Scary Pension History

Steven Malanga had an interesting article in City Journal today:
that touched on some history of the false idol of investment return as cure-all for the public pension crisis (with New Jersey prominent):

States and localities began creating pension systems for their workers in the early twentieth century. For a time, they proceeded cautiously. New Jersey, for example, instituted a pension system for teachers in 1919, pledging that it would be “established on a scientific (actuarial) basis,” so as to avoid the fate of an earlier worker-funded system that had gone bankrupt.

To help pay for the largesse, the state, beginning in the 1960s, let CalPERS start speculating in real estate and stocks—riskier bets but with potentially higher returns than government securities. Over time, California raised the amount of assets that the pension fund could put into such investments. Other systems eventually followed suit. In 1999, South Carolina, facing pressure to capitalize on the 1990s market boom, became the last state to permit its retirement system to invest in stocks.

legislators discovered that they could pad pension benefits, without contributing much more up-front tax money, by allowing retirement funds to project much higher investment returns—and then invest more aggressively to try to achieve them.

Rather than preserve this bounty, politicians used it as an excuse to hand out yet more new goodies to retired workers—and gave themselves holidays from contributions, to boot. Even as the 1990s bull market collapsed, New Jersey passed 13 separate benefit enhancements between 1999 and 2003, piling billions of dollars in new obligations on the pension system.

Pensions have also had trouble recovering because local reforms have proved inadequate or wind up gutted by courts. Both Connecticut governor Dannel Malloy and New Jersey governor Chris Christie declared victory in enacting pension savings in 2011, though critics warned, accurately, that their states’ pension systems would remain extremely costly. Jersey’s pension payments, only $1 billion in 2012, must rise to $4 billion by 2018—in a state with only a $33 billion budget. Christie has since proposed a much more extensive, money-saving overhaul of Jersey’s retirement system, but he’ll have trouble getting it passed, after proclaiming that the state had solved its pension woes.

53 responses to this post.

  1. Posted by Tough Love on January 26, 2016 at 1:56 am

    I see that Mr. Malanga mentioned ….. “New Jersey passed 13 separate benefit enhancements between 1999 and 2003” … wo enumerating them

    I would love to see the specific list……. and then discuss justification for reneging on these outrageous pension & benefit “promises”.

    Reply

  2. Posted by Anonymous on January 26, 2016 at 2:11 am

    You are an idiot

    Reply

    • Posted by Tough Love on January 26, 2016 at 11:44 am

      Well there are 17 items on that list … some minor in cost, and some very major (such as the 9.09% RETROACTIVE:Y APPLIED pension increase).

      As a Taxpayer I object to all (nothing but give-aways of taxpayer wealth to special interests who will return the favor with campaign contributions and election support) with the exception of (#2) the survivor’s benefit to spouses of VOLUNTARY ESWs who die on duty, and (#s 7 &8) a minor cost expansion of Veterans benefit provisions.

      Reversal of all of this THEFT from the taxpayers should be at the top of the list WHEN (not IF) these Plans go bust (i.e. theoretically, pay-as-you-go) and decisions must be made as to where to start making reductions.

      The 9.09% increase should clearly be FIRST…..how outrageous to KNOWINGLY give that way IGNORING the DOCUMENTED and material downturn in Plan assets ….. and applying it RETROACTIVELY no less (free taxpayer money …. for absolutely ZERO incremental services).

      Reply

      • No, it had to be done to prevent a mass exodus of valuable drones to the private sector. And if you believe that I have a bridge…..

        Reply

        • Posted by Sean on January 26, 2016 at 12:26 pm

          And the irony of all this?

          If the public workers were smart, THEY would be the ones running to try to STOP garbage like this. THEY would be the ones telling their leaders, “Stop! You are going to run these benefits into the ground. Don’t get greedy. A modest and fair retirement can be had by all, if we just don’t go too far.”

          Of course, they passed the point of no return years ago…

          And they think those of us on this blog who oppose them are the enemy. They are wrong. THEY are their own worst enemy.

          Reply

      • Posted by dentss dunnigan on January 26, 2016 at 2:05 pm

        yep there it is ……PG 51

        Provides a 9.09 percent increase to TPAF and PERS retirement benefits for active members and retirees; revises calculation of assets and establishes benefit enhancement fund. Reduces TPAF member contribution rate to 3%.

        Reply

        • Kind of shoots holes in the argument of deferred compensation ,even current retirees received the 9% boost …wonder why we never got to vote on that one !

