Moody Outlook for New Jersey Public Pensions

It looks like Moody’s has released another report on the sad state of the New Jersey Public Employee Retirement System but the article on nj.com did not fire as many flares as New Jersey itself did in a recent bond statement.  After the SEC found some fraud in these statements before the state has introduced some harsh truths into their disclosures.

Notable excerpts follow:

 As a result of lower-than-recommended contributions by the State to the Pension Plans for an extended period, lower than expected investment returns on an actuarial basis and other causes, the Pension Plans have experienced (and, absent action by the State, are expected to continue to experience for a number of years) a deterioration in their financial condition. (page I-50)

The actual amounts that the State contributes to the Pension Plans each Fiscal Year are subject to annual appropriation by the State Legislature and to actions by the Governor. The amounts that the State contributes to the Pension Plans can be and, since Fiscal Year 2004, have been less than the actuarially recommended contribution rates. (page I-52)

The amount the State actually contributes to the Pension Plan may differ from the actuarially recommended contributions of the Pension Plans because the State’s contribution to the Pension Plans is subject to the appropriation of the State Legislature and actions by the Governor. (page I-54)

The State does not anticipate the overall financial condition of the Pension Plan to improve until such time that the State resumes making full actuarially recommended contribution. As the State has previously noted, increased contributions in future Fiscal Years, depending on their magnitude, will likely create a significant burden on all aspects of the State’s finances. (pages I-60-61)

Impact of Financial Deterioration of Pension Plans on Benefit Payments. The continued financial deterioration of the Pension Plans will cause a substantial increase in the actuarially recommended contributions of the State to the Pension Plans. These actuarially recommended contributions can place a significant burden on all aspects of the State’s finances. Further, State budgetary pressures from areas other than contributions to the Pension Plans can place pressure on the State to contribute less than its actuarially recommended contributions, as was the case in Fiscal Year 2014 and as is contemplated by the Fiscal Year 2015 Appropriations Act and the Governor’s Fiscal Year 2016 Budget Message. (page I-61)

As part of its process of analyzing the condition of the Pension Plans and formulating its recommendations, the Commission has requested and is expected to continue to request that the State provide to it information regarding the Pension Plans containing data in addition to or different from that presented herein and analyses using assumptions and methodologies which differ from those used herein. As a result the Commission may develop for its own internal use or for public dissemination information characterizing the present and projected financial condition of the Pension Plans which differs markedly from that presented herein. The State continues to believe that the information relating to the Pension Plans contained herein, including information describing assumptions and methodologies employed, provides a reasonable basis to evaluate the status of the State’s Pension Plans. Investors and other market participants should refer only to this Appendix I and official supplements thereto provided by the State. (page I-63)

The new [GASB 67] standard contains a provision that requires a pension plan to be treated as a single trust for purposes of valuing the plan when there are no separate trust agreements in place for the component groups within the plan. Since there is no language in legislation that legally segregates the State and local components within the Public Employees’ Retirement System (PERS) and the Police and Firemen’s Retirement System (PFRS), the information and disclosures for these two multi-employer plans had to be developed in the aggregate per system and not separately for the State and the local participating employers. If the State and local employers were segregated for GASB Statement No. 67 disclosure purposes, the State’s Plan Fiduciary Net Position as a percentage of Total Pension Liability in both PERS and PFRS would have been lower than the combined State and local Plan Fiduciary Net Position as a percentage of Total Pension Liability shown in the above chart, and the local employer Plan Fiduciary Net Position as a percentage of Total Pension Liability would have been higher. (page I-66)

17 responses to this post.

  1. Posted by The Resident Nutcase on January 21, 2016 at 5:51 pm

    Nuff said—

    “”As a result of lower-than-recommended contributions by the State to the Pension Plans for an extended period, lower than expected investment returns on an actuarial basis and other causes, the Pension Plans have experienced (and, absent action by the State, are expected to continue to experience for a number of years) a deterioration in their financial condition””

    Didn’t say because the benefits are too rich…
    Stop blaming the workers!

    Reply

    • It’s that ‘other causes’ part that might cover it. It’s a 118 page statement so it’s hard to believe they couldn’t take a few lines and list those ‘other causes’.

      Reply

    • Posted by dentss dunnigan on January 21, 2016 at 6:01 pm

      They don’t get into that ….what do you want them to say “How the hell can you give someone a 60K a year pension plus benefits for life
      for 4 stinkin’ months of work” ….god I’d love to see that in a report…..

      Reply

  2. Posted by Anonymous on January 21, 2016 at 7:51 pm

    John, given what you know, would you buy state bonds?

    Reply

  3. Posted by Javagold on January 21, 2016 at 8:06 pm

    Tick Tock Public Parasites. Tick Tock.

    Reply

  4. Posted by Anonymous on January 21, 2016 at 8:15 pm

    It takes one to know one

    Reply

  5. Posted by Nave on January 21, 2016 at 8:43 pm

    True/false:

    Did Moody’s actually say

    “A constitutional requirement to make pension contributions would remove a tool that the state has used to balance its budget for decades.” ?

    Reply

  6. Posted by nfs on January 21, 2016 at 11:13 pm

    Atlantic City on the verge of bankruptcy with all those casinos for decades. How does that fucking happen? Democrat controlled City = stupid

    Reply

    • Posted by Tough Love on January 22, 2016 at 12:36 am

      No …. it was competition from PA, NY and CT that took away many of their customers (and profits). Too many casinos for their shrinking market-share ….. some HAD to go.

      Reply

      • Posted by dentss dunnigan on January 22, 2016 at 11:03 am

        AC had a sweetheart deal with state as far as paying only 3% on profits …I believe most states charge 10 or 11% …which leads me to believe someone was being paid off ….IMHO

        Reply

        • Posted by bpaterson on January 25, 2016 at 11:40 am

          it was a cash cow and trees grow to the sky-the state did nothing to promote AC for those 40 years prior to the collapse. The state took their vig of plenty of money from the casinos revenues of course, and then leveraged programs like local transport systems for the disabled and poor….But then the free cash flow from casinos dried up and the transport costs had to be shifted onto the taxpayers since govt programs in place become in perpetuity.

          Reply

  7. Posted by Sean on January 23, 2016 at 4:03 pm

    Here’s something of interest…

    Just got an email with a link to a Bloomberg article making the case to allow STATES to declare bankruptcy.

    Obviously, this is something that can be argued forever, but I think the larger point is clear: CHANGES ARE COMING.

    Like it or not, the mathematical realities will FORCE the issue.

    http://www.bloomberg.com/news/articles/2016-01-21/the-case-for-allowing-u-s-states-to-declare-bankruptcy

    Reply

    • Posted by Anonymous on January 24, 2016 at 9:18 am

      Holy moral hazard Batman!

      Reply

    • Posted by bpaterson on January 25, 2016 at 11:44 am

      First towns and now states? is the fiscal incompetency, waste and abuse spreading? If allowed that would allude that the govt is not almighty and invincible like they want us to believe, with the mindset of the endless programs and services are worth every penny of appropriations.

      Reply

      • Posted by Tough Love on January 25, 2016 at 5:46 pm

        Just wait until NYC goes bankrupt and their grossly excessive pensions & benefit can’t be paid.

        The Public Sector workers will be demanding that NYC carve up Central Park and give it to them.

        Reply

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