Pension Black Magic

What you get out of this discussion on Reporters Roundtable this morning about the scheme to move the New Jersey lottery into the pension system is confusion about how this will save any money:
.

.

  • black magic
  • counterintuitive
  • found money

Not really. Here’s the deal…..

The July 1, 2016 actuarial report for the Teachers’ Pension and Annuity Fund (TPAF) shows this development of the contribution on page 37:

An astonishing 88% of the total contribution ($2.637 out of $3 billion) is for paying off prior unfunded liabilities that arose through a combination of bad assumptions and, when that was not enough, outright repudiation of those contribution ‘requirements’.  The resulting $30.7 billion of unfunded liabilities is amortized over 30 years at 7.65% interest which a loan calculator program confirms does come to $2.637 billion:

It would only be 78% of the money that will be going into the TPAF from the lottery but all the other plans use identical rates so plugging in that  $13.5 billion asset into the calculator gets you this reduction in the overall contribution:

$965 million generated annually turns into $1.16 billion when filtered through the public-pension gimmick machine.*

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.

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* Something possibly overlooked in all this is that the state is still in one of its contribution phase-in periods so the $1.16 billion savings would be subject to, for the coming year, a 5/10 fraction meaning that the actual contribution would only be $580 million less leaving $385 million still needed to fund those lottery programs.

22 responses to this post.

  1. Posted by dentss dunnigan on May 21, 2017 at 12:44 pm

    To me it seems this will just transfer what the lottery was paying on to the backs of property taxpayers …once special ed is no longer funded by lotto homeowners will be forced to pick up the tab ……around around we go ….everything goes bcd to property taxes because it’s the one tax that you’re forced to pay .

    Reply

    • Posted by skip3house on May 21, 2017 at 1:06 pm

      Stop all this now by switching cruel/regressive school property tax hidden in rents/mortgages/Qpay. to based-on-ability-to-pay tax combo like income/sales increases.
      Creates other positive stuff like town mergers,……..no need for County ,…..

      Reply

      • Posted by George on May 21, 2017 at 4:18 pm

        “stuff like town mergers”

        I do not see how town mergers will do anything. You will just end up with a larger less manageable/understandable entity. With more ways to redistribute income. The current poster children for municipal bankruptcy are Chicago and Dallas with Houston as runner up. Those are the largest municipalities in their states. In particular, I think in Texas municipalities can involuntarily absorb neighbors.

        Search on Municipal Merger for some articles. Even in the business world mergers don’t necessarily work.

        The one potent threat individual citizens have is moving, town mergers make that more difficult.

        Reply

        • Posted by skip3house on May 21, 2017 at 6:10 pm

          @George Yes, by all means do not change NJ school taxes to a fair progressive system as there are big troubles in Chicago,and Texas, plus so much harder to move out of town?

          Reply

      • Posted by Anonymous on May 21, 2017 at 9:01 pm

        While PRIVATE Sector mergers typically lead to considerable savings, PUBLIC Sector mergers are mostly a bad joke.

        Ever attend one of the meetings when 2 towns or a town & county are considering a merger ? The FIRST thing ALL sides put on the table is that NOBODY will lose their job (any reductions limited to retirements and voluntary terminations).

        Then what’s the point? Anyone with any financial common sense or experience KNOWS that 75+ % of all saving comes from headcount reductions.

        The “positive stuff” that’s needed is to outsource almost every town job. When the “employee” relationship ends, so does ALL future growth in pensions & benefits….. the nemesis of towns all over the country.

        Reply

    • Posted by Anonymous on May 21, 2017 at 8:09 pm

      Quoting ………..

      “To me it seems this will just transfer what the lottery was paying on to the backs of property taxpayers”

      I agree, and likely why the Unions WILL support it.

      THEY get their “cake” and the Taxpayers ultimately get an add’l bill.

      Reply

  2. Posted by skip3house on May 21, 2017 at 1:16 pm

    If I were a public worker, I would appreciate a monthly audited value total of my pension portion, not including unfunded ‘promises’;. Then, a clearer picture of my actual pension prospects become facts!
    I would expect my services in a year paid completely by NJ taxpayers of that year. Only debts for lasting bridges, roads, …..should be passed along proportionately to future taxpayers.

    Reply

  3. Posted by Anonymous on May 21, 2017 at 9:34 pm

    Quoting ….

    “An astonishing 88% of the total contribution ($2.637 out of $3 billion) is for paying off prior unfunded liabilities that arose through a combination of bad assumptions and, when that was not enough, outright repudiation of those contribution ‘requirements’. ”

    That’s one way to look at it, but there is another …………..

    I look at the unfunded liability as being the amount roughly equal with the 50+% share of current formula pensions (both in terms of the formula itself, the young retirement ages, the now-suspended COLA increases, etc.) that should never have been granted in the first place, never being necessary, just, fair to taxpayers, or affordable (including the myriads of enhancement to those pensions … some “retroactively applied” …. over the years), but simply BOUGHT by the Unions from our Elected Officials with BRIBES disguised as campaign contributions and election support.

    Hence, I look at the $3 billion annual contribution as being the full annual payment to fund the Normal Cost of that 50% smaller pension that SHOULD have been granted.

