Misreading Supreme Court Denial

That United States Supreme Court will not rule on whether New Jersey has to honor contracts but, as important as that may be for anyone doing business with the state, it has absolutely nothing to do with properly funding public pensions as this northjersey.com story would have you believe.

The decision means that — unless New Jersey voters approve a constitutional amendment to guarantee pension funding — New Jersey governors and lawmakers have discretion over how much money to send to the troubled retirement funds every year.

That discretion would still be there, with or without the amendment, since for public plans there are no (or very few):

  1. funding rules
  2. numerate people making decisions
  3. honest actuaries

New Jersey governors and lawmakers would still get to pick their contribution amounts and, even if we get a constitutional amendment requiring that those manufactured contributions be deposited, unless the three items mentioned above magically appear the plans will run out of liquid assets shortly and no court ruling will  make them reappear.

47 responses to this post.

  1. Posted by Anonymous on March 2, 2016 at 1:24 pm

    Not to mention significant P&B reform!

    Accepting your three points as to why an amendment won’t SAVE the pension funds, what’s the justification for opposition to such an amendment?

    Reply

    • Purely based on conjecture. If we ever get to a point where there are real funding rules that politicians or actuaries can’t game then having it in the constitution that those amount have to be put in becomes important. Fairly slim chance we’ll get there unless retirees in Illinois or New Jersey make a lot of noise (ie lawsuits) once their pensions get slashed some more.

      Reply

    • Posted by Tough Love on March 2, 2016 at 2:27 pm

      Here is a example of why ….

      Suppose our next (likely Democratic) governor and our in-the-Union’s-pocket Legislature determine that NJ can “afford” to contribute no more than $3 Billion into NJ’s pension Plans in a given year (with the full ARC,, even under the absurdly rosy assumptions being $5 Billion) so they intend to “SET” that year Constitutionally-required contribution at $3 Billion.

      For the moment, let “assume” that $3 Billion is truly the most NJ can “afford” to contribute w/o unfair service reductions or unjust tax increases.

      Now suppose NJ’a insatiably greed Unions aren’t really happy with that, and in Quiet/private conversations suggest that a few $ million in additional Union contributions to their favored Elected Officials might magically appear if the $3 Billion were to be finalized at say $3.5 or $4 Billion.

      Don’t think such can happen?

      And once the $3.5 or $4 Billion was set as the official contribution amount, due to the Constitutional amendment, NJ’s resident would be stuck with the reduced services or greater taxes.

      Reply

  2. Posted by Anonymous on March 2, 2016 at 2:29 pm

    It’s not like this is news but it does reinforce what’s been said here and elsewhere. Ain’t Sh*t happening during his remaining term UNLESS………

    http://www.mycentraljersey.com/story/news/politics/new-jersey/2016/03/01/ciattarelli-christie-should-focus-nj-resign/81157758/

    Reply

  3. Posted by Tough Love on March 2, 2016 at 3:05 pm

    Christie is even pissing everyone off …. bad-enough during his run for the President, but now, while on a NJ salary (and likely with significant security costs), he’s campaigning out-of-State for Trump. It’s IS beyond ridiculous.

    Is there no basis challenge payment of his salary during such outings ?

    Reply

    • At this point there’s not much to be said on Christie here. About the only ones supporting him are those who have benefited financially from his ‘governance’: people at Gibson Dunn, whatever company Palatucci starts up, and anyone who donated to him for monetary payback (which they got) rather than ideology (which people like Meg Whitman did not get any payback for).

      The problem is that those newspapers are piling on for the wrong reasons. They say:

      “We’re fed up with Gov. Chris Christie’s arrogance,” the papers wrote. “We’re fed up with his opportunism. We’re fed up with his hypocrisy.”

      But those characteristics are in evidence in a lot of politicians and may even be a job requirement. From what I’ve witnessed first-hand (pension reform and local government oversight) it’s the gross incompetence that he should be criticized for. Yes he comes off as arrogant, opportunistic, and hypocritical but that’s not going to hurt a lot of other people. His failures on pension reform and allowing a continuation of a culture of corruption in government will (and have).

      Reply

      • Posted by Tough Love on March 2, 2016 at 3:53 pm

        Agree … except that “his” failure on pension reform is NOT “his” failure, but a failure of the Union-BOUGHT legislature to VERY materially reduced NJ’s Public Sector pensions and benefits (for all CURRENT workers) from the grossly excessive level in place today …… and as proposed by the NJ pensions & benefit Commission.

        Reply

  4. Posted by Anonymous on March 2, 2016 at 3:58 pm

    TL loves Christie don’t let her fool you

    Reply

    • Posted by Tough Love on March 2, 2016 at 4:22 pm

      Is who I love important …….. or is the need to materially reduce NJ’s grossly excessive pensions & benefits (for all CURRENT workers) what’s important ?

