No Good News on NJ Pension Cash Flow

Some view as good news that New Jersey has deigned to put in 50% of the calculated ‘required’ contribution this fiscal year for the portion of the retirement system the state is ‘responsible’ for funding. Aside from the fact that (1) the state can still renege on this ‘commitment’ whenever they want and (2) putting in 50% of what you owe means, by definition, that you are incurring additional debt there is the overarching issue that happens to be the primary focus of this blog: the political/actuarial cabal willfully understates contributions for public plans.

This becomes obvious when examining the portion of the New Jersey system for which the localities are ‘responsible’ (PFRS and PERS) to which they are supposed to be making 100% of ‘required’ contributions.

For the twenty-one municipalities in Union County and the county itself those bills for 2017 total $68,141,807 for PFRS and $27,701,995 for PERS. In addition, based on active participant information,  the employee contribution rate of 10% of salary for PFRS would generate $24,868,388 while 7.34% of salary for PERS would generate $14,397,484. That comes to about $135 million coming in for 2017 to fund benefits for Union County pension participants.

So how much is going out?

$230,341,655!

 

28 responses to this post.

  1. Posted by Anonymous on August 28, 2017 at 9:14 pm

    Yeah and based on your posts which one is projected to dry up first, Kimmie’s hubby’s JRS – now how’s that going to go?

    Reply

  2. Posted by TrueSue on August 29, 2017 at 4:31 am

    So it only took eight years for Christie to fix it where all others have failed .

    Reply

    • Posted by Tough Love on August 29, 2017 at 10:39 am

      With all his many faults, public sector “pension-wise”, Christie was the best thing that has ever happened to NJ. and NJ’s Private Sector Citizens should give him a standing ovation for what he accomplished.

      First, understand that he inherited this mess (and without doubt the GROWTH in the unfunded share of that liability), with the rapid GROWTH in Plan liabilities all but unstoppable due to the ludicrously excessive LOCKED-IN pension formulas & liberal Plan provisions (early retirement ages, heavily subsidized early retirement adjustment factors, “air-time” or not-worked service-year purchases at way below true value, COLA increases unheard of in Private Sector Plans, absurdly easy to meet “disability” retirements, …… and endless Plan improvements, many of which were retroactively applied) for current workers

      Second, he DID put in place employee contribution increases, formula reductions and retirement age increases for new workers, and a suspension of COLA increases. Not one of these would likely have been implemented with a Democratic Governor, or likely even with a different Republican Governor. All of these AREN’T the feel-good “accounting’/actuarial changes” that simply impact the TIMING of when promised pensions are paid for. Each of these are REAL Plan changes that keeps more money in the Taxpayers’ pockets. In fact, just ONE of these changes, the suspension of COLA increase since 2011 means that over $15 BILLION in COLA increase payments that would have been paid out were not was not paid out …… $15 BILLION that didn’t and will never come out of Taxpayers’ pockets.

      Thank you Governor Christie !

      Reply

      • Posted by Anonymous on August 29, 2017 at 1:51 pm

        Your welcome but why did you support my run for POTUS – the Trump stops where?

        Reply

      • Posted by Anonymous on August 29, 2017 at 3:06 pm

        Not of a fan of his Lottery scheme, makes no sense to dedicate revenue to something – does it?

        Reply

        • Posted by Tough Love on August 29, 2017 at 3:16 pm

          I agree (not a fan of his Lottery scheme), but with only $1 Billion expected annually in Lottery Proceeds vs $5+ billion annual ARC, it’s relatively harmless because I’m sure we would have at least contributed the annual $1 Billion anyway.

          Reply

          • Posted by Anonymous on August 29, 2017 at 3:25 pm

            and we repay that lost billion from education and senior aid….how?

          • Posted by Anonymous on August 29, 2017 at 3:38 pm

            best to keep underfunding the pensions and let them cash flow out – end of story and blog!

          • Posted by Tough Love on August 29, 2017 at 4:37 pm

            Quoting Anon …..

            “and we repay that lost billion from education and senior aid….how?”

            The structure of the Lottery-money shift SPECIFICALLY offsets OTHER budget funds that would have been used for the $1 Billion contribution, but will now NOT be contributed.

            This offset money will pay for the items that the Lottery proceeds paid for in past yeas.

  3. Posted by Anonymous on August 29, 2017 at 9:09 am

    I always wondered why this wasn’t done as part of the 2011 reforms?

    http://www.courier-journal.com/story/news/politics/2017/08/28/kentucky-pension-crisis-benefits-should-cut-employees-moved-401-k-plans-consultant-says/608022001/

    That recommendation suggests taking away from future benefit checks cost-of-living increases awarded to state retirees from 1996 to 2012. This, PFM said, could result in significant benefit reductions of some retirees.

    Reply

  4. Posted by Unanimous on August 29, 2017 at 3:31 pm

    Longtime legislators and past governors are the main culprits for the under funding problems in the pension systems.Diverting money over the last 15 to 20 years that should have went into the states various retirement systems was used for pet projects and the every day running of state government.Elected officials knew exactly what they were doing and do not let them tell you otherwise! If I was a retiree or a current worker I would be emailing and ringing their phones off the hook raising cane telling them “any laws passed going forward that result in benefit changes to those already retired would be met with lawsuits.” The same goes for changing retiring requirements for those already working.

    Reply

    • Posted by Tough Love on August 29, 2017 at 4:47 pm

      Yes, the Legislators knew (or certainly SHOULD HAVE known) that they were contributing FAR FAR less than the amount necessary to fully fund the ludicrously generous pensions that were promised.

      BUT …….. the calculated amount to achieve “full funding” is A FUNCTION OF and moves in DIRECT PROPORTION TO the richness of the promised pensions. When you promise ludicrously generous pensions, the annual contribution to fully fund them will also be ludicrously high ….and hence it will be very difficult to find the revenue to do so. The lack of “full funding” is not the CAUSE of the pension mess we now find ourselves, but the CONSEQUENCE of the real underlying ROOT CAUSE ….. ludicrously generous pension generosity.

      An indeed they are ludicrously generous, routinely being MULTIPLES greater in value upon retirement than those typically granted comparable Private Sector workers who retire at the SAME age, with the SAME pay, and with the SAME years of service,

      Reply

  5. Posted by S Moderation Honestly on August 29, 2017 at 5:25 pm

    Actually, that comment was shamelessly copy/pasted from a comment on the above mentioned Kentucky pension crisis. Kentucky apparently has an unfunded liability equal to New Jersey, yet according to Biggs has “market level” compensation.

    Kansas and Indiana are only 65% funded (Pew) even though their compensation (including the value of job security) is below market level.

    “DON’T PAY THE BILLS, THE DEBT GETS LARGER.”

    Could it be?…

    “…….. the calculated amount to achieve “full funding” is”

    ***not***

    “A FUNCTION OF and moves in DIRECT PROPORTION TO the richness of the promised pensions.”

    SMH

    Reply

    • Posted by Tough Love on August 29, 2017 at 7:33 pm

      SMD,

      Anyone with even modest math ability can VERY easily ascertain that …………..

      ” the calculated amount to achieve “full funding” is A FUNCTION OF and moves in DIRECT PROPORTION TO the richness of the promised pensions.”

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

      Given that your Public Sector work-responsibilities included changing light bulbs, I’m not at all surprised at your lack of basic math skills.

      Reply

    • Posted by Anonymous on August 29, 2017 at 9:24 pm

      I hear the military is looking for a few good light bulb changers, ladders not included – LOL.

      Shameless, hardly – only as it applies to politics and politicians. As logic would have it, problem #1 is the assumption logic is present in those making the decisions.

      To the point, sorry I love to digress…..

      In the case of NJ’s 2011 reforms COLAs were suspended BUT COLAs accrued to date remained and continue to be paid to retirees. The twisted NJSC ruling abbreviated; COLAs were not specifically mentioned in the pension benefits non-forfeitable right legislation and therefore the intent was to exclude them (at least I think, not a lawyer – thankfully)! Yet they remain.

      How, logically, can the legal consideration of ‘base’ benefit reductions ever be considered as long as COLAs are still being paid? Maybe one way would be IF Kim is elected governor her husband can be appointed to the NJSC, problem solved!

      Reply

      • Posted by S Moderation Honestly on August 30, 2017 at 12:25 am

        Situational logic. Just decide what outcome you want and work backwards.

        SMH

        Reply

      • Posted by S Moderation Honestly on August 30, 2017 at 1:16 am

        Like whoever decided to eliminate public pensions in New Jersey. Simple. Just under fund the system until it’s in a death spiral, then blame the workers.

        SMH

        Reply

        • Posted by Tiugh Love on August 30, 2017 at 10:40 am

          SMH,

          Wrong. Over NJ’s Plans’ history, the Taxpayers have funded to a level of 40% of full funding of the “promised” pensions.

          But ………….. as has been DEMONSTRATED here numerous times, NJ’s Plans’ are grossly excessive, with our self-interested, vote-selling, contribution-soliciting Elected Officials having “promised” pensions routinely 2.5 time (4+ times for Safety workers) greater in “value upon retirement” than those of comparably situated Private Sector workers.

          Well ……………… There is ZERO justification for such rich pensions. NJ’s workers deserve EQUAL, but NOT better pensions (AND retiree healthcare), and if their 2.5 times greater pensions instead were EQUAL to those granted Private Sector Taxpayers, that 40% already paid-in would have funded 100% of that smaller but “Equal” pension.

          As such, NJ’s Taxpayers HAVE contributed a fair amount into NJ’s Public Sector pensions, and the fact that NJ’s funding ratio is lower than almost all other States, just means that NJ’s Taxpayers have been LESS SUCKERED in being forced to contributing MORE than what is necessary, just, fair (to them as well as NJ’s workers), and affordable.

          Reply

          • Posted by truesue on August 30, 2017 at 5:16 pm

            So if pension promise were half of what was promised we would be 100% funded …?

          • Posted by S Moderation Honestly on August 31, 2017 at 2:26 am

            If pension promises were half in NJ, they “might”* have been fully funded in 2007, like many other states. But after losing 1/3 of their assets in 2008-2009, they would still be struggling today to recoup their losses.

            *”might” don’t take that to the bank. There are other states with lower “pension promises” which, much like NJ, just found other uses for that money.

            DON’T PAY THE BILLS, THE DEBT GETS LARGER

          • Posted by Tough Love on September 4, 2017 at 11:16 am

            No, SMD, you rarely “think” at all.

            If pensions were halved, indeed the funding ratio would be double whatever it is today (which depends on the assumptions & methodology used in the funding rate calculation).

  6. Posted by S Moderation Honestly on August 30, 2017 at 10:54 am

    Déjà pu

    #23%bulls hit

    SMH

    Reply

  7. Posted by S Moderation Honestly on August 30, 2017 at 2:41 pm

    C’est la vie.

    My all time favorite was “asshole”.

    SMH

    Reply

  8. […] « No Good News on NJ Pension Cash Flow […]

    Reply

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