NJ Pension Number Deception

When the July 1, 2016 actuarial reports came out the headline on nj.com was:

N.J. pension debt soared to $49B last year

Today njspotlight followed:

Unfunded Liability of Public-Employee Pension System Closes in on $50 Billion

with this explanatory paragraph:

New actuarial calculations for New Jersey’s beleaguered public-employee pension system show an unfunded liability of near $50 billion, a staggering number for a retirement plan that’s been set up to cover roughly 780,000 current and retired government workers.

But when you total the pertinent numbers from the July 1, 2016 actuarial reports you find:

It is the total official unfunded liability for the portion of the retirement system that the state is ‘responsible’ for that is $49 billion. For the entire system it over $66 billion using the actuarial (phony) value of trust assets and over $75 billion using market value of assets and likely over $150 billion using GASB rates to value liabilities.

Yet in this next gubernatorial election candidates and the media, if they even deign to touch upon the subject, will be using that $49 billion number as if they didn’t know any better.

28 responses to this post.

  1. Posted by Tough Luck on March 6, 2017 at 2:34 pm

    • Posted by Charles Sainte Claire on March 7, 2017 at 6:06 am

      True. Calpers has gone up and down. They will go up again. Bad news sells. News writers copy each other because they are too lazy to do research


    • Posted by George on March 7, 2017 at 2:38 pm

      The paper cited is Funding Public Pensions Is full pension funding a misguided goal?


      He claims that full funding of pensions is neither necessary nor desirable, as long as you have the income, see pg 16 Political: Overfunding is a risk, too.

      He says stuff like ” the Illinois economy is much larger than the state budget, and over
      those same 50 years, can be expected to produce around $64 trillion. That is, another way to look at this debt is that it is 0.17 percent of the state’s gross product over the term during which it will be paid, a much less frightening number. ”

      This is an abuse of GDP, I think. GDP is sort of like income. You have to subtract costs to get to a kind of discretionary GDP number. So if 99% of GDP were non-discretionary costs like food and shelter, you would be left with 1% of discretionary GDP. 0.17% sounds small compared to 100% but is a huge chunk of 1%.

      All considered he may have a point that fully funding pensions might not be optimal.


  2. Posted by James Shearer on March 6, 2017 at 3:07 pm

    Trimtone@gmail.  More bad news.

    Sent from Yahoo Mail on Android


  3. Posted by Anonymous on March 6, 2017 at 8:38 pm

    The lesson here is one Donald Duck has been preaching since his presidential runs ( maybe he should try kaopectate)! Fake news is directly related to the counterpoint argument of one’s opinion making the false allegation – what? Conclusion: Confucius say man who keep making mistake no longer fool but a**hole.


    • Posted by truesally on March 7, 2017 at 4:25 am

      I thought the Clinton campaign stopped paying you mercenary trolls after Nov. 22nd. What’s up, just doing some extra credit??…..she lost get over it


      • Posted by Anonymous on March 7, 2017 at 7:49 am

        I’m over it but for me, unlike our idiot Prez, the fun is just begun. He’s doing the bang up job anyone with a working brain knew he would!


  4. Posted by George on March 7, 2017 at 5:49 am

    N.J.’s top pensions adviser: 5 ways to cut property taxes | Opinion



    • Posted by bpaterson on March 9, 2017 at 3:20 pm

      by years end we may read of the authorities finding Tom floating face down in the delaware. It is dangerous to speak truth in NJ. I will add one of my own peeves to his list since it is rampant: matching grants. From experience at union county govt: Union County taxes the towns for open space trust fund. Then they offer grants to the towns but it must be a 50% match. The public pointed out that the county is taxing the people then just to get their own money back, the towns have to tax the people again to match the county grant. Freeholder Bruce Bergen said that’s “more bang for the buck” missing the fact they are increasing taxes twice. For his ignorance and complete idiocy, the freeholders selected him to be chairman of the union county board of freeholders for the last 2 years. The sad part is area boss senator lesniak has perfected such a corrupted political machine in the county, the idiots just get voted back in every year.


  5. Posted by S Moderation Douglas on March 7, 2017 at 10:42 am


    Can you explain, in layman’s terms (I know, LOL, right?) how, in Massachusetts, a teacher can NEVER get back all she contributed towards her pension?

    And why, nationally, teachers have to work twenty years just to break even? What is so different about teacher pensions?

    Also, if a teacher never gets back even her own money, how can the system go broke?

    And for us minions, this is an excellent interactive resource. Why haven’t I seen this before?


    (I’m going to call this “on topic” because it includes New Jersey pensions, although I haven’t checked them out.)


    • Posted by State Aid Guy on March 7, 2017 at 11:15 am

      S Moderation Douglas,

      I saw that piece too and the study it was based on. I’m sure that a huge violation of generational equity is taking place, but I suspect the claim that it takes 20 years of service for a new NJ teacher to get into positive territory on their pension might be erroneous.

