Good News for NJ Pension System – If You Ignore the Big Numbers

There was a meeting of the New Jersey State Investment Council yesterday and the story on it was mostly celebratory:

There was a bit of bright news Wednesday for New Jersey’s troubled public employee pension fund.

State officials disclosed the fund held $76.3 billion in assets at the end of the October, its highest value in over two years.

Robust returns, including 13 percent in the last fiscal year, helped boost the health of the fund, which pays out benefits to hundreds of thousands of retired government workers and has obligations to hundreds of thousands of active workers.

Christopher McDonough, director of the state’s Division of Investment, said the fund, which saw challenging investment years chip away at its assets, has reached its highest total value since July 2015.

Not only was there no consideration that:

  1. assets in Defined Benefit plans where benefits are still accruing SHOULD be going up as more benefits accrue,
  2. values placed on alternative investments are questionable, and
  3. had the Plan been fully funded, 13% asset growth would have resulted in about $30 billion of earnings instead of $9 billion.

But the big numbers, as well as their trajectories, were ignored.

According to the July, 1 2016 GASB 67 disclosures:

Compared to the July 1, 2015 disclosures:

That is an increase in the total liabilities of $26.4 billion and the unfunded liabilities of $32.4 billion (about the size of the entire annual New Jersey budget) in one year.

Then there are the annualized payout amounts taken from valuation data:


20 responses to this post.

  1. Posted by S Moderation on November 30, 2017 at 12:46 pm

    It’s a no win situation. Pensions are a big problem in New Jersey and most other states. But they aren’t the only problem. New Jersey is one of the highest taxed states in the nation even without paying the ARC for years.

    The pension fund should have $244 billion (or more) to be 100% funded.

    If that money were actually there, there would be a hue and cry for tax cuts…

    “Why are we paying the highest taxes in the nation, when there is $244 billion sitting there for the overpaid trough feeders?”

    If there were $244 billion earning 13%, MOST of that $32 billion “earnings” is TAXPAYER money (or earnings thereof) and should be used for tax reduction or needed services.


    • Posted by Tough Love on November 30, 2017 at 1:01 pm

      Or ……………. all that money that rightfully HASN’T been put in (BECAUSE NJ’s Plans are unjustifiably grossly excessive) has remained in the Taxpayers’ pockets for THEM to (rightfully) enjoy the benefits of that 13% