State With Worst Depletion Ratio

Depletion Ratio (DR):

(Deposits – Payouts) / Assets

is a good indicator of which state has the biggest pension problem since those numbers are difficult to fudge with.

Paring down our DR spreadsheet to only Illinois plans shows $11.6 billion being paid out of a fund that is supposed to have $114.5 billion with $9.8 billion coming in. That translates into a DR of -1.61% which would mean all the money is gone in 62 years.

Not exactly a crisis when compared to New Jersey which has a DR of -6.64% and 15 years left. What this tells me is that Illinois is making an effort to fund their pensions (even if they have to tax to do it) while many other states careen toward plan bankruptcies, benefit defaults, or some combination.

But, after sorting and subtotaling all the data, it turns out there is one state that has a lower combined DR for all their plans than New Jersey.

Rhode Island

9 responses to this post.

  1. Posted by Eric on August 9, 2016 at 2:10 pm

    In the past, your “real” numbers on the NJ pension system indicate that the fund had only 3 years time remaining. See Real Numbers 06-30-14, after returning employee contributions, and the return of cost of living adjustments. Even for allowing for no return of either of the above, the 15 years is a welcome “life extension” shock to your prior dire prediction of 3 only years.
    I am a bit confused.
    Could you enlighten me?


    • There are several definitions of bankruptcy for pension plans.

      One is when assets hit $0 and that’s about 15 years for NJ. But when we get there we will have $15 – $20 billion that will then have to paid out annually to retirees on a pay-go basis (unless that is defaulted or curtailed) plus however many tens of billions in member contributions that will be a liability (unless again defaulted on).

      With $70 billion in assets that is supposed to be in the plan now, when you adjust for what those alternative investments will really pay back, and all those public employees scared into retirement, and the state with no ability or inclination to put in anything more than token amounts we are only a couple of years away from having the remaining liquid assets being near the value of what plan participants have put into the plan less what they got out, adjusted for earnings.


  2. Posted by Eric on August 9, 2016 at 8:29 pm

    I understand. If I were a public employee, I certainly would want to receive my full contributions. I would ask you what the law is on this issue, but then again, there is no law in NJ. It is constantly “made up” based upon political expediency. It is ad hoc politics, and damn precedent. Thank you NJ Supreme Court, another national embarrassment.
    I seem to remember that the amount of contributions by actives was not a trivial figure, perhaps $30 billion? Does that sound correct?
    Thanks again John.


    • They do keep track of contributions with interest since if people leave without vesting they get their contributions back but on top of that there are retirees to have not gotten all their money back so somewhere around $30-$40 billion seems about right when you have $3 billion a year going in form member contributions.


  3. Posted by Eric on August 9, 2016 at 9:33 pm

    Thanks. Your concern regarding the alternative investments is well placed. That will become a grave concern when they must be sold off to whomever is dumb enough to purchase them. I am certain that their valuations are grossly distorted “to the upside.”


  4. Posted by Javagold on August 9, 2016 at 10:46 pm

    Read the comments. Not only are they hilarious. They tell you what pissed off people really think about public pensions.


    • Posted by Anonymous on August 10, 2016 at 12:09 am

      Of course, because we don’t get them. I don’t really give a fuck either way, but it is rather ridiculous to blame the employees. Rather it is the scumbag politicians who always screw things up. As for me, I am doubling down on the apocalypse,Java. Lead. And lots of it. These Assholes that hoard gold are dumb bastards who think that cops/judges etc will still be around to keep society functioning properly when they aren’t paid. Actually, who would? It will be everyone for themselves and no one will give a rat’s ass about how much gold you have hoarded. Paperweight, bitches!!!


  5. Posted by Eric on August 10, 2016 at 9:28 am

    Most astute investors purchase physical gold, not the gold ETFs, ie ( Exchange Traded Funds) store it outside of the banking system, and outside of the borders of the US concentration camp.
    I for one, am not that astute.


    • Posted by Anonymous on August 10, 2016 at 11:00 am

      The “white, uneducated male” Trump supporters store their gold in bomb shelters and are packing lead.


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