          Reply

          • Posted by MJ on January 27, 2016 at 5:41 pm

            ….and they wonder why the pension system is basically insolvent……

          • All you get to do is pay for it. And if you do not think they laugh at all the private sector suckers whose only role in their future lavish retirement is to pay for it you are mistaken. They laugh at you every day. And when they get the boat check they laugh twice as hard. All I can say over and over in response is BUNCH OF THIEVES!!

    • Posted by Vote it Down on January 26, 2016 at 2:33 pm

      Anyone know if the additional accrued liability is in 2005 dollars, the year the report was written, or in year of the enhancement dollars?

      Reply

  3. It’s interesting that Phil Murphy was the chair of the benefits task force.

    As a gubernatorial pre-candidate, Murphy has avoided the pension conversation. I see that a decade ago however he was an active participant.

    I would like to know if Murphy still stands by a DB plan instead of a DC plan.

    Reply

  4. I found it interesting that the public employers provide free life insurance coverage or did I read that wrong? Can’t the taxpayers repudiate the unconstitutional debt? and these overly generous and quite debt ridden pension plans would fall under that category…..mmmm I guess thats why they are now trying to get it written into the constitution except the dolts can’t grasp that every other expense in the budget would have to be cut or eliminated…..hard to follow this circular argument

    Reply

  5. Posted by bpaterson on January 26, 2016 at 5:27 pm

    anon8:23-thanks for the link to 2005 Pension study commissioned by gov pro-tem cody. It was interesting for sure. Especially when the underfunding was only $12.1 bill back then (but who knows what the real numbers were). Was any of this implemented? Also during Corzine, another study was done by senator scutari on pension relief (which BTW is actually ironic since scutari is a HUGE double dipper). Their recommendations were also valid but maybe one or 2 were initiated by CC when he came in. (http://www.njleg.state.nj.us/PropertyTaxSession/OPI/jcpe_final_report.pdf). The snowball rolling thru all this from last decade was the combination of 4-5% annual raises (which when pension is factored in creates around 7% increase) to the public sector along with the incessant health and medical cost increases of anywhere from 8%/year to 12-15% year thru the last decade. The rubber band is stretched as far as it can be, it needs a snapback from what this bizarre reality has created..

    Reply

  6. Posted by Sean on January 26, 2016 at 5:38 pm

    Hey Everyone,

    Remember this post from the other day:

    Anonymous: “You nor your mentor TL have provided any proof of NJ union/elected collusion, would you use some of your work time blogging hrs to reveal your evidence.”

    Gee, I guess we struck out on the whole “collusion” argument now, didn’t we?

    Sometimes you just have to wonder how much people are willing to look away from.

    Like the saying goes: You can never make a man understand the truth when his livelihood depends upon him NOT seeing the truth…

    Reply

    • Posted by Anonymous on January 27, 2016 at 8:08 am

      This is what I’m saying about you Sean, truth be told it is unethical, illegal and dishonest to use your work time to comment against NJ public employee pensions because your underlying job doesn’t offer a retirement benefit.

      Reply

      • Posted by Sean on January 27, 2016 at 11:42 am

        No, what you are saying is that you have nothing to say to the real issue we’re talking about, so you are reverting to the only thing you know how to do.

        I work a minimum of fifty hours per week, ass hat, but keep trying. At least it will keep your mind off reality for a bit.

        Reply

        • Posted by Anonymous on January 27, 2016 at 1:00 pm

          You respond to these comments throughout your private sector 50 hr workweek, so you violate the company ethic code and steal work time that you shouldn’t’t be paid. Accept your truth, own your deception.

          Reply

          • Posted by Sean on January 27, 2016 at 2:57 pm

            “throughout your private sector 50 hr workweek, so you violate the company ethic code and steal work time that you shouldn’t’t be paid.”

            Hey EINSTEIN: I am required to work 40 hours per week. The rest of that time I put in without extra pay, something you publics would be screaming bloody murder over, or finding some way to fleece taxpayers into some kind of pay and benefits windfall for all your “heroism and dedication.” But by all means, come after those thieving bloggers who post on their breaks or lunch hours. You are one desperate dude, trying to make yourself feel better while you and your kind are robbing the citizenry blind.

            This is why there will be zero sympathy for people like you WHEN the mathematical reality starts to sink in.

            I personally do not wish calamity on anyone, but it is impossible to feel sympathy for people like you.

          • Posted by Anonymous on January 27, 2016 at 3:06 pm

            Sean, Sean, Sean, seriously you work an additional 40 hrs per month at your underpaid private sector job without overtime and you think you are a martyr? You shortchanged your personal finance and family by blog commenting instead of finding a better paying job. 40 additional paid hours of work can support a college fund, vacations, better food etc.