      Reply

  5. Posted by Anonymous on March 2, 2016 at 4:45 pm

    MAYBE both of NJ’s political parties can use this moment to move above and beyond this Governor as he cares nothing for NJ. But politics being what it is, so screwed up, more of the same NOTHING is likely to continue.

    Reply

  6. Posted by dentss dunnigan on March 2, 2016 at 5:02 pm

    comparing private compansation to public “A study published by the CATO Institute last year, based upon figures from the U.S. Bureau of Economic Analysis, and in agreement with data from the U.S. Bureau of Labor Statistics (USBLS; 2015), found that the average earnings for federal government workers was $84,153, compared to the private sector’s average of $56,350. But when benefits are included, the difference becomes staggering: $119,934 in total compensation for federal workers compared to only $67,246 for private sector workers — a whopping 78% difference.” …..http://www.auburnjournal.com/article/3/01/16/another-view-bold-proposal-public-compensation

    Reply

    • Posted by Anonymous on March 2, 2016 at 5:12 pm

      Like most, if not all, studies generally bias – conservative or liberal. Truth usually lies in between the extremes. But let’s go with your example for FEDERAL,workers which I’m assuming does (or should) include Armed Forces, hair cuts for the bald are just too painful!

      Reply

      • Posted by dentss dunnigan on March 2, 2016 at 5:39 pm

        I have yet to read a study that disputes “facts ” ….just opinions not facts

        Reply

        • Posted by Anonymous on March 2, 2016 at 5:42 pm

          Facts are ALWAYS subject to manipulation and interpretation – depends on who’s conducting the study and what database they’re including/excluding.

          Reply

          • Posted by dentss dunnigan on March 2, 2016 at 6:04 pm

            Independent study … unions always prefer to rely on Cato ,that’s why they don’t dispute this one

          • Posted by Anonymous on March 2, 2016 at 6:15 pm

            Ok fair enough, Armed Forces get ready for a buzz cut…….or are you yet another of those that reek of “exceptions”?

          • Posted by dentss dunnigan on March 2, 2016 at 7:02 pm

            Agreed a MP officer make less than 1/2 of what a municipal cop does …and 1/2 in pensions as well ….point well taken

          • Posted by Anonymous on March 2, 2016 at 7:21 pm

            So States/Locals adjust to Federal P&B levels…..probably a Fed requirement IF they ever considered a bailout of sorts.

          • Posted by Tough Love on March 2, 2016 at 7:43 pm

            Quoting …. “So States/Locals adjust to Federal P&B levels…..probably a Fed requirement IF they ever considered a bailout of sorts.”

            Oh ….. can you hear the squealing that would come from Local/State Police ?

          • Posted by Anonymous on March 2, 2016 at 8:27 pm

            I know but SQUEAL if they must. NJ can get meaningful comprehensive P&B reform accomplished with the right approach.

            Your opinion is clear but continued comparison to the PRIVATE sector, justified or not, only allows for a distracted conversation. A “public to public” type comparison would be easier for the Administration to justify and harder for the Unions to unsubstantiate.

            For example, use the Federal P&B model as a baseline for reform. Of course there will be stiff opposition but in the end it’s really hard to honestly justify P&B GREATER than what’s available at the Federal level?

          • Posted by Tough Love on March 2, 2016 at 10:16 pm

            Anon, A full description of federal Pensions under FRS (Federal workers employed since 1987) be can be found here …………

            “http://www.fedweek.com/reg-jones-experts-view/calculating-a-fers-annuity/”

            I agree that using the Federal DB pension formulas would materially reduce pension accruals, but their value would remain remain considerably ABOVE those granted Private Sector workers.

            Example: with 30 years of service, a non-safety FRS worker can retire with an unreduced pension at their MRA (where the MRA varies between 55 and 57 depending on the year of birth). Private Sector pension formulas typically reduce the otherwise calculated pension for retirement below age 65 (sometimes age 62 with 30 years of service) by 5% for EACH year of age, so even if we use the lower age 62 and age 56 (the middle of the 55-57 range for FRS participants), the FRS participants get to retire 62-56= 6 years younger w/o the 6×5%=30% reduction in payout that would apply to the Private Sector worker’s pension.

            In that example, the 30-yr age 56 FRS Retiree with a calculated pension of say $50,000 gets the full $50,000, but the similarly situated Private Sector worker gets a pension of $50,000 x 70% = $35,000

            The Public Sector worker’s pension is $50,000/$35.000 = 1.43 or 43% greater than that of the Private Sector worker making the SAME pay and with the SAME years of service.

