NJ Pensions Still Bleeding

Outgoing New Jersey Governor Chris Christie touted to the Wall Street Journal his record of making New Jersey a far better state than the one he inherited 8 years ago in four ways:

  1. “We stopped all kinds of bad ideas coming out of the Democratic legislature, vetoing a record 584 bills so far, without a single override,” the termed-out Christie wrote.
  2. We “enforced fiscal responsibility in its annual budgets,” resulting in $2 billion less in discretionary spending from 9 years ago.
  3. “We introduced conservative tax policies to the highest-taxed state in America,” including tax cuts and eliminating “the worst estate tax in America.”
  4. “We aggressively reformed an underfunded pension system” that has “stopped the bleeding.”

I can’t speak definitively on the first three points but on that fourth one:

New Jersey now has the worst funded state pension system in the country which calls to mind the words of Branch Rickey after his team had a losing season in 1952 and he proposed cutting Ralph Kiner‘s salary:

“Son, we could have finished last without you!”

21 responses to this post.

  1. Posted by dentss dunnigan on November 26, 2017 at 2:05 pm

    But the good news is the bleeding will stop with Murphy ..because he will do every in his power to fully fund the pensions …no matter how much it might hurt because thy were promised …

    Reply

    • Posted by rdquinn on November 26, 2017 at 3:30 pm

      Let’s clarify. You mean hurt taxpayers at all levels the vast majority of whom have no pension plan and far less in all other benefits including no retiree medical benefits. That’s what you call fair?

      Reply

  2. Posted by Tough Love on November 26, 2017 at 2:29 pm

    Christie sure HAS done a lot* pension-wise ….. more than anyone else likely would have………… But I agree with John, Christie’s #4 that …“We aggressively reformed an underfunded pension system” that has “stopped the bleeding.” is VERY far from accurate.

    To “stop the bleeding” we need to either freeze the DB Plans for ALL of NJ’s Public Sector workers, or at a minimum reduce the value of future service accruals by no less than 50% for all CURRENT workers (via a combination of formula-factor reductions, increases in the age at which an unreduced pension can be collected, increases in the early-retirement adjustment factors, further limiting what is included in “pensionable compensation”, making it MUCH more difficult to be granted a “disability” retirement, etc.)

    * the COLA suspension ALONE has saved NJ’s Taxpayers MANY $ Billions … in REAL money, not accounting/timing.

    Reply

  3. Well when the retirees keep piling up and no one is paying much more, not sure how the investments are doing……….elimination of COLAs and 2% cap were better than nothing to keep real estate taxes at bay but bend over NJ because Phil’s in the house. Although I’m not sure how much higher real estate or business taxes can go but I’m sure we will find out very soon

    Reply

  4. Posted by Anonymous on November 26, 2017 at 8:32 pm

    You can’t reform it enough w/o a consistent funding comittment something clearly lacking pre Christie and during his tenure as well! It’s not about the $ appropriated but the % relative to the ARC.

    Reply

    • Posted by Tough Love on November 26, 2017 at 10:10 pm

      No, the “problem” has it’s ROOT CAUSE in the ludicrously excessive pension generosity ….. 2 to 3 times (4 times for Safety workers) greater in value upon retirement than the pensions granted COMPARABLY SITUATED (in wages, age at retirement, and years of service) NJ Private Sector workers.

      And the “lack of full funding” is not the CAUSE of the pension mess, but the CONSEQUENCE of the real ROOT CAUSE …. the ludicrously excessive pension generosity.

      Reply

    • Posted by S Moderation on November 26, 2017 at 11:39 pm

      I’ll give it away at the beginning: they’re in trouble because they’re not making the “required” contributions to the pensions.

      Yes, there are all sorts of other reasons as well, such as spiking, early retirements, sluggish payroll growth, optimistic valuation assumptions, etc.

      But ultimately the reason the pensions are so little funded is because the state didn’t put in enough funds.

      And they knew it.

      They knew it for years.

      It’s not because of investment fees, though those should be more transparent. It’s not because of part-time board directors who get a lifetime pension for very little work, though that doesn’t help. (I’ll address why these aren’t significant problems in a later post.)

      DON’T PAY THE BILLS, THE DEBT GETS LARGER

      Mary Pat Campbell
      …………………………..

      If you think… “the real ROOT CAUSE …. the ludicrously excessive pension generosity.”

      What mindless drivel …………….

      If you want credibility, write a clear paper detailing your unique “demonstration” and submit it to a well-respected professional economics journal for peer review as part of the acceptance-for-publication process. Who knows, perhaps very early one morning years from now you’ll get that very special call from the Nobel Committee.

      SMH

      Reply

      • Posted by Tough Love on November 27, 2017 at 12:11 am

        Quoting SM-Whatever (aka, SMH, SMA, SMD, S, Moderation Douglas, Stephen Douglas, SM, and a few others…)

        “I’ll give it away at the beginning: they’re in trouble because they’re not making the “required” contributions to the pensions.”

        Only HALF-correct.

        Yes, they’re not making the “required contributions”. But no, they’re “in trouble” BECAUSE the Public Sector Unions and NJ’s Elected Officials colluded to trade BRIBES disguised as campaign contributions to our Elected Officials in exchange for their favorable votes on Public Sector pay, pensions, and benefits.

        THAT collusion resulted in what I noted above ……………. ludicrously excessive pension generosity ……. 2 to 3 times (4 times for Safety workers) greater in value upon retirement than the pensions granted COMPARABLY SITUATED (in wages, age at retirement, and years of service) NJ Private Sector workers.

