knowledgeable of your property tax details. Beats many who ask why the concern about property tax, as banks,landlords pay them ! If NJ school/town/county property tax had to be paid separately, a Revolution might have started 40 years ago…….Regards

          • Posted by Tough Love on January 7, 2016 at 2:42 pm

            SMD,

            THAT was the “(more to come”) …….

            if NJ’s grossly excessive (by any reasonable metric) Public Sector pension & benefits promises are not VERY VERY materially reduced for all CURRENT workers, NJ’s taxpayers, economy, and survival (as a reasonably nice place to live) are in for a world of hurt.

  6. Posted by skip3house on January 6, 2016 at 4:46 pm

    Ignorance, encouraged by (what), has allowed politicians to run amok with promises to about every special interest. Where was the common sense Ike tried to find with his warning of military/industrial/(congressional) complex. It has spread to local politics, too.

    Reply

  7. Posted by Eric on January 6, 2016 at 6:58 pm

    What Magyar fails to mention is that in the proposed constitutional amendment, bondholders get paid before pensioners. Bondholders are taking a risk by investing in NJ, and are counting on the high tax rate continuing for paying the interest and the principal when the bonds come due. If a bondholder is adverse to risk, he or she may purchase insurance. Pensioners may not purchase insurance. Unfortunately for pensioners, NJ is not unlike Puerto Rico, where there is a mad scramble for scarce money. When the Debt Limitation Clause, which is mentioned in the proposed constitutional amendment as a limitation to any borrowing, AND the bondholders get paid before the pensioners, there will be nothing left. Any amount remaining, will not rise to the level of “table scraps” for pensioners, but would be analogous to Scrooge taking the last crumb or morsel from the mouse as he stole Christmas.
    The hypocrisy goes far beyond the $40 billion amount stated, since the entire “story” is laced with lies including its”legal” discussion.
    I have posted this previously.
    It would have been far more effective to amend the constitution to simply direct that money be paid into the pension system, rather than appease so many competing political interests resulting in the “strangulation” of the pensioners awaiting for their contributions to be made.
    Eric

    Reply

    • Posted by Tough Love on January 6, 2016 at 8:07 pm

      “Bondholders” don’t purchase insurance, the bond “issuer” purchases the insurance in bulk for the entire lot of bonds issued ……… when available and at reasonable cost.

      Reply

  8. Posted by Eric on January 6, 2016 at 9:09 pm

    Tough Love:
    Yes, you are correct, but what difference does it make? The bondholder pays the issuer more for a bond that is insured verses one that is not insured. It is not free, correct?
    The insurance ultimately inures to the benefit of the bondholder if there were a default.
    Eric

    Reply

    • Posted by Tough Love on January 6, 2016 at 9:21 pm

      True of course.

      Municipal/County/State Gov’t with significant debt will find the cost of such insurance (where available) to be prohibitively high ….. limiting the pool of buyers who will not buy w/o such insurance.

      Reply

  9. Posted by S Moderation Anonymous on January 7, 2016 at 1:43 am

    According to “hemline theory”, if skirts are short, it means the markets are going up. And if skirts are long, it means the markets are heading down.

    They say that theory is going out of fashion. (See what I did there?)

    But I don’t think it was crowded out by the moving van theory.

    If the moving van data has any relevance at all, it should be noted that, per United Van Lines 39-th annual National Moving Study, for 36.14% of those moving out of New Jersey, the reason given for the move was …..”job”. For those moving into New Jersey, “job” was given as the reason by 55.45%.

    Long term trends show more people moving out of almost all the northeast states, not just New Jersey.

    “The aging Boomer population is driving relocation from the Northeast and Midwest to the West and South, as more and more people retire to warmer regions.”

    California is another one of those loser high tax blue states with unfunded pension liabilities. Yet 67.92% of those moving into California are moving for ….”jobs”.

    The glass is at least half full.

    Reply

    • Posted by MJ on January 7, 2016 at 4:37 pm

      SMD Part of what you say may be true as far as retirees/boomers move to southern states for warmer climates, but people my age (50) are also taking their money to other states. For example, just purchased brand new construction (5 BR, 2 bath, pool, upgrades galore, 3 level) investment property 3 houses from the beach in SC for 500K. RE taxes 4600 a year. Rental incomes upwards of 45,000,00 per year based on years of rental histories and demand in the area. Wow! The money just doesn’t work in NJ simple as that. Try doing that at the Jersey shore, Not that souterhn states don’t have their share of problems but can live way better for a lot less,

      Reply

      • Posted by S Moderation Anonymous on January 7, 2016 at 8:07 pm

        Part of what TL was implying is true, also. But it’s exceedingly simplistic to take from one unscientific survey from a non representative source and somehow arrive at the conclusion that taxes cannot be raised, therefore pensions are excessive, or whatever s/he implied.

        Logically, each of the three things ‘may’ (or may not) be true, but the causal relationships just aren’t there. At least when John uses it (next article), it’s a good setup for the punchline:

        “No word on whether Christie was officially included in those statistics.”

