Pensions Give New Jersey Another Negative Outlook

Here is a listing of New Jersey’s credit downgrades over the last five years:

More will come if the state has to pay COLAs again.

nj.com just reported that Standard and Poor’s Ratings Services (S&P) lowered its outlook for New Jersey debt from stable to negative Tuesday over concerns with the state’s declining pension funding levels and growing retirement liabilities and noted that:

Standard and Poor’s also highlighted the potential impact of a lawsuit pending before the New Jersey Supreme Court that could require the state to reinstate cost-of-living increases for retired public workers, which would boost the state’s $40 billion in unfunded liabilities  higher and annual required payments even higher. (The state’s unfunded liabilities are $135.7 billion under a different accounting standard)

Those increases were frozen as part of a 2011 pension reform package designed to cut system costs. Oral argument were held last week.

Returers reported:

S&P’s change in outlook “reflects our view of the significant long-term pressures the state is under related to its postemployment benefits and the potential for New Jersey’s situation to worsen over the next year or two based on current litigation and proposed legislation,” S&P analyst John Sugden said in a report.

Those oral arguments in Berg v. Christie last week were a disaster for the state and any justice on that New Jersey Supreme Court inclined, for career reasons, to the state’s position will be hard pressed to manufacture a rationale.  So what S&P is doing here is anticipating the return of COLAs (and the loss of the hyperinflation tool for getting out of this pension mess) and then a tenth downgrade.  Fitch and Moody’s should follow shortly after with the only question being the number of notches.

20 responses to this post.

  1. Posted by Anonymous on March 22, 2016 at 10:37 pm

    Oh what a tangled web they’ve woven. They being ALL Politicians and their party line Justices, oops forgot the Unions and undoubtedly somebody else.

    Assuming the Justices rule in favor of COLA reinstatement, it seems like they got their opinions backwards. A partial ruling in favor of funding and an overturn of lower court COLA ruling would have been better for all concerned. I know some would argue who cares let the funds run dry but there’s no guarantee on how the NJSC will rule next.

    Reply

  2. Nj.com featuring easter bunny story Whites v. blacks? . Guess governor didn’t rate tonight while our president agrees with dictator in cuba, doing the wave and what else fucking asshole thinks appropriate. SMFH.

    Reply

    • Posted by Anonymous on March 23, 2016 at 10:26 am

      Please tell us how you feel that in present day America any white male seeking the Presidency of the USA must receive at least 30% of the black vote. Latin American alliances are necessary to prevent terrorist from entering America from the southern hemisphere. All of the Obama hating Republicans have been campaign disasters, karma impacts politics, Donald Trump is like pouring soapy water on soil, the work as come through, you are a mean hate spewing female that will call your fears and reap what you sow. The US messed up the ” Bay of Pigs”, so Castro’s reign should be credited to the CIA.

      Reply

  3. Posted by eric blair on March 23, 2016 at 11:15 am

    Will nationalization of private retirement accounts be used to bailout public pensions?

    A Comprehensive Plan to Confront

    the Retirement Savings Crisis

    By Teresa Ghilarducci and Hamilton “Tony” James

    Under the Retirement Savings Plan (the “RSP” or “Plan”), all those who don’t have access to a workplace pension plan would be enrolled into a Guaranteed Retirement Account (“GRA”)—and those with 401(k)-type and all other plans would roll their savings over to a more suitable GRA.

    This includes part-time and self-employed workers.

    Page 14

    Can a spouse inherit a deceased partner’s GRA?

    Pre-annuitization GRA accounts would be inheritable by the spouse.

    After annuitization, which occurs on the household level, the annuity would already reflect longevity assumptions and would not be inheritable.

    Page 21

    Who would be responsible for investing the funds? Is this plan way to get more money for Wall Street to manage?

    This plan will increase competition among retirement investment managers, which will be good for retirement savings. The individual saver will choose their own manager, and there will be many to choose from— including traditional money management firms, mutual fund companies, state agencies that now manage public pension plans, a self-funded, national entity that could potentially be set up by the Federal Government, and maybe even Berkshire Hathaway—all competing for your business.

