NCPERS Progagandizing

Spewing faulty research commissioned by misguided public unions the National Conference of Public Employee Retirement Systems (NCPERS) has taken to playing the Frank Drebin role:
.

.
And according their latest ‘research’ brief, they are being insulting about it now:

Pension funds are resilient and well managed. They have stood the test of time for more than 100 years through economic ups and downs. If state and local legislators had kept their side of the bargain over the years by making scheduled payments on time, most critics of public pensions would have to find another hobby. (page 2)

It is that ‘if’ that disturbs us hobbyists.

Because of dishonest actuaries and politicians deluding participants and taxpayers about the real cost of defined benefit plans we have a crisis where these public plans are in various stages of collapse. It is the system itself that requires fixed benefits to be paid out while costs for those benefits are on a pay-what-you-will basis that is threatening the retirement security of those participants and taxpayers. And it is groups like NCPERS that take misspent union money to defend these ‘theft-of-services’ arrangements with inanities that appeal to those looking to be duped:

Public pension opponents often focus on unfunded liability when they make a case that taxpayers cannot afford to pay for public pensions. They fail to recognize that when you advance-fund a program, you have an unfunded liability. Suppose you want to prefund your child’s college education and establish a college fund at birth. The college savings program would have an unfunded liability from day one until the child enters college. At that point, depending on a variety of factors, it could have a surplus, a deficit, or be exactly on the mark. The same is true of pensions. Hitting the mark is of course important; historically, pension funds have actually exceeded it. The unfunded liability is a bogeyman conjured up by critics who are either ignorant of or willfully ignoring how advance-funding mechanisms like pensions actually work. (page 3)

When you advance-fund a program you do it to AVOID an unfunded liability which represents the shortfall between the portion of benefits accrued to a certain date and the value of the assets you have accumulated to that date. If you start defining unfunded liability as ALL benefits, including those already accrued and those that will be accrued for all future years and participants,  then those 40% real funded ratios for New Jersey’s plans would drop to 20% – which might be what NCPERS is unknowingly arguing for.

Mark J. Magyar explains the concept well in this 2014 njspotlight article:

What is an unfunded liability? An unfunded liability in a retirement system is the shortfall between projected future payment obligations to both current workers and retirees and the amount of funding set aside to pay those obligations. This shortfall takes into account both money currently set aside in a separate retirement fund and projected investment earnings on that money.

Why do unfunded liabilities matter? Unfunded liabilities are costs that need to be covered by future taxpayers. In New Jersey, an estimated $90 billion in future costs are being pushed onto the backs of future generations to keep taxes low for current taxpayers — a practice that Assembly Budget Committee Chairman Gary Schaer (D-Passaic) decried as “kicking the can down the road.” Even worse, the cost of dealing with those unfunded liabilities in the future grows exponentially because the failure to make a current payment is compounded by years of lost investment income on that money. For example, $1 billion put into New Jersey’s pension system last July 1 would have been worth $1.15 billion this July 1 because the state earned a 15 percent return on investments. That shortfall due to a lack of return on investment is compounded with every year that passes.

39 responses to this post.

  1. Posted by Anonymous on August 15, 2017 at 3:25 pm

    wow! NJ made 15% returns in 2013? not bad!

    Reply

  2. Posted by Tough Love on August 15, 2017 at 5:08 pm

    Wow…………

    (1) John, In you early paragraph starting with “Because of dishonest actuaries “, it would be perfect if, after the word “plans” (in the first sentence, the following words were inserted…… “thereby approving Plans far greater than they would have had the TRUE cost been known,”

    (2) the Italicized paragraph that starts with the workers “Public pension opponents”, show an astounding lack of understanding of pensions by it’s author….. (or knowingly being a charlatna and puppet of the Public Sector Unions). As you accurately pointed out in your follow-up paragraph, an unfunded liability doesn’t exist as stated …. because a promised benefit or obligation due many years in the future is not yet fully funded …. but ONLY when the “portion” of that promise ALREADY ACCRUED TO DATE has insufficient assets.

    (3) you stated that Mark J. Magyar explains the concept of “unfunded liability” well. I believe it would be MORE ACCURATE if, after his first use of the word “obligations”, the words “associated with benefits accrued to date” were inserted.

