Phil Murphy, the only declared 2017 Democratic candidate for governor of New Jersey, in 2005 chaired a task force that looked for solutions to the state’s, at the time, $12.1 billion pension problem. It came up with a report urging less gaming of the system and these major fixes:
- No More Pension Holidays— State and local government must meet their full obligation to make annual payments to the pension plans.
- No More Actuarial and Valuation Gimmicks— State government must use consistent and generally accepted actuarial standards.
Present an idea that sounds good to anyone who won’t think about it in any depth to people who are not going to think about it in any depth.
Former Wall Street executive turned 2017 Democratic candidate for governor Phil Murphy on Thursday unveiled a radical proposal for reviving New Jersey’s economy and saving its pension system millions in fees: A public bank, owned by taxpayers.
Daring New Jersey to “put our money where our mouth is” Murphy unveiled his idea for a “Bank of New Jersey” as the cornerstone of his economic platform during a speech at the New Jersey Institute of Technology.
The idea is not new. The state of North Dakota chartered a state-owned bank in 1919, and began making federally-insured student loans in 1967. Murphy said that the average college graduate in New Jersey would save over $8,000 on their student loans.
Murphy said The Bank of North Dakota returned more than $130 million in returns on its investments to taxpayers.
Murphy said he believes a New Jersey public bank would be even more successful, creating a new revenue to pay down the state’s debt while simultaneously spurring small business investment with more favorable lending terms, offering affordable borrowing to college students, and curbing Wall Street influence on politics.
The benefits would accrue to students, who would benefit from low interest rates for college tuition, for small businesses that would gain greater access to capital, and to municipalities that would no longer need to rely on Wall Street bond houses taking a cut.
Low-interest rates to spur the economy and help with student loans is an easy sell but where will the money come from? He continues:
The Democratic candidate also said such a proposal would also offer substantial savings to New Jersey’s state worker pension funds.
“I’d love to sit down and pitch the pension plans, and say, ‘This is an investment you should consider,'” Murphy said. “We’re paying, still, huge fees (to Wall Street hedge funds) and not getting much in return. It got me thinking, why not pitch this as a compelling investment to the pension plans. It’s something we haven’t done yet, but it’s a potential area of equity funding.”
So the New Jersey pension trust, whatever is left of it, is going to get that 7.9% assumed investment return they are predicting by backstopping a bank that makes loans at 2% interest to students and start-up businesses.
Even Christie wouldn’t have the nerve to recommend something this blatantly absurd (unless there was a way for enough of his campaign donors to get a cut).