Breaking News: Christie Makes It To Eleven – And It’s All About Pensions

Minutes after hearing the news this is all we got on Ask the Governor on pensions:
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According to Reuters:

New Jersey’s credit rating was cut on Monday, affecting $37 billion of debt, the 11th time Wall Street has downgraded the state’s bonds since Governor Chris Christie took office in January 2010.

Persistent underfunding of the state’s public pension system and weak budgetary position contributed to the rating cut. So did the $1.1 billion of annual revenues the state will lose by 2021 because of sales and estate tax cuts passed last year in conjunction with a gasoline tax hike, Moody’s Investors Service said.

Christie, once a Republican presidential candidate, will leave office at the end of the year when his second term expires.

His fiscal 2018 budget proposal last month included a $2.5 billion contribution to the state’s retirement system for public employees, a $647 million increase from this year.

Moody’s said the bigger contributions under Christie were still not meeting actuarial recommendations and unfunded liabilities were mounting.

“This rating action confirms what the Governor has been saying since 2009,” said Willem Rijksen, spokesman for the New Jersey Department of the Treasury, in a statement. “The pension system must be reformed or it will fail and continue to damage the entire state budget.”

Christie and the Democrats who control the legislature passed bi-partisan reforms in 2011. Christie has since said more changes are needed to halt ballooning costs, but Democrats soured on Christie’s suggestions after he failed to fund the system the way he had agreed to under the prior reforms.

New Jersey’s  downgrade history under Christie:

2/9/11 S&P Downgrade: AA- from AA

4/27/11 Moody’s Downgrade: AA3 from AA2

8/18/11 Fitch Downgrade: AA- from AA

4/9/14 S&P Downgrade: A+ from AA-

5/1/14 Fitch Downgrade: A+ from AA-

5/14/14 Moody’s Downgrade: A1 from AA3

9/5/14 Fitch Downgrade: A from A+

9/10/14: S&P Downgrade: A from A+

4/16/15: Moody’s Downgrade: A2 from A1

11/14/16: S&P Downgrade: A- from A

3/27/17: Moody’s Downgrade: A3 from A2

 

10 responses to this post.

  1. Posted by skip3house on March 28, 2017 at 11:11 am

    We want retro pension adjustments based on actual funds deposited each year of work, not unfunded political promises. Instant zero IOU.

    Reply

    • Posted by dentss dunnigan on March 28, 2017 at 2:40 pm

      Yes exactly as it should be ….and no more fake actuaries 7.9% returns …

      Reply

    • Posted by Anonymous on March 28, 2017 at 4:10 pm

      While your suggestion would likely get us to a similar place, the approach is wrong.

      Periodic payments (by the employees and the Taxpayers) into pension plans (i.e. funding) are simply a timing/generational-fairness mechanism to pay for the promised benefits.

      The real problem isn’t a funding issue. It’s that the pension promises themselves were always too generous, even before the many increases (some retroactively applied) over the years.

      The proper way to determine what pensions to honor, should not be based on existing assets, but by answering the question …. what would they have received if doing the same job in the Private Sector. Few in the Private Sector get more towards their retirement than their employer’s 6.4% SS contribution on their behalf plus about 3% of pay into a 401K Plan. All current Public Sector pensions cost many many times that amount, with no justification.

      Reply

  2. Posted by Anonymous on March 28, 2017 at 3:57 pm

    When you pay your bills on time lenders don’t consider you a credit risk!

    Reply

    • Posted by George on March 29, 2017 at 6:49 am

      The problem with the article is it starts at the top of the credit spectrum State of NJ General Obligation bonds. Bonds of special purpose entities, cities like Newark are, if I understand it correctly, already ‘junk’ bonds. I think Newark finances are being administered by the state at this point. So the first signs of NJ not being able to finance projects with debt might be appearing.

      Your articles on hospital pensions might also be a harbinger of things to come, as the hospital obligations are usually very low rated and if I get it right are the municipal bonds most likely to end up in Chapter 9 bankrtuptcy.

      That said, money invested in an NJ in 2007 grew 40%
      https://personal.vanguard.com/us/funds/snapshot?FundId=0014&FundIntExt=INT

      NY vs NJ as far as Vanguard is concerned. Something upset the ‘market’ early 2015 giving NY a 5% better return over NJ. What could that be?

      https://www.google.com/finance?q=MUTF%3AVNYTX%2C+MUTF%3AVNJTX&ei=3pbbWNnfHMroePWIuKAO

      Search on Puerto Rico for a possible ‘municipal’ bond failure. Obviously, Puerto Rico is not a US state (colony?), does not have 2 US Senators and therefore a claim to 2% of federal income. But my guess is the Puerto Rican response by Fed Gov is what to expect during a financial takeover of a state.

      Reply

  3. Posted by bpaterson on March 30, 2017 at 5:16 pm

    actually its only 4 downgrades. one agency is stabbing the other agency is shooting and the 3rd agency is poisoning…so all the same result. therefore only 4 downgrades. but hey whats a little govt decomposition among friends.

    Reply

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