    This new class of “pension managers” would work like endowment and pension plan administrators. They would focus on asset allocation, risk management, and the selection of individual investment managers and sub-advisors to handle the actual buying and selling of particular investments. These managers would have a fiduciary obligation to the GRA holders and would need to be federally licensed and regulated.

    Individual GRA holders would select their pension manager based on fees and investment performance. They would be able to choose their preferred manager or change from one to another at the beginning of each year. Accounts would be fully portable and the assets would transfer based on the account balance. A national exchange of managers would be the best way to facilitate this process.

    A cottage industry could even arise to advise GRA holders and rate different managers (similar to Morningstar and mutual funds).

    Page 22

    Does the combination of mandating GRAs and ending tax breaks for 401(k)s and IRAs take retirement savings decisions out of the hands of individuals?

    No. Each individual will control their own account. For too long, the American people have been left on their own when it comes to preparing for retirement. That’s why almost no one is prepared for retirement today. The word “mandate” may be politically charged these days, but research and experience make it clear that it’s the only thing that will work.

    Page 23

    http://www.economicpolicyresearch.org/images/Retirement_Project/Retirement_Security_Guaranteed_digital.pdf

    Reply

  4. Posted by George on March 23, 2016 at 11:54 am

    We NJ taxpayers should be happy to provide any monies that are due our brave police officers. I hope that when COLA is reinstated they pay retro COLA to all these people that have been hoodwinked by a corrupt State Government.

    Reply

    • Posted by Tough Love on March 23, 2016 at 1:32 pm

      Sure, THAT and their basis pensions, which are routinely 4 times greater in value at retirement (even W/O the COLAs) than that of a Private sector worker retiring at the SAME age, with the SAME pay, and the SAME years of service.

      Heck, they “deserve” it, they “earned” it, NJ’ taxes aren’t high enough, Private Sector worker 401ks are over-flowing, and money grows on trees.

      Reply

    • Says George of Police FOP Lodge No. 69.

      Reply

  5. Posted by Eric on March 23, 2016 at 12:13 pm

    John:
    I believe that the rating agencies look at the financial aspect of the reinstatement of cost of living adjustments without any limitations. This means what would it cost the trust fund, in dollar amounts, for EVERYONE who has vested to have earned one at retirement.
    Eric

    Reply

  6. Posted by MJ on March 23, 2016 at 3:56 pm

    Like another downgrade is going to stop them from borrowing and spending like drunken sailors!

    Reply

  7. Posted by Tough Love on March 23, 2016 at 5:41 pm

    SMD, I bet you’ll love this Public Sector pension article….

    http://www.americanthinker.com/blog/2016/03/the_great_global_governing_elite_scam.html

    Quoting the last 2 sentences:

    “This staggering level of debt simply can’t be paid by taxpayers. The stark fact is that governments all over the Western world have enriched themselves and created a protected elite of their own employees comparable to a feudal system in which the peasants struggle to survive while handing over all of their surplus to a governing elite that rules them.”
    ——————————

    But we all know, SMD is correct and everyone else is wrong.

    Reply

  8. Posted by Javagold on March 23, 2016 at 5:56 pm

    Put all the public takers on Obamacare and give them MyRa accounts and be done with the pension Ponzi scam killing this state one and for all.

    Reply

  9. Posted by Tough Love on March 23, 2016 at 6:14 pm

    SMD,

    And here is one that will assuredly give you indigestion, an article form Andrew Biggs PHD, whose studies you love to quote (but only when they support your agenda)…

    http://www.forbes.com/sites/andrewbiggs/2016/03/22/gasb-public-employee-pension-disclosures-arent-merely-insufficient-theyre-part-of-the-problem/#3834513e2cda

    This one is going to need an EXTRA dose of your quintessential “smoothing”.
    —————————-

    And where Mr. Biggs describes it as …………

    “In my view, GASB 67/68 were enacted under pressure to appear to be doing something about pension accounting rules, but without making the majors changes that so many independent analysts were calling for.”

    I have simply called it “caving in” in previous comments ….. one of which (in a response to commentator “BH”) follows:

    “Interestingly, I agree with you (that the “new funding guidelines are BS”), not for the reasons YOU think, but because the GASB “caved” under pressure to NOT insist upon lower (and CERTAINLY more reasonable and appropriate) liability discount rates even for the portion of Plan Liabilities supportable (at the time of calculation) by actual Plan assets. The ridiculous RESULT is that a reasonably well funded Plan can STILL assume it will 7.9% forever.”

    Reply

    • Posted by Anonymous on March 23, 2016 at 10:16 pm

      Slightly of topic, TL you always call for fair and equal. Could you please explain for me and others on this blog what that means in relation to the Camden County Police Dept.? What would you do specificly, to stop the horrendous retention rate there?
      Since the dept was created over 100 officers have left the force as of late 2015. 50 of them are no longer in law enforcement. The other 50 plus left for literally and figuratively greener pastures in law enforcement. Some have stayed for less than a month before boogeying to better paying forces. If you were a Camden County Freeholder, how would specifically address this problem? Jersey City had only 8 officers leave(not retire) in the same period of time and has a larger force. Google the subject and you will find articles on Philly.com. it is widely known that the ccpd has by far and away lowest paying contract in the area. Interestingly enough, dozens have left the force and not returned to law enforcement. Why would that be? Is it financial, or are they hiring whover can mist up a mirror when the breath on it and they really aren’t cut out for the line of work?

      Reply

      • Posted by Tough Love on March 23, 2016 at 11:01 pm

        Quoting Anon ……. “Could you please explain for me and others on this blog what that means in relation to the Camden County Police Dept.? What would you do specifically, to stop the horrendous retention rate there?”

        NJ, as other States (and Cities) have (for in a LONG time) been stuck in a situation of grossly excessive Safety pay, pensions, and benefits with Labor rules and an Arbitration processes that support a cycle one-upsmanship in pay, pensions, and benefits….. to a level that today is clearly unnecessary, unjust, unfair (to Taxpayers), and unaffordable.

        Granted that it will be difficult for the first City to change to deal with attrition, the process of bringing Safety compensation “down-to-earth” is undeniably necessary and must start somewhere. Once it begins (and other Cities see that it CAN be done successfully), I believe that it will spread rather quickly.

        I would address that with multi-step process associated with a call for new recruits:

        (1) All new recruits will have a higher starting salary … $60K
        (2) Retirement security will be via 5% of pay into a DC Plan + an additional employee “match” of up to an additional 7.5% of pay. This is far more “generous” than Private Sector Plans.
        (3) eliminate the (WELL KNOWN and PHONY) process that eliminates many QUALIFIED candidates from consideration solely to create an artificial “scarcity” to keep wages very high.
        (4) Recruits will be LOANED the FULL cost of their training, with the loan “forgiven” levelly over 7 years with zero interest, and with signed Legal Contracts calling for the City/State to withhold (from all and any form of compensation due) any unpaid loan balance upon termination (other than for a job-related disability retirement) from such amounts due, and with any unreimbursed balance becoming a debt of the terminating officer (accruing at 5% interest from the date of termination)….. with the stated intent to the garnish wages paid by a subsequent employer.

        A careful hiring process coupled with the consequences of (#4 above) HAVING TO repay the LOAN for training will seriously discourage those whose INTENT is to deceive.

        Next ….. immediately freeze the pay of all existing officers. Tell them that they are NOW over-compensated and should be quite happy with what they have, and if not, they can leave.

        Yes, there will be disruptions for a while, but they will indeed find qualified officers willing to serve……. likely MANY more than they have the money to hire.