            In addition, FRS pensions are annually COLA Increased whereas Private Sector pensions are RARELY COLA-increased. The addition of a COLA-increase provision to an otherwise identical pension w/o COLA, increases it’s value at retirement by about 30% (at the ages FRS employees typically retire).

            So where are we …..

            (1) a 1.43 multiple advantage from younger FULL/UNREDUCED retirement ages, and

            (2) a 1.30 multiple form COLA increases

            Those advantages are “multiplicative (not additive), giving an overall advantage of 1.43 x 1.3 = 1.86 or 86% greater than that of the Private Sector worker making the SAME pay and with the SAME years of service.

            Another way to look at is….

            COLAs INCREASE the “value at retirement” of the FRS worker’s (above) $50,000 pension to one equivalent to a non-COLA pension of $50,000 x 1.30 = $65,000 (w/o any reduction for retiring at age 56), and

            Retiring at age 56 REDUCES the Private Sector worker’s non-COLA pension of $50,000 to $50,000 x 0.70 = $35,000 (w/o any increase because they RARELY get COLAs).

            The ratio of the FRS pension to the Private Sector worker’s pension is $65,000/ $35,000 = 1.86 or 86% higher …. JUST as calculated above.
            ——————————————————-

            As you stated, it would be …… “really hard to honestly justify P&B GREATER than what’s available at the Federal level”, …….. and, the Federal FRS pension structure may be a ….. ” model as a baseline for reform” ……… but it is woefully inadequate in creating the Public/Private Sector pension EQUALITY that SHOULD BE our goal.

            EQUAL ….but NOT better.

          • Posted by Anonymous on March 3, 2016 at 7:52 am

            Well dentss dunnigan I guess it’s back to the drawing board……….

          • Posted by Anonymous on March 3, 2016 at 12:01 pm

            TL equality in ALL aspects of life should be everyone’s goal. None of which happens instantaneously. Significantly movement in the right direction is a worthy goal.

          • Posted by Tough Love on March 3, 2016 at 2:09 pm

            Anon, I would agree if your word “significantly” was changed to “significant”. SIGNIFICANT movement is a worthy goal. Movement that is not SIGNIFICANT is meaningless and is all that is ever offered by NJj’s insatiably greedy Public Sector unions.

            For example, only reducing the pension accrual rate for NEW workers is NOT “significant”, as any savings will be 20+ years in the future. In Private Sector pension Plans, it is both legal and routine for Plan Sponsors to reduce the pension accrual rate for the future service of all CURRENT workers (or even freeze the Plan completely). Given NJ’s DIRE financial condition, there is no reason such (“significant” in magnitude) changes should not immediately put in place…………….. and as proposed by the NJ Pension & Benefit Commission.

          • Posted by Anonymous on March 3, 2016 at 5:17 pm

            I’ll agree with you on dropping the ly but everything else I stated would be a major step forward in this process.

          • Posted by Tough Love on March 3, 2016 at 6:00 pm

            Anon, Yes, as would be (a major step forward) a SIGNIFICANT reduction in the pension accrual rate for the future service of all of NJ’s CURRENT Public Sector workers.

    • Posted by Smooth Moderation Anonymous on March 2, 2016 at 6:22 pm

      Andrew Biggs; hardly a liberal:

      “If I were a federal employee, I would push back hard on the 78% headline pay difference number.”

      http://www.forbes.com/sites/andrewbiggs/2015/10/09/if-women-are-underpaid-by-23-then-federal-employees-are-overpaid-by-78/#65a30a35530b

      Once again, it’s the infamous “apples and oranges.”

      Reply

      • Posted by Tough Love on March 2, 2016 at 6:31 pm

        The 78% is of course silly because a fair comparison compares apples-to-apples, and the Federal Gov’t workforce doesn’t include many of the very low-paying service (think “fast food”, “light-bulb-changer”, etc.) and retail (think “store clerk”) jobs common in the Private Sector.

        However, don’t let SMD and the fact that the 78% is exaggerated, lull us into believing that Federal employee compensation and ESPECIALLY State and Local PUBLIC Sector compensation (with pensions FAR FAR more generous than those granted Federal workers) are not INDEED Grossly excessive when compared to COMPARABLE jobs in the Private Sector.

        Reply

  7. Posted by Smooth Moderation Anonymous on March 2, 2016 at 6:37 pm

    Stephen Moore:
    “A CBO report says that on average the compensation paid to federal workers is nearly 50% higher than in the private sector.”

    http://www.wsj.com/articles/SB10001424052970203889904577201100548361044

    LOL!!! Wrong again!!!

