According to the NCTR anti-PEPTA hit piece:
Rauh advised Congressman Nunes when he was first developing PEPTA, and the Nunes materials contain Rauh’s projections. For example, Nunes/Rauh claim that seven states will run out of money before 2020, including Louisiana and Oklahoma in 2017. Furthermore, the Nunes materials state that these insolvency dates “are based on generous assumptions concerning the performance of pension plans and are likely the ‘best case scenario.’”
The only problem? If you check with your colleagues in Louisiana and Oklahoma, they will be happy to inform you that they are not going to completely deplete their pension assets by next year and have to make pension payments out of general revenues. In fact, as the Government Accountability Office (GAO)—an independent agency that provides Congress with audit, evaluation, and investigative services—said in a 2012 report, Rauh’s exhaustion dates were based on assumptions that it found to be “unsupported.” Indeed.
So how are Rauh’s run out predictions, made in 2009, working out?
As it turns out the Rauh paper included this list:
It is Illinois with a 2018 run out date that tops the list though it would have been inconvenient for the NCTR people to throw that against Rauh since, even with those additional Pension Obligation Bond issues in 2010 and 2011, the picture is ugly:
As for the New Jersey plans which supposedly have $70 billion in assets 2019 seems a little soon unless you consider:
- $20-$30 billion of that are the employees own contributions that would need to returned upon collapse
- All those alternative investments where, the higher the values assigned, the higher the fees those investment providers get
- New Jersey’s own Pension Obligation Bonds from 1997 that are now in payback stage
- The return of COLAs (to be argued this coming Monday) that would raise annual payouts from around $10 billion to $12 billion on average
To an objective observer looking at all the facts Rauh’s paper comes off as clairvoyant. Indeed.