    Reply

  3. Posted by skip3house on August 15, 2017 at 7:44 pm

    NJ Pensions….retro calculate based on actual total contributions (DC) each year, not politically promised Defined Benefits (DB) , drop NJ retiree Medical/Rx.

    Reply

    • Posted by S Moderation Honestly on August 18, 2017 at 4:15 pm

      There are myriad similar suggestions. Most are illegal (and illogical). This, from Ed Ring is, according to TL, what I “should have” quoted:*

      For all pensions to existing retirees over $50,000 per year, whenever necessary, reduce the pension payout by an amount proportional to the amount the existing pension assets are underfunded. Restore them – but not retroactively – whenever and to the extent the funds move back towards being 100% funded. This can be accomplished by declaring a fiscal emergency.

      For all participants still working who are unable or unwilling to afford to pay 50% of the required pension contribution – should it skyrocket in the face of persistent low returns to the fund – offer them an opportunity to accept a smaller defined benefit that they can afford. This can be done pursuant to AB 340.

      Impose a ceiling on pension benefits to retirees, based on the principle that pensions are supposed to ensure retirement security, not lavish affluence. Similarly, establish a floor for pension benefits to retirees, based on the principle that employees at the low end of the pay scale are nonetheless entitled to retire with an income sufficient to live with dignity. Assuming the pension ceiling is realistic, the savings from establishing a ceiling for benefits will greatly offset the costs of establishing a floor on benefits.
      ………………………….
      Like many other pundits, Ed Ring seems to ascribe to the theory that big pensions are “bad” and small pensions are “good”. Even TL (I think) understands that this is simplistic thinking, and pension “reform” based on simplistic ideas is counterproductive.

      *Would someone post TL’s E-mail address, so we can send him/her our posts for editing and pre approval? Apparently this also applies to various moderators who didn’t realize what they “should have said”.

      SMH

      Reply

  4. Posted by S Moderation Honestly on August 15, 2017 at 9:20 pm

    Pension Progagandizing

    Everything old is new again.

    Marc Joffe

    DIRECTOR OF POLICY RESEARCH, California Policy Center

    “Suggestions that the nation is facing a wave of pension-driven municipal bankruptcies are overheated.”

    “Flat or declining revenue and a failure to maintain adequate general fund reserves better explain fiscal emergencies that confronted Vallejo, Stockton, San Bernardino, Detroit and Puerto Rico in recent years.”

    “Fiscal hawks like me are prone to exaggerate the pension funding crisis for a variety of reasons.”

    “But critiques of pension funding may have pecuniary motives in some cases. For example, if governments can be convinced to increase funding levels, that means pension systems will have more money to allocate to mutual funds and other money managers. Since these financial players normally quote their fees as a percentage of assets under management, more pension funding leads to higher revenues.”

    “If government agencies can be convinced to replace their defined benefit programs with defined contribution plans, financial interests stand to make even more money. Individually managed employer-sponsored retirement plans — known as 401(k) plans in the private sector — generate substantial fees for the firms that manage them.”

    https://finance.yahoo.com/news/public-employee-pensions-income-inequality-101500635.html

    SMH

    Reply

    • Posted by Tough Love on August 16, 2017 at 12:55 am

      SMD,

      Wow ….. how do you say “Bias” and “Agenda” ?

      Why didn’t you include these quotes from the SAME article….

      (1) While Sgouros and like-minded public finance experts make some valid points, they may be surprised to learn that public employee pensions are becoming a driver of income inequality.

      (2) Although progressives may be right that the sky isn’t falling, they may be surprised to learn about the impact that certain pensions have on income inequality. In California, over 50,000 public sector retirees are receiving annual pension benefits in excess of $100,000 — and in many cases, way over $100,000.

      (3) Among the retired police and fire officers, many put in 30 years of service earning retirement credits at a rate of 3 percent per year. This entitles them to retire at 90 percent of final compensation, which is often “spiked” through last-minute promotions and payouts for unused sick and vacation time. The average California Highway Patrol officer who has retired since 1999 receives $96,270 per year and more than 1,000 CHP retirees collect over $100,000 annually.

      (4) Senior managers at public agencies have the power to affect retirement rules, allowing them to cash out in the process. In 2004, administrators in the inland California city of Redding convinced Council members to approve a supplementary retirement benefit program offered by Public Agency Retirement Services (PARS). A year-and-a-half later, Redding City Manager Mike Warren retired. Now, in addition to his annual CalPERS benefit of $198,000, he receives $50,000 each year from PARS. Warren’s total pension income of $248,000 annually is almost six times Redding’s median household income of $43,000.