        There have been similar comments about California in the past few years about the one way costs of U Haul trailers being much higher for those leaving the state than for those incoming, due to the higher demand for those leaving the state. The implication was for businesses leaving California. But who uses U Haul? Businesses? Poor people? And who uses United Van Lines? These don’t really even try to be valid socioeconomic studies. If they have any value at all, it’s just marketing research or investment research to future expansion of moving companies.

        They can’t really be used to judge NJ or CA tax policies, much less pension formulae.

        Reply

        • Posted by Tough Love on January 7, 2016 at 9:33 pm

          Quoting SMD ….

          “Part of what TL was implying is true, also. But it’s exceedingly simplistic to take from one unscientific survey from a non representative source and somehow arrive at the conclusion that taxes cannot be raised, therefore pensions are excessive, or whatever s/he implied. ”

          First, you in incorrectly concluded that I stated that taxes can’t be raised

          Then you stuck your foot in your mouth a 2nd time by wrongly linking THAT (wrong) conclusion as the reason why “pensions are excessive”.
          —————————————————————————-

          Sure NJ’s taxes “can” be raised, but it’s a really bad idea in a state (NJ) with the highest (or near highest ?) taxes in the nation, and a net outflow of productive tax-paying residents and businesses ….. clearly perturbed by CURRENT tax levels.

          And NJ’s Public Sector pensions are grossly excessive irrespective of the tax level needed to fund them. They are grossly excessive simply by comparing* the value upon retirement of Public Sector pensions to that of comparable Private Sector workers who retire at the SAME pay, with the SAME service, and the SAME age at retirement……. and shown by the AEI study to be (in NJ) a 23%-of-pay overall Public “Total Compensation” (pay + pensions + benefits) advantage.

          * Public Sector pensions TYPICALLY have a value at retirement 2-4 times greater for non-safety workers and 4-6 times greater for Safety workers …… as I demonstrated in comment #s 95 and 96 of the 99 comments attached to THIS John Bury Blog-article:

          https://burypensions.wordpress.com/2015/05/14/its-embarsaing-and-im-tired-of-hearing-this-i-want-what-i-was-promised/#comments

          Reply

  10. Posted by MJ on January 7, 2016 at 4:40 pm

    Would not spend one penny here in NJ on real estate—prisoner forever. Of course we all have to keep quiet because family members, friends, neighbors, etc. most all work in the public sector so we are expected to shut up and keep paying. No thanks. Although I will admit that I have had some discussions with already retired publics who admit that major changes are needed as they realize they may not be as secure as they thing,

    Reply

  11. Posted by Anonymous on January 10, 2016 at 5:58 pm

    Poor NJ. When the pensioners go belly up, can you imagine what 800,000 people being late on their payments will do for the state economy? Then couple in some type of bond default–just as Detroit. In the meantime, who is going to drop $125,000 on a college education to be a teacher making $50k for 20 years? The whole system will implode. Real estate values will be cut in half. But, the taxpayer will save $2,000/yr by not paying what has not be paid in 20 years.

    The assertion that by voting the amendment down will mean that pensioners will not get paid is completely erroneous. In fact, I would argue that if the public votes down that bonds are not superior to pensions, they are subordinate. The money has already been spent. A state can not default on its obligations. Look at what’s happening in Puerto Rico–the retirees will be paid.

    Reply

    • Posted by Tough Love on January 10, 2016 at 7:27 pm

      Hogwash (from the imagination of a Public Sector taker)…..

      EVERY dollar not UNJUSTLY extracted from Private Sector Taxpayers (to fund the grossly excessive Public Sector pensions) is an ADDITIONAL dollar for those taxpayers to spend.

      The net result is a ZERO difference in contributions to the economy.

      Reply

  12. Much of the 2011 reform savings do come from the COLA. Since the State didn’t uphold its part of the bargain and other reasons, this may well be reinstated by State or Federal Courts on appeal.

    On variations in funding, local salaries, and general pension abuses. There’s no point in attacking these piecemeal. They all highlight that defined benefit pensions, which once were an offset to low salaries, are not in the taxpayers’ interest. Distortions are increased by State payment of some pensions as well as State subsidies.

    The solution needs to focus on these aspects: regular funding of the accrued liability (eg the Amendment), ending the current pension system by transitioning to defined contribution (401k) type systems. The sweetener for the Unions to accept the change is the reinstatement of a capped COLA. These should be tied into one package.

    Despite wishful thinking, the State is obligated to pay the accrued pensions. The sooner there is fundamental change in the pension system, the sooner we are on the path to long term taxpayer relief and fiscal solvency. There are no magic bullets. Delay simply allows the accrued liability to continue growing.

    Reply

    • Posted by Tough Love on January 12, 2016 at 12:55 am

      Lots of “denial” ….

      Quoting from a comment Mr. Bury posted on his 1/11/16 blog-post :

      “It will be the 300,000 who are not doing the job at the moment (ie retired) who will not be paid…………. The underfunding numbers and the current tax burden in NJ are too massive to allow for any other alternatives.”

      Reply

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