Duller Heads Prevailing

In another propaganda assault against a question likely to be on the November ballot that, in part, would require state pension contributions to be deposited quarterly former New Jersey state treasurer Andrew Sidamon-Eristoff had a piece in njspotlight offering an alternative:

One possibility would be to withdraw SCR-184 and instead adopt a law that commits the state to making its annual normal contribution at the beginning of the state’s fiscal year in July. This would obviate the most serious objections to SCR-184 yet deliver a substantive and not entirely inappropriate victory to the unions.

Going on to explain:

The normal contribution is generally the amount that independent actuaries determine is sufficient to fund pension obligations that arose or “accrued” in the most recent valuation year, based upon a wide range of assumptions with respect to benefit levels, headcount, investment earnings, mortality, and so on. In simplistic terms, this is the amount due in relation to active employees’ service. Currently about $700 million a year for New Jersey, this amount is expected to remain fairly stable going forward.

What Mr. Sidamon-Eristoff proposes as a compromise is to make that $700 million Normal Cost contribution at the beginning of the plan year.  He fails to mention three flaws in his reasoning as if he were preaching, not to the cognoscenti, but to the ignorati:

  1. There is no such thing as an ‘independent actuary’ where public plans are involved.  All sides have an interest in low-ball numbers and actuaries use whatever means available to play along.
  2. An annual cost of $700 million for about 240 thousand active participants for whom the state is responsible comes to $3 thousand per person, a ludicrously understated amount considering the population [see item (1) above] as I discussed before.
  3. Among the Generally Accepted Actuarial Principles that public plan actuaries do use is the interest adjustment for when contributions are deposited.  If you look at the valuation reports you will see an adjustment to the date of deposit – see page from JRS report line item F.6.(d).  What this means is that if the machinations that develop a Normal Cost of $700 million now take into account that the deposit will not need to be adjusted for interest it reduces it to $650 million.  There is less money put into the plan which is now on the hook for earning that 7.9%.

 

7 responses to this post.

  1. Posted by Anonymous on July 13, 2016 at 1:50 pm

    It’s expected from a ROYAL highne(A)SS!

    Reply

  2. Posted by George on July 13, 2016 at 7:04 pm

    Is there a place where monthly payments into and out of the NJ pension are reported. The dept of investments reports assets but not payments as far as I know.

    NJ pension assets.

    http://www.state.nj.us/treasury/doinvest/directorsreports.shtml

    Reply

    • Not on any website as far as I know. The actuarial reports have an income statement and you can probably OPRA the data – either the NJ Treasury Department payment data or the Funds receipt data.

      Reply

  3. Posted by Anonymous on July 14, 2016 at 8:57 am

    The state’s fiscal trauma ends when CC resigns to join the Trump stomp towards the White house. Presently, CC as the head of the Trump transition team,working from Trump Towers is so busy he only has time to veto and throw obstructions in any activity under the dome in Trenton. I blame the NJ Republican Party for this employment law/ethics code violator. No other public employee would be allowed to abuse his position. CC connects aid to distressed cities to employees increasing health benefit contributions,why? Is it because many women and minorities who work in public jobs live in urban centers and are public employee union members? CC is so sexist, racist and anti urban, he totally compliments Donald Trump. Maybe, Friday will be a very good day for the State of NJ. CC will get a new job from Trump and step away from NJ. God Bless NJ and America.

    Reply

    • Posted by bpaterson on July 14, 2016 at 4:38 pm

      Good one anon-fiscal trauma ends when CC resigns. The issue was swept under the rug before CC and it will certainly be swept under the rug after CC is gone. This was definitely one of CC’s forte in bringing this major issue to conversation and light, whether or not the public sector plus the taxpayers and politicians didn’t really know about nor wanted to face….and obviously by the comment above, the sector still doesn’t since it is such a looming fiscal catastrophe that may only have resolution in dunning each property in the state $30-50,000 or cutting the large pensions by 30-50%. I thank CC for the transparency except for the fact its horrible news.

      Reply

      • Posted by dentss dunnigan on July 14, 2016 at 4:48 pm

        I dread to think of where taxes would be under the like of Corzine (union organizer ) and his friggin’ “painful choices” on the taxpayers backs .

        Reply

    • Posted by skip3house on July 14, 2016 at 4:40 pm

      Miracles never happen in NJ for working folk. Is there a case here for causing havoc with construction workers not working?

      Reply

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