      (5) changes designed to contain windfall pension benefits are difficult to implement in states that have adopted the California Rule, which protects public sector workers from reductions in retirement benefits.

      (6) One problem with most defined-benefit plans is that taxpayers are on the hook when pension assets don’t grow at the sometimes lofty rates assumed.

      (7) A way to address this inequity is to limit the annual service credit pension formula to salaries up to $50,000. For income above that level, member and employer pension contributions would be held in a separate account that grows at the same rate as that earned by the pension system. At retirement, this balance would then be annuitized and paid on top of the guaranteed benefit.

      (8) Public employee pensions are unlikely to trigger a tsunami of municipal bankruptcies any time soon, but the need to fund these plans is placing pressure on local government budgets and crowding out other spending priorities.

      Reply

  5. Posted by S Moderation Honestly on August 15, 2017 at 9:24 pm

    Ed Ring, California Policy Center, Dec. 6, 2012

    “Hence there are two distinct virtues to defined benefit plans, both based on the fact that these plans allow large numbers of participants to pool their risk. This means that even though some participants may live longer than average, their income is secure their entire life, because by definition whoever collected more from the plan by living longer than average had their higher than average withdrawals offset by those whose lifespans were shorter than average. And because risk in a defined benefit fund is shared across generations of workers, during eras when investment returns are low, existing workers guarantee extra cash coming into the plan to keep it solvent, and during eras when investment returns are high, surpluses are fed into the pension fund that can also be used to make up the shortfall during lean years.”

    “And comparing defined benefits – or social security, for that matter – to Ponzi schemes or Pyramid schemes are specious arguments that do not belong in serious debate.”

    (Note: Ed Ring was, at one time, CEO of California Policy Center. I don’t know if his views were, or still are, those of CPC.)

    SMH

    Reply

    • Posted by S Moderation Honestly on August 15, 2017 at 9:42 pm

      Truth in advertising… In the article quoted above, Ed Ring also said, quite clearly, that saving Defined Benefits would require lower pensions for existing workers and retirees.

      Today’s extra credit question… What well known commenter, in response to the above statement, said…

      “Just insert the word “significant” (e.g., by 50+%) before the word “lower” and it’s PERFECT.”

      SMH

      Reply

      • Posted by Earth on August 15, 2017 at 10:27 pm

        Earth to SMH:

        I know! I know!

        It is “Anonymous”. CAPS LOCK is a dead giveaway!

        Plus it is unsubstantiated opinion. That locks it.

        Reply

      • Posted by Tough Love on August 16, 2017 at 1:01 am

        Yup, That was me (Tough Love).

        The addition of “significant” was PERFECT then (in 2012), and is even MORE necessary today.
        *************************

        P.S. You know what else hasn’t changed?

        You were and A-hole then, and you still are today.

        Reply

    • Posted by Tough Love on August 16, 2017 at 1:08 am

      SMH,

      Again, “Bias” and “Agenda” is likely why you didn’t include the following from the SAME article…..

      “The only way defined benefits as they are currently structured for California’s public employees can remain solvent is if annual investment returns go into the double digits and stay there for the next 20 years. Even if that happens, contribution rates may have to go up. And if that doesn’t happen, the likelyhood that anyone is going to be willing to pay the required higher contributions is virtually nil – whether it is the participants themselves who are (at least according to Gov. Brown’s AB 340 pension reform that was signed into law on Sept. 12, 2012) going to eventually have to pay 50% of the required contributions through withholding from their paychecks, or taxpayers. So how can defined benefits be saved? A question that big defies concise answers, but it is unlikely that any financially viable, equitable solution can be found that will not affect existing workers and existing retirees. Here are some options:

      For all pensions to existing retirees over $50,000 per year, whenever necessary, reduce the pension payout by an amount proportional to the amount the existing pension assets are underfunded. Restore them – but not retroactively – whenever and to the extent the funds move back towards being 100% funded. This can be accomplished by declaring a fiscal emergency.

      For all participants still working who are unable or unwilling to afford to pay 50% of the required pension contribution – should it skyrocket in the face of persistent low returns to the fund – offer them an opportunity to accept a smaller defined benefit that they can afford. This can be done pursuant to AB 340.

