New Jersey Pension Amendment – Making Up Billions

Even without cost-of-living-adjustments on pensions the New Jersey retirement system is hundreds of billions of dollars in debt.

Before the state embarks on more arbitrary benefit reductions the public employee unions are seeking to up the chances that some benefits will continue to be paid so they are pushing for a constitutional amendment that, among other things, would require quarterly deposits of the annual pension contributions.  However, in fighting against any semblance of fiscal responsibility Governor Christie has made those quarterly payments the main thing and is making up numbers to justify his position along the way.

From his speech yesterday to the Morris County Chamber of Commerce we start with a nod to the opposition:
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To maintain those palaces and fancy cars they need that $5 billion:
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So how would this amendment require a $3 billion tax increase:
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Of course there is more to the proposed constitutional amendment like:

  1. not being able to skip contributions (after the next four years when partially skipping contributions is still OK), and
  2. guaranteeing benefits accrued (to the extent possible considering the NJ court system).

But why bother your audience with petty details when you can tell them that borrowing short-term at 2% interest will cost twice as much as the entire budgeted contribution?

Full speech as recorded by MorristownGreen.com:
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15 responses to this post.

  1. Posted by Anonymous on June 14, 2016 at 3:56 pm

    So Christie is bought by big business.

    Reply

    • No surprise …you’re either in the pockets of business or unions ,it’s all about the money to keep you in the game

      Reply

      • Posted by Anonymous on June 16, 2016 at 1:22 pm

        Correctamundo……my friend….born n raised in nj. Now can’t wait to retire a d leave. Might even leave the usa…..be ween the two choices for president, we are going downhill fast, I love my country but don’t like what is turnjng….no reasonableness anymore. Mass shootings are becoming commonplace and accepted as living in a “free state” and we can’t even get terrorist to not be able to legally b uh assault rifles. Wow.
        Like George Carlin said, the Assholes in charge want you smart enough to run the machines, but dumb enough to realize that your getting fucked.

        Reply

  2. Posted by Anonymous on June 15, 2016 at 9:10 am

    The bottom line is this country will always be divided. The politicians have created that which with they can control us. They want us to think we are controlling them

    Reply

  3. Posted by Eric on June 15, 2016 at 2:17 pm

    John:
    When you said that the retirement “system” is hundreds of billions of dollars in debt, are you referring to ONLY pensions?
    Thanks,
    Eric

    Reply

    • Right, only the pensions and that’s a rough estimate of 800,000 participants with an average benefit value of $300,000 which comes to a couple hundred billion dollars more than they have in the ‘trust’ (when you allow for the coming crash in alternative investments).

      OPEB benefits are additional but since they are negotiable the state can always renege on all or part of them (which might be possible also for pensions if they can extend the COLA decision to base benefits).

      Reply

      • Posted by dentss dunnigan on June 15, 2016 at 7:00 pm

        I’m confused about that 300K number .I just read where teachers average pension is 44K …if that 300K number is right you would need a yearly return 15% to pay out that 44k …am I not doing this right

        Reply

        • $300k is a wild guess as to what the lump sum value of the average participant’s benefit would be. For the 300,000 retirees getting $44k per year, most on J&S annuities (something else to cut?) that’s around $500k each and I figure the other 500,0900 active and terminated participants due money have accrued benefits valued at around $150k – $200k so $300k is about the group average.

          Reply

  4. Posted by Eric on June 15, 2016 at 6:20 pm

    Thanks for the clarification John.
    Eric

    Reply

  5. Posted by Eric on June 15, 2016 at 7:11 pm

    John:
    You seem to be sure that the “alternatives” will crash. Why? I seem to remember that they comprise about 38% of the portfolio. Is there any more information about them, and why do you believe that they are so overvalued?
    Thanks again.
    Eric

    Reply

    • Logic being the main reason. No audits are required of the plans and in looking over the alternative investments I already noticed a $105 million investment double counted. Those alternatives are valued based on the numbers assigned to them by people who make more money the higher the numbers are while nobody approving these values has every incentive to wish those numbers as high as possible. It gets back to what’s logical and lying about asset values seems logical since nobody is wants to see anything else.

      Reply

  6. Posted by Eric on June 16, 2016 at 9:04 am

    John:
    I understand, and agree with you.
    Thanks again,
    Eric

    Reply

  7. Posted by dentss dunnigan on June 16, 2016 at 1:49 pm

    Jon Bogle from Vanguard who is the most respected manager said ..““It’s reasonable to think that stocks might return 4 to 5 percent in the next decade.” A bond portfolio, including corporate debt, could produce a yield of about 2.5 percent, he said. The S&P 500 Index returned about 2.6 percent this year through Tuesday and 1.4 percent in 2015.” I don’t understand why the pension fund refuses to lower their benchmark from 7.8% to something more realistic ,it’s only hurting the pensioneers and taxpayers

    Reply

    • Posted by Anonymous on June 21, 2016 at 1:51 pm

      It allows the state and towns to have lower “required” payments into the pension funds so they don’t really care and don’t want to be more realistic. Taxpayers also don’t care as long as it keeps their taxes from going up.

      Reply

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