    “Wall Street Journal Total Fail: Stephen Moore Takes a Weighted Average of 2% and 48% and Gets 50%”

    (Subtitle: Why oh why can’t we have a better press corps? We will see if anybody at the Wall Street Journal is honorable enough to run a retraction and a correction.)

    http://delong.typepad.com/sdj/2012/02/wall-street-journal-total-fail-stephen-moore-takes-a-weighted-average-of-2-and-48-and-gets-50.html

    _____________________________________________________________

    One more time.

    And the answer is: some federal workers earn more than the private sector. Some earn less. According to every study. Just like state government. Just like local government.

     Federal employees with no more than a high school
    diploma earned 21 percent more per hour, on average,
    than private-sector employees with the same amount
    of education (see Table 2).

     Employees whose highest level of education was a
    bachelor’s degree—about one-third of the federal
    workforce—earned roughly the same average wage in
    the federal government as in the private sector.

     Federal workers with a doctorate or professional
    degree earned 23 percent less per hour, on average,
    than similar workers in the private sector.

    https://www.cbo.gov/sites/default/files/112th-congress-2011-2012/reports/01-30-FedPay_0.pdf

    Reply

    • Posted by Anonymous on March 2, 2016 at 6:43 pm

      You two bring out the best in the rest….. blog on!

      Reply

    • Posted by Tough Love on March 2, 2016 at 7:39 pm

      SMD, always misleading and omitting material facts:

      (1) It would have been appropriate to note that your linked study was PUBLISHED over 4 years ago with a study data from 2010.

      (2) You use the word “earn” in your 3 bullets ….. perhaps hoping that the readers will believe that means “Total Compensation” (wages + pensions + benefits”), but it doesn’t. From Table 2 (page 6) of your linked study, it’s clear that the %s are ONLY “wages”.

      (3) True, there is a wide difference in Public/Private Sector “Wages” and “Total Compensation” BY EDUCATIONAL CATEGORY. But, is it not the overall difference for ALL educational groups COMBINED that is financially meaningful to Private Sector Taxpayers …… who pay for it? And does not the bottom row in Table 4 (page 11) of your linked-study show that for all Educational levels combined, Federal workers have a 16%-of-pay Total Compensation ADVANTAGE over their Private Sector counterparts?

      Taxpayer’s, think about that …… how much better would YOUR retirement be if you had an ADDITIONAL 16%-of-pay to save and invest in every year of your career ….. an extra $500K or $1 Million? And not to forget, State and Local Public Sector workers get pensions MUCH more generous that those granted Federal Workers.

      Haven’t Private Sector Taxpayers been suckered long enough ?

      Reply

      • Posted by Smooth Moderation Anonymous on March 2, 2016 at 11:16 pm

        The AEI study from which you like to cite the 23% public sector advantage used data from Census Bureau’s American Community Survey for the years 2009 through 2012.

        Four to seven very volatile years in which most public workers saw marked reductions in pensions and benefits. Are you suggesting the federal 16%-of-pay Total Compensation ADVANTAGE is not valid? (FWIW, Biggs/Richwine calculated an overall federal compensation advantage of 37%)

        Moderation says the relationship between public and private compensation is in constant flux. Many cities and states, including New Jersey and California, have been reducing employee benefits and increasing employee costs.

        Wages are even more sporadic.

        Perhaps we would be just as accurate using anecdotal evidence : “I know this fireman who retired when he was 42 and his pension is over $100,000”. Or, “everybody knows that the PUBLIC Sector (say) CPA works 40 hrs/wk (perhaps 5-10 at the water cooler or browsing the internet) and many private sector CPAs ACTUALLY WORK 50 to 60 hours/wk.”

        I hate to break it to you, Love, but you will never get your “EQUAL”. If the lower percentile of auto mechanics in California make $28k per year, and the highest percentile makes $70k, how much should a CalTRANS mechanic make? Average? Median? Who keeps track?

        Perhaps we can take comfort in the fact that a public sector lawyer will almost never make as much as a private sector equivalent. And, yes, a public sector clerk will almost always make more than she would in the private sector.

        I doubt that will change in our lifetime.

        Reply

        • Posted by Tough Love on March 2, 2016 at 11:52 pm

          Quoting …. “I hate to break it to you, Love, but you will never get your “EQUAL”.”

          Your likely correct, but keeping EQUAL on the Table as the APPROPRIATE goal … will help get us as close as possible ….. given the inextinguishable desire of of self-interested Elected Officials to keep Public Sector Union campaign contributions flowing.

          Reply

  8. Posted by Pauline Walnuts on March 3, 2016 at 12:28 am

    Please read the above. 700 million to perform worse than the S&P again. They deserve 300 million in bonuses for this?

    Reply

  9. Again, have not received blog here since about Jan 2016. Please add me again

    Reply

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