          • Posted by Sean on January 27, 2016 at 3:17 pm

            You just. Can’t. Let. Go. Can you?

            You’ve proven, beyond all doubt, that you have nothing to say about the real issue, so you hang on to this desperate and irrelevant path. It’s like watching a spoiled child throwing a tantrum. Really dude. Let’s move on.

    • Posted by Anonymous on January 27, 2016 at 8:13 am

      Contract negotiations between unions and the state to reach a legal labor agreement is not “collusion”. Please get a better job in Illinois or spend quality time with your family.

      Reply

      • a 9% increase in pensions benefits to all even retirees plus a decrease in workers contribution to 3% for union yes vote is collusion

        Reply

        • Posted by Sean on January 27, 2016 at 11:50 am

          Right on Dentss. Isn’t funny how everyone can see this for what it is, except those who are receiving the fruits of the extortion?

          You can never make a man understand the truth when his livelihood depends upon him NOT seeing the truth.

          Reply

      • Posted by Tough Love on January 27, 2016 at 11:56 am

        Quoting Anonymous ….. “Contract negotiations between unions and the state to reach a legal labor agreement is not “collusion”. ”

        It is when:

        (a) The Elected Officials or their Management reps negotiating on the Cities behalf belong to the same (or similar) Pension/Benefit Plans and know that they will always get at least as good a pay, pension & benefits package as award the rank & file. The more they give YOU, the more THEY get.

        (b) Our self-interested elected officials (whose #1, #1, & #3 goal is to be re-elected) knowingly trade their favorable votes on pay, pensions, and benefits for Public Sector Union campaign contributions and election support.

        (c) At no stage in the negotiations is the compensation package being negotiated with the PUBLIC Sector workers compared (as it SHOULD BE) to the compensation package of comparably skilled, educated, knowledgeable, and experienced PRIVATE sector workers in reasonable comparable/risky jobs. It is the PRIVATE Sector, where 85% of all workers are employed and where employers freely & unencumbered compete for talent that sets “market rate” compensation, NOT the Public Sector where politics and Public Sector union influence materially distort compensation levels.

        Reply

        • Posted by Anonymous on January 27, 2016 at 1:50 pm

          TL and Sean rant about “greedy” public sector employees, but they sit at their private jobs getting paid to perform job-related duties making disparaging comments. Unethical hypocrisy.

          Reply

          • Posted by Tough Love on January 27, 2016 at 1:54 pm

            What, no reasonable “response”, so you resort to when, where, how we post ….

            Really ?

            Nothing more RESPOPNSIVE to offer ?

          • Posted by Sean on January 27, 2016 at 2:38 pm

            So, you still have nothing, isn’t that correct, Anonymous?

  7. Posted by Javagold on January 26, 2016 at 10:19 pm

    800,000 parasites living off of 8,000,000. Wake up and put and end to the Ponzi scam TODAY. Or just let it all collapse tomorrow. I really could care less. But I were a 50yo public taker I would be very very nervous that my IOUs will be worthless. And we will all finally understand. IF YOU DONT HOLD. YOU DONT OWN IT.

    Reply

  8. Posted by The Resident Nutcase on January 27, 2016 at 12:41 pm

    I just sit back and giggle as you goofs run around high fiving each other and chest bumping like you’re gonna change anything. Lol!!! God I feel for ya.
    I’ll continue to read Johns blog because he gives some insight but the same 6 people saying the same ol’ crap is soooooo old and boring. FYI…. There’s good news coming down the pipe for public workers. But I’ll let you stew in that thought.
    But by all means keep up the show!!!

    Reply

    • Posted by Tough Love on January 27, 2016 at 1:03 pm

      Check the health of your Plan periodically ….. and watch as it spirals down the toilet.
      NJ’s annual pension/benefit payments are WAY to great to continue (w.o very material reductions) on a pay-as-you-go basis.

      Reply

    • Posted by Sean on January 27, 2016 at 1:08 pm

      “There’s good news coming down the pipe for public workers.”

      Yep. Sure is. The good news for you publics is…the orchestra sounds great! Of course, you’ve hit the ice berg, and you are rapidly taking in water, but, be of good cheer, my friend, the orchestra sounds great!

      Reply

      • Posted by Anonymous on January 27, 2016 at 3:12 pm

        Just how many pension rant breaks do you get during your 40 he paid, 10 hrs voluntary position. You do know it’s illegal to volunteer in the same job you are getting paid. This is not looking good, you need to rethink your employment situation.

        Reply

        • Posted by Sean on January 27, 2016 at 3:20 pm

          col·lu·sion

          /kəˈlo͞oZHən/

          noun

          noun: collusion

          secret or illegal cooperation or conspiracy, especially in order to cheat or deceive others.

          Reply

          • Posted by Anonymous on January 27, 2016 at 6:16 pm

            NJ public employees agreement are negotiated through the collective bargaining process. Still stealing time, still ranting against unionized public employees and still a hypocrite.

        • Posted by The Resident Nutcase on January 27, 2016 at 4:06 pm

          He would be compensated for all those free hours of work if he was unionized!!! Lol. Why work for free so the man gets to soak in all the money. Nothing wrong with compensation for work Sean. But seeing as you post here frequently throughout the day….. You’re right to work 40 hrs free per month.

          Reply

          • Posted by Sean on January 27, 2016 at 4:41 pm

            I think, between you and Anonymous, there might be enough wattage to power a table lamp.

            You two are such geniuses. What would society do without you, besides save a ton of money.

            Nutcase, I really think you should save all of your postings and put them into a scrap book, and you can label it “BC” (Before the Cuts). This will provide the comfort you will need to help you deal with it all. You can flip through your scrap book and remember the good ole days, when you though you were invincible.

    • Posted by Anonymous on January 27, 2016 at 5:31 pm

      Don’t feed the trolls. They thrive on others pain.

      Reply

    • Posted by MJ on January 27, 2016 at 5:52 pm

      I don’t believe that the purpose of this blog is to intended to be the know all end all for the significant pension reforms to come but rather to try and educate everyone as to what the dire situation is regarding the pension mess. As more and more people become aware and math and the laws of economics win out over the desperate band aids used by the useless politicians, the changes will just happen because there won’t be any other choice.

      Reply

      • Posted by Tough Love on January 27, 2016 at 6:04 pm

        Amen !

        Reply

      • Posted by Anonymous on January 27, 2016 at 7:28 pm

        Don’t encourage TL and Sean they repeat the same doom and gloom every 15 minutes on their employees dime with no guilt for stealing employment time to comment against public sector employees.

        Reply

      • Posted by Sean on January 27, 2016 at 8:10 pm

        MJ, you are most correct in your assertion when you say, “As more and more people become aware and math and the laws of economics win out over the desperate band aids used by the useless politicians, the changes will just happen because there won’t be any other choice.”

        Think of the last bubble in the real estate market. Once again, greed and arrogance came to full blossom all the way to the top. Those in the know kept saying, “this simply cannot go on.” Those who knew what they were talking about knew that the only time the real estate market had had that kind of growth was in the 50s, when the post WWII GIs were creating a huge demand for housing. Their warnings were, of course, ignored, and they were mocked, laughed at, and called “doom and gloomers.” The market would rise, and keep rising, and all the while the dumbshits gleefully mocked the naysers. “We just hit new highs, dummies. Real estate always goes up. You gloom and doomers are always spouting your negativity.” And they were right. Until they weren’t. Then, the collapse, then the panic, then the puking, then the crying, and finally, the finger pointing. Same thing happens every time.

        It will be no different this time. As you and I and others from both sides of this argument have said, it really doesn’t matter what we as individuals post on this blog. These changes are coming, because the laws of nature always rule in the end. Mathematics will have the final word. And you will see it happen for yourself.

        All bubbles burst. No exceptions.

        Reply

  9. Posted by Eric on January 27, 2016 at 8:29 pm

    Sean:
    I remember the real estate bubble well. I teach mathematics. I told my wife that we should sell our house, and temporarily move into an apartment. If I were single, I would have done that. My wife is a hoarder, so it was impossible. I have no belongings since I have no place to store them. For me, the move would have been just driving in my car to the apartment.
    Eric

    Reply

    • Posted by Sean on January 27, 2016 at 9:29 pm

      Eric:

      What was fascinating to me was how many people, even so-called “experts,” refused to question the internals of the housing market. The few that did, and bet against it, made crazy money. With the public sector pension bubble, the math is even worse, but the response is the same: look the other way, ignore the pain, and hope that somehow it all works out. I sincerely hope that you are not getting caught in that boat.

      Reply

      • Posted by MJ on January 28, 2016 at 9:48 am

        If I said it once….whether it be housing bubbles or pensions bubbles, if it sounds too good to be true it probably is………and there is no honor among thieves no matter how the anyone wants to spin it (collusion or negotiations) all the same principle.

        Reply

  10. Posted by Eric on January 28, 2016 at 10:08 am

    Sean:
    I teach math at a private university. I also teach some courses overseas.Thanks for your concern.
    Eric

    Reply

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