      The contribution rate in NJ is 7.5%. If the average teacher salary is $61,000, that means the average teacher puts in $4575 per year.

      Multiply that by 20 years and you get $91,500 in total contributions. If you factor in interest and assumed investment earnings, the real contributions should be seen as a few tens of thousands of dollars higher.

      But then with the 20/60 calculation at a final average salary of $80k and you get a pension of $26,600 per year. (it’s n/60 for Tier 4 and 5 employees in NJ)

      At that size it should only take a few years for a teacher who had 20 years to get into positive returns.

      If the teacher taught 15 years the total contributions would be about $68,625 and the pension would be 15/60. The final average salary would be lower and the pension payout lower, but still it wouldn’t take that long to get into positive territory.

      Assuming the final average salary is $75,000 a year, the pension payout would be $18,750.

      Again, it should be within a retiree’s life expectancy to get into positive territory. Even if you increase the $68,625 to $100k (with interest and investment earnings), we are talking about five years of retirement to get into postive returns.

      I would like to know what the final average salary is for NJ teachers. The numbers I used here are conservative guesses.

      Hopefully John Bury can clarify this for everyone.



      • It’s all about the time value of money. If you ask Christie there is no time value and teachers get $3.5 million by putting in $195k. This study likely goes the other way by assuming a high interest rate (possibly the plan funding rate) during the accumulation period and maybe annuity rates during the payout period.


    • Posted by State Aid Guy on March 7, 2017 at 11:25 am

      Even a person who teaches 11 years – the bare minimum for a pension – would get into positive territory pretty soon.

      11 * .075 * $61,500 = $50,737 in contributions.

      11/60 = 18%, so the pension will be 18% of the final average salary.

      Assuming the final salary were just $65,000, the pension would be $11,900 per year.

      At $11,900 per year, it still wouldn’t take that long to get into positive territory.

      I can’t calculate what the interest+earnings would be on the $50,737, but even if you boost it to $100k (which is a huge boost), it would take less than 10 years to hit the transition point.


    • Posted by Anonymous on March 7, 2017 at 6:49 pm

      Hard to believe. After working 30 years (and contributing), my annual pension is $50K. I get back $3.5K per month forever, so my payback is less than 2 years. All gravy after that. Just have to hope someone monetizes the lottery to keep things going!


  6. Posted by S Moderation Douglas on March 7, 2017 at 11:06 pm

    Anonymous at 6:49,

    Thank you guys for doing the math. As Dr. Henry Lee said, “something is not right.” but I haven’t had time to look closely.

    Anon, are you a teacher? It looks like the study says this is true for teachers, but not other FAS formulae ???

    Plus, as TL says, I am not good at (some) math.

    It makes me wonder what else is hinkey about this data.


    • Posted by Anonymous on March 8, 2017 at 12:07 pm

      SMD different anon here. TPAF and PERS contribution rate and pension calculation are very similar and so is their respective contribution recovery timeline. IRS regs state if you recover your contributions within three years you don’t pay taxes on your pension until you recover your contributions. Otherwise a lifetime “exclusion” amount is calculated using an IRS formula.


  7. Posted by Now Retired Pat on March 9, 2017 at 1:59 pm

    State worker for 30 years retired at 54 (took a slight penalty). I will be in positive territory after less than 3 years – all gravy after that! Monetize the Lottery and dedicate money to Pensions!


    • Posted by bpaterson on March 9, 2017 at 3:29 pm

      although a reasonable sounding proposal about monetizing the lottery, couple of items: mostly the lower income people play the lottery and they really cant afford what they dream, and you sadly want to take advantage of them. if the constitution can be changed to allow this transfer, i would like to see the pensions funds take over the whole lottery, operations, distributions of winnings, investment of psnsion monies and the distributions of pensions etc and have the taxpayers wipe their hands of this whole sordid fiasco that occurred the last 20 years.


  8. Posted by S Moderation Douglas on March 9, 2017 at 3:17 pm

    There is a lesson to be learned. (No, I am not the teacher, I just re-learned this myself.)

    Public pensions are like snowflakes, from a distance, they all look alike, but up close, no two are alike. In the example given, if a teacher withdraws his/her personal contributions either by choice or because she is not vested, he/she gets her contributions back with NO interest. In my system, 6.2% interest was added every year, so it was compounded. If I had worked less than five years, I would have withdrawn that (mandatory for non vested workers), or if I chose to, at retirement, I could have taken a lump sum which would have included the interest. (Dumb choice, though, except for in possibly extreme circumstances.) That is a big difference.

    Also, our present formula is 2%@62, it starts at about 1%@55 and increases to 2.5%@67. An employer with forty or more years can get over 100%. The one examined had a 75% max. Those are the big ones, but sometimes small changes make a big difference.


  9. […] but rather what is in the valuation reports to determine those mini-contributions. Replacing the $152 billion valuation liability amount with even the July 1, 2015 GASB68 amount of $217 billion reduces that NJ funded percentage to […]


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