        The “required contributions” are A FUNCTION OF (and move in DIRECT PROPORTION TO) the the generosity of the underlying Plans. Plans that are VERY VERY generous, are VERY VERY costly, and hence VERY VERY difficult to fully fund.

        So again, as I noted above ……….. the “lack of full funding” is not the CAUSE of the pension mess, but the CONSEQUENCE of the real ROOT CAUSE …. the ludicrously excessive pension generosity.
        **********************************

        The rest is just more of SM-Whatever’s ongoing denial that immediate and very material pension reductions are necessary for all CURRENT workers (and in many States & Cities, for those already retired as well).

        We’ve heard it from his ilk before ….. “just keep moving folks, nothing to see here”.

        Reply

    • Posted by boscoe on November 26, 2017 at 11:53 pm

      Well, as the warden says in one of my favorite movies, Cool Hand Luke, “What we have here is failure to communicate.” Maybe you guys should settle this outside.

      Reply

      • Posted by Tough Love on November 27, 2017 at 12:15 am

        Well, I just a well-informed/fed-up NJ taxpayer, but I’m “communicating” with a CA Public Sector retiree collecting one of these “ludicrously excessive” pensions …. even MORE excessive in CA than in NJ.

        I have no reason to be BSing anyone. How about him ?

        Reply

        • Posted by PS Drone on November 27, 2017 at 5:49 pm

          He has to be on somebody’s payroll to spend all the time he spends on a NJ pension blog. Can’t let the truth be told without the corrupt public union counterpoint. Always tries to have the last word too. Sad, particularly in retrospect after the money runs out.

          Reply

          • Posted by Tough Love on November 27, 2017 at 8:45 pm

            I’ve noticed that last point as well ….. that those who MIGHT be paid-commentators always like to get the last word in …. so that THEIR position is the LAST readers see. And FWIW, I’m just very persistent and hardened by all the BS tossed-my-way, buy not paid directly or indirectly for anything I say on the internet.

            Years ago a had a VERY long back and forth (2 to 3 times longer than I’ve ever had with SM-Whatever) comment-discussion with someone so strongly opposing any form of pension reform, and with such absurd suggestions that BEFORE any reforms, we first needed to “study this” and study that”, that I was sure he/she was paid to comment. Funny ending………. our comments went back and forth for a few days until they were time-closed by the blog-administrator. Knowing that my “opponent” was trying his/her darnedest to get in the last word, I laughed when closed just after my last comment.

  5. Posted by S Moderation on November 27, 2017 at 6:39 am

    Quit crying in your beer Mr. Love. You claim that all (yes, all) public pensions are excessive because the formulas produce a value at retirement 2-4 times greater than those in the private sector (4-6 times for safety employees).

    Moderation says, to quote Juvenal, “You cannot compare pensions outside the context of total compensation.” It is a given that (most) public pensions are higher than those in the private sector. It is also empirically shown that, on average, state and local public sector workers earn lower wages than equivalent private sector workers. Pensions can be called “excessive” only if the value of the higher pension is sufficient to overcome the value of lower wages.

    Well, “I just a” CA Public Sector retiree, but even if I were not, the principle would be the same. A pension is “excessive” only if it raises the total compensation above that of an equivalent private sector worker. My pension or lack thereof have absolutely no bearing on the logic or the data.

    And ye, being a “well-informed/fed-up NJ taxpayer”, should know that in some cases, it does, and in other cases it does not. In our classic example, the public sector janitor has wages similar to one in the private sector, so with his pension and benefits, his total compensation truly “exceeds” that of a private sector janitor.*

    But for the average public sector lawyer or doctor, studies show that their wages are so much lower that, even if their pensions are 2-4 times greater in value at retirement, their total compensation is still lower. Even in California and New Jersey. Therefore their “2-4 times” pension is NOT excessive.

    And, like Goldilocks, between those two extremes, there are hundreds of thousands of workers whose pensions are “just right”, where their higher pensions balance out the lower wages so the total compensation is “roughly equal”.

    The fact (if it is a fact) that their pension is 2-4 times higher (4-6 times for safety) is not “necessary and sufficient” to show that said pension is excessive, let alone “ludicrously excessive”.

    Sorry for taking up the bandwidth on the blog. It is clear I will never persuade Mr. Love, but if he continues to misrepresent the principle, I will continue to refute his claims.

    It’s the least I could do.

    SMH

    Reply

    • Posted by Tough Love on November 27, 2017 at 8:54 am

      Same old denials.

      Noting new, just ……. “just keep moving folks, nothing to see here”

      And all while we’ll get a front row seat watching as half the Cities in America go broke just so that the insatiably greedy Public Sector workers (the new ROYALTY) can get “all they were promised”, no matter how unnecessary, how unjust, how unfair to Taxpayers, how clearly unaffordable, and how fraudulently BOUGHT form our Elected Officials with Public Sector Union campaign contributions.

      Reply

  6. Posted by S Moderation on November 27, 2017 at 7:00 am

    *janitor

    In the above post, the example that the public sector janitor’s total compensation “exceeds” that of the private sector does not necessarily mean his pension is “excessive”.

    That becomes a political decision.

    As Juvenal (also) says…
    ” you are just wrong about the comparison of public sector and private sector total compensation (except at the level which requires no education–sorry for giving them benefits other than Medi-Cal).”

    SMH

    Reply

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