    Reply

  4. Posted by MJ on May 22, 2017 at 7:26 am

    People……it’s all the same story…….how to keep the scam going and who can come up with the next shuffle of the deck chairs on the Titanic.

    Anybody following the Hartford, CT possible bankruptcy?

    Reply

    • Posted by Anonymous on May 22, 2017 at 9:01 am

      tolls …highway tolls ..dedicate all highway tolls to the pensions .Who pays the workers and repairs ,just send the bill to the homeowners in the form of higher property taxes .We all know it’s coming ,because it has to

      Reply

  5. Posted by Anonymous on May 22, 2017 at 12:09 pm

    Ouch, please remove the pins from the pension voodoo doll they hurt!

    Reply

    • Posted by Anonymous on May 22, 2017 at 10:25 pm

      The last paragraph in that linked article says:

      “Of course, like most financial grenades with a huge tail risk, the devastating consequences of America’s failed public pensions will not be addressed until it’s already too late. Unfortunately, with ~$5 trillion in underfunded pension obligations in the public sector alone, the pension catastrophe will be too large for even America’s overly generous taxpayers to bail out. ”

      ******************

      Let me add to it’s end …………… nor should they given the Public Sector Unions’ BUYING of these ludicrously generous pensions from self-interested Elected Officials with BRIBES disguised as campaign contributions and election support.

      Reply

  6. Posted by Anonymous on May 23, 2017 at 1:04 pm

    Chicago, NJ, Feds, Military – no more deflecting, let’s stop the selective criticism and end ALL of these Ponzi scheme!

    Reply

    • Posted by Anonymous on May 23, 2017 at 4:22 pm

      No …… In NJ the insatiably greedy and arrogant are the Public Sector Unions/workers with their ludicrously generous, unnecessary, unjust, unfair to Taxpayers, and clearly unaffordable pension & benefits.

      THAT is where NJ Taxpayer must focus…………. ignoring the cries to do otherwise by those (such as yourself) riding this gravy train and trying to divert our attention to OTHER issues (that impact us but FAR FAR less directly).

      Reply

      • Posted by Anonymous on May 23, 2017 at 4:49 pm

        Your the one who quickly replied to javagold’s post on Chicago’s pension woes – keep enjoying your Fed benefits you’re always quick to deny exist. DB are either a Ponzi scheme or they’re not at any level military included – keep your deflecting BS coming!

        Reply

        • Posted by Anonymous on May 23, 2017 at 5:34 pm

          That’s “you’re”, not “your” ….. you’re welcome.

          The ludicrously excessive NJ Public Sector pensions (AND benefits), unless VERY substantively reduced for FUTURE Service accruals of all CURRENT workers (and likely PAST service accruals for BOTH actives and those already retired) will DIRECTLY and materially impact NJ property taxes.

          All of the “issues” you bring up will not.

          Reply

          • Posted by Anonymous on May 23, 2017 at 7:03 pm

            Great catch, for the anal at heart. As far as the reductions you refer to, Kim is the only one that can get it done b/c she’ll have to reduce her and hubby’s pensions too – LOL!

          • Posted by Anonymous on May 23, 2017 at 7:14 pm

            Kim is as In-The-Union-‘s-Pocket as the “miserables” (called Democrats).

            When responding to what she would do to address the pension mess, she says we “need to do something”, without ANY specifics and littered with repeated qualifications that anything we propose must be “negotiated” with the Unions.

            Well then she just full of bull ……. the Unions will not even offer even 10% of the givebacks (ADDITIONAL pension & benefit reductions) that they need to.

            “Negotiating” with Pubic Sector Unions is a fool’s errand. We need legislators willing to FORCE change upon them.

  7. Posted by Anonymous on May 24, 2017 at 9:47 am

    Like it or not Jack’s plan is the most realistic of all the gubernatorial candidates. Significant health care reductions at all levels of government will result in more than a 10% benefit reduction/savings.

    Reply

    • Posted by skip3house on May 24, 2017 at 11:48 am

      Ten percent less of a very, very, very large amount still leaves a very, very,ver big number

      Reply

      • Posted by Anonymous on May 24, 2017 at 5:57 pm

        In the Private Sector in NJ, there is VERY little employer-subsidized/employer-sponsored retiree healthcare, and assuredly LESS (likely FAR less) than 5% of Private Sector workers are currently accruing pensions under Traditional “Final Average Salary” DB Pension Plans (of the type routinely granted Public Sector workers).

        So whoopee, shouldn’t Private Sector Taxpayers be tickled pink if Taxpayer-subsidized PUBLIC Sector retiree healthcare goes from “Platinum+” to just “Gold” level coverage, and the keep their current LUDICROUSLY generous pension Plans.

        NO ………….. we’re NOT !

        END the retiree healthcare. and FREEZE the DB pensions and replace them for the future service of all CURRENT workers with SS benefits (to those who do not now already get them) and 401k Plans with a 3% of pay “match” (just like Private Sector workers typically get from their employers).

        ***************************************

        EQUAL, but NOT better ………… on the Taxpayers’ dime.

        Reply

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