        Reply

        • Posted by Anonymous on March 24, 2016 at 12:19 am

          Addressing #1- what would the top salary be? For that matter, most dept start in 30s or low 40s. But some are in 50s. 60s is high, but what would retain officers from leaving a few years down the road.(I’ll get to the loan idea later) after the salaries stagnate. Don’t forget you are limited to in most cases under 2% a year. Please answer this: If this is such a great idea, why has no other dept joined them and no other town/county done or even talked about doing this. Except for bergen county police-and they were absorbed into sheriff and still make good money.
          #2- this is fair, will it be enough if the salaries are not competetive (again, what is your top pay for long term officers) and will officers stay instead of changing careers. There is truly no substitute for experience I’m this field. Don’t you want competent supervisors with experience to handle domestic violence calls, missing children searches, etc?
          #3 not sure what you mean here, I agree nepotism and “quotas” really should have no place in hiring–good luck with that. If you are suggesting we dumb down the requirements, I couldn’t disagree more. A leopard usually doesn’t change its spots, and honesty and integrity issues should ALWAYS be disqualifiers. Again, not sure what you mean.
          #4 we already have an alternate route program in nj. I went through it. I paid my own way through the academy (many moons ago, it was approx $4000) really can be only done fresh out of college. Normally a town will have to reimburse another town if they hire on officer that has been trained by thst town within last 3 years. On a prorated scale.
          Not sure that the loan thing would stand up in court. Alternate route is a great program that is made up of people that truly want to be officers.
          #5 freezing pay of officers–and tell them they can leave, (nice way to show you value your employees) apparranetly over 100 have done so. Far more than any dept in the state. Not even close!!!!! Many left the profession.
          When is ok to not just be “happy that you have a job” and to actually try to better your lot in life? Over 100 officers have done that in this agency in last 2.5 years. Huge problem!!! Don’t let the Obama photo op fool you, that dept has problems. Why hasn’t any other dept joined them?

          Reply

          • Posted by Anonymous on March 24, 2016 at 12:31 am

            One more thing, usually your best and brightest officers go on to have second careers in the private sector working for law firms, corporate security, insurance,etc. I, myself have extensive training in motor vehicle crash reconstruction. I served on my countys pros office squad part time for 8 yrs while working for my local dept. For past 20 plus.
            I plan to finish my career and join an insurance company in a fraud reduction capacity. (SID)
            One question– after receiving all this training on your dime, (tough gig, working on fatals) would you want me to leave the profession so soon? Most of these insurance companis pay real well for experts in this field. With no pension to stay for, I would’ve left already and take my knowledge and experience and 401k with me. Same goes for homicide det, arson guys, white collar crime etc. There’s a reason real good attorneys don’t stick around the pros office for whole careers and do defense work. Money! And prosecutors do get pensions.

          • Posted by Tough Love on March 24, 2016 at 1:19 am

            One of the MAIN reasons for the 2% cap is the absurd cost of current pension promises ….. which along with the ridiculous cost of their Platinum+ healthcare is OUTSIDE the 2% cap. Without such outrageous costs, annual WAGE raises could EASILY exceed 2% with total employee costs remaining WELL BELOW the current total costs.
            ———————————————————————————-
            Quoting …. “Please answer this: If this is such a great idea, why has no other dept joined them and no other town/county done or even talked about doing this. ”

            Lack of political will because our Union-BOUGHT Elected Officials want to continue getting the Public Sector Union’s campaign contributions and election support…. FAR more important to them than betraying the electorate that put them in office.
            ———————————————-

            Quoting …… “#2- this is fair, will it be enough if the salaries are not competetive (again, what is your top pay for long term officers) and will officers stay instead of changing careers.”

            While we don’t live in a perfectly operating world, the Officer’s compensation should be reasonably comparable to what a Private Sector worker in a job with similar risks and requiring comparable experience, knowledge, and skills would be paid……….. plus a SMALL premium for the VERY SMALL risk that they might be injured or killed as part of their jobs.

            Current Police “Total Compensation” (pay + pensions + healthcare +++ ) levels are absolutely ludicrous ROUTINELY over $200K annually just for patrolman with 5 to 7 years of experience (when factoring in not the VERY low-ball “official” cost of their pension & benefit promises, but the cost under appropriate and reasonable assumptions & methodology).

            The pay should be such that (at all durations) moving to the Private Sector will NOT likely yield a greater compensation package. That plus the movement of neighboring Cities to this structure for Police and the Loan-repayment obligation for training costs should limit attrition.
            ————————————————
            Quoting …….. “#3 not sure what you mean here, I agree nepotism and “quotas” really should have no place in hiring–good luck with that. If you are suggesting we dumb down the requirements, I couldn’t disagree more.”

            I am suggesting that we use APPROPRIATE requirements, certainly eliminating nepotism, but also NOT setting requirements HIGHER than necessary or reasonable. CLEARLY (in many ways) QUALIFIED applicants are turned away because the hiring agencies want to create the ILLUSION of great difficulty in finding qualified candidates …. simply to justify the ludicrous compensation packages in place today.
            ————————————————–
            I was aware of the alternate route program, but wanted to propose an option for those who don’t have the funds to pay for it upfront. I see no reason why enforceable Loan-Repayment Contracts could not be made.
            ——————————————————————————————-
            Quoting ……….. “#5 freezing pay of officers–and tell them they can leave, (nice way to show you value your employees) ”

            Well, THAT was a reaction to the reality of AC’s financial situation. You can’t get money form a stone. When GM is hurting and can’t afford raises (even if Ford can) it tell it’s employee’s such and doesn’t expect FORD to help them out … just there is ZERO reason for taxpayers OUTSIDE of AC to prop up AC compensation levels (that by ANY reasonable standards) are already too high.
            —————————————————–

            Quoting ……… “When is ok to not just be “happy that you have a job” and to actually try to better your lot in life?”

            WOW, while it’s good to feel confident, you need to take a hard look at YOUR compensation vs others in jobs with similar risks and similar experience, knowledge and skills in the Private Sector…… NJ’s Police are WAY at the top (CERTAINLY in the top 5%) in such a comparison. Just being there doesn’t mean you “deserve” it.

          • Posted by Tough Love on March 24, 2016 at 1:52 am

            Responding to the 2-nd Anon comment above …

            Quoting……….. ” I, myself have extensive training in motor vehicle crash reconstruction. I served on my countys pros office squad part time for 8 yrs while working for my local dept. For past 20 plus. I plan to finish my career and join an insurance company in a fraud reduction capacity. One question– after receiving all this training on your dime, (tough gig, working on fatals) would you want me to leave the profession so soon? ”

            The Primary (by FAR) reason that you have that option (at all) is BECAUSE of the absurd pension structure for NJ Police, wherein you can retire in NJ after only 25 year (at any age) with a full/unreduced pension of 65% of your final pay, and have NJ’s Taxpayer pick up MOST of the cost of your retiree healthcare (for you AND your spouse and children).

            It doesn’t work that way in the Private Sector. There likely would be VERY little (if ANY) employer-sponsored retiree healthcare benefits today, and if making the SAME wages, retiring at the SAME age, and with the SAME years of service, the TYPICAL Private Sector retiree pension ( for the FEW who still get them) would be about 1/4 to 1/3 the value at retirement of what you have been promised. It is specifically this ludicrously generous (and hence extremely “costly” and clearly unaffordable) DB pension that needs to end, which is why I proposed the DC Plan for new recruits.

            Just because it’s been this way (for a LONG time) does NOT make it necessary, justifiable, fair, or affordable. What makes Public Sector workers so “special” that they deserve (and get in most cases) equal cash pay, but pensions and benefits 3, 4, 5, even 6 times greater in value at retirement than those of their Private Sector counterparts?
            ————————————————————
            P.S. You WAY overestimate what an insurance company would pay you for those services as a full-time worker and with a modest DC (not a rich DB) pension, “Silver”-level (not “Platinum+” level) healthcare coverage while employed, and (if lucky) a modest retiree Healthcare HSA (that might pay for 10% of your retiree healthcare costs). Without doubt the Total Compensation Package would be no more than HALF that of the typical NJ Police officer.

            Your many years in the “Public Sector” world has distorted your sense of the financial realities of the world OUTSIDE of that protected cocoon.

  10. Posted by Tom Banks on June 25, 2016 at 10:29 am

    Patriot here.

    Please copy paste this elsewhere because of censoring.

    UNION, NJ.
    There in an apartment complex, next to a small Church, across from Union Pediatric Associates PA: Krul Geddy J MD… ( Chestnut Street. ) where STALKING OPERATIVES may be operating from. Including, one possible agent driving a Green Ford Explorer XLT. May be switching vehicles.

    Some of these surveillance types may be breaking into homes COVERTLY…please see

    SNEAK AND PEEK (authorizing police to come into your home while you are not there).

    Basically, police, firemen, security guard rabble and cronys appear to be stalking citizens COVERTLY
    (See POLICE GANGSTALKING)..

    In many cases CITIZENS are falsely accused by Police for having reported drug crime. That’s what is not reported. Do the math. God help us all.

    Reply

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