      Impose a ceiling on pension benefits to retirees, based on the principle that pensions are supposed to ensure retirement security, not lavish affluence. Similarly, establish a floor for pension benefits to retirees, based on the principle that employees at the low end of the pay scale are nonetheless entitled to retire with an income sufficient to live with dignity. Assuming the pension ceiling is realistic, the savings from establishing a ceiling for benefits will greatly offset the costs of establishing a floor on benefits.”

      Reply

  6. Posted by S Moderation Honestly on August 15, 2017 at 10:18 pm

    “Because of dishonest actuaries and politicians deluding participants and taxpayers about the real cost of defined benefit plans we have a crisis where these public plans are in various stages of collapse.”

    “It is the system itself that requires fixed benefits to be paid out while costs for those benefits are on a pay-what-you-will basis that is threatening the retirement security of those participants and taxpayers.”

    Can we distinguish between the two? Most public pensions (as well as many multi-employer plans, apparently) use an ambitious ROI when calculating required contributions (deluding about the real cost). Some of those states and/or local governments double down on the underfunding by not contributing even that minimum (pay-what-you-will).

    If the end is near, will it come differently to those like New Jersey, Illinois, Pennsylvania, etc. who didn’t contribute even the minimum, and may literally run out of cash? Or to those like California, where government is required by law to contribute the minimum, but the required contributions are increasing so fast they will bankrupt local governments?

    SMH

    Reply

  7. Posted by Anonymous on August 16, 2017 at 4:31 am

    “You were and A-hole then, and you still are today.”

    Wow………… was that cathartic, or what?

    Reply

  8. “If state and local legislators had kept their side of the bargain over the years by making scheduled payments on time, most critics of public pensions would have to find another hobby.”

    Except in New York City, where taxpayers paid more for public employee pensions than those anywhere else, and higher taxes for less in services as a result, but as a result of repeated retroactive pension increases the pension funds are as deep in the hole as New Jersey’s.

    The race is on. Will the public employee unions destroy the Democratic Party before or after the Alt-Right destroys the Republican Party? The one percent have their hooks in both.

    Reply

    • Posted by Tough Love on August 16, 2017 at 10:19 am

      Quoting ….

      “If state and local legislators had kept their side of the bargain” …….. meaning paid the ARC BASED ON THE PROMISED PENSIONS in full and on time …..

      they would be acquiescing to the unnecessary, unfair (to Taxpayers), clearly unaffordable and ludicrously excessive promises made by decades of Public Sector Union-BOUGHT Elected Officials that preceded them.

      Thank goodness that NJ’s Taxpayers HAVEN’T been forced to pay for those absurd promises …………. and hopefully never will.
      ***********************************************

      And as for those “retroactive increases”, being nothing but a THEFT of private sector taxpayer wealth, ALL of them should be RETROACTIVELY reversed.

      Reply

    • Posted by S Moderation Douglas on August 16, 2017 at 5:32 pm

      What is “repeated retroactive pension increases”?

      Is that one city, or one bargaining unit getting two or more serial pension increases, or is it a number of different groups getting similar pension increases?

      Reply

  9. Posted by Tough Love on August 16, 2017 at 10:50 am

    The subject of this Blog-article is NCPERS Propagandizing.

    Well, NCPERS outdid itself again with even MORE Bullsh**. here:

    http://bit.ly/2v0QOz1
    ***************

    SMH=SMD=SMA=EARTH, You’ll be a pig rolling in sh** soaking in this crap.

    Reply

  10. Posted by Anonymous on August 16, 2017 at 5:23 pm

    Point being, the propaganda is from the extremists on both sides.

    Caveat emptor.

    Reply

  11. Posted by PS Drone on August 16, 2017 at 5:53 pm

    Private sector DB plans have been converting to some form of DC plan ever since 1974 with the advent of ERISA. The reason for that is the mandated recognition of liabilities, actuarial gains and losses and, of course, funding. If public sector plans had been subjected to the same accounting and funding rules as the private sector at that time we would not have these pointless arguments now. The same phenomenon (conversion of DB to DC) would have taken place because taxpayers in possession of real-time accounting information about present values of future liabilities and current funding demands would not have tolerated the current impact of the obscene promises made in the form of pensions (aka “deferred compensation” LOL) and retiree health care. But cowardly and crooked politicians and their equally mercenary union supporters conveniently lobbied to keep public sector plans exempt from ERISA. Thus they were allowed to continue ad infinitum the lying and obfuscation. And here we are. Unfortunately, arithmetic will eventually catch up with even the most talented liars and serial scumbags.

    Reply

  12. Posted by MJ on August 17, 2017 at 7:51 am

    Nothing to see here folks, it’s all fake news…haha..the short film clip says more than every blog about pensions on the internet

    Reply

  13. Posted by Anonymous on August 17, 2017 at 12:34 pm

    Me thinks it’s time for another 9% bump in pensions to make up for CC shortchanging them ….just like before even current retirees will be eligible ….future Gov Murphy are you listening

    Reply

  14. Posted by Unanimous on August 17, 2017 at 7:59 pm

  15. Posted by S Moderation Honestly on August 17, 2017 at 8:16 pm

    Narrow down the propaganda by getting rid of the extremes.

    Eliminate National Conference of Public Employee Retirement Systems.

    Eliminate California Policy Center.

    Eliminate Steve Maviglio.

    Eliminate Steven Greenhut.

    Keep working toward the middle.

    SMH

    Reply

    • Posted by Tough Love on August 17, 2017 at 9:03 pm

      Quoting ………. “Keep working toward the middle”.

      LOL….. the Public sector Unions don’t want “the middle” because that would mean EQUAL to what their Private Sector counterparts typically get

      No, They want more and more and more …….. and to hell with the Taxpayers.

      Reply

  16. Posted by Earth on August 17, 2017 at 9:57 pm

    Earth to Tough Love:

    You’re not helping. You make Greenhut and CPC look like moderates. Destructive criticism is counter productive.

    file:///storage/emulated/0/Download/learn-to-see-the-difference-between-constructive-and-destructive-criticism-appreciate-the-constructive-ignore-the-destructive-john-douglas.jpg

    Reply

    • Posted by readslikeamofiabook on August 17, 2017 at 10:41 pm

      Tough Love speaks the truth … that is why pensions are going broke and cutting benefits …. because they are over generous. At some point are municipalities in NJ going to take the entire paychecks of property owners? That’s where it is headed.

      Reply

  17. Posted by S Moderation Honestly on August 17, 2017 at 11:21 pm

    Assuming facts not in evidence.

    South Carolina is one of the lower compensated states… Less than 60% funded.
    New York state is one of the highest paid… One hundred percent funded
    California and Illinois are each among the highest compensated. California is 68% funded, Illinois is 50%.

    There is no correlation between the generosity of pensions and the sustainability of the plan.

    NJ is the prime example of the principle “DON’T PAY THE BILLS, THE DEBT GETS LARGER”, a fact of which Tough Love (AKA Anonymous) is inordinately proud.

    #23%bulls hit

    SMH

    Reply

    • Posted by Tough Love on August 17, 2017 at 11:34 pm

      SMH,

      In PS Drone’s earlier comment, in the last sentence he said ….

      “And here we are. Unfortunately, arithmetic will eventually catch up with even the most talented liars and serial scumbags.”

      I’m not sure if he had Politicians, Unions, and Elected Officials in mind ………. or commentators such as yourself.

      Reply

  18. Posted by S Moderation Honestly on August 17, 2017 at 11:54 pm

    Like many others, PS Drone is very liberal with the use of loaded terms such as “obscene promises”, “cowardly and crooked politicians”, “mercenary union supporters”, “lying and obfuscation”, and the aforementioned “talented liars and serial scumbags”.

    Colorful and cathartic, but hardly enlightening, and based more on opinion than fact, in my opinion.

    “Learn to see the difference between constructive criticism and destructive criticism. Appreciate the constructive, ignore the destructive.

    John Douglas (no relation)

    SMH

    Reply

    • Posted by Tough Love on August 18, 2017 at 12:03 am

      “loaded terms” ?

      To be sure, I read each that you listed 3 times ….. and the take-away is that EVERY ONE of them is accurate and right on the mark.

      Perhaps you’re not a “liar and serial scumbag”…… just hopelessly delusional.

      Reply

  19. Posted by Unanimous on August 20, 2017 at 6:33 pm

  20. New York City failed to pre-fund all the retroactive pension increases of the past 25 years.

    Far from learning from this, NYC is not pre-funding the future retroactive pension increases that will obviously occur in the future, given who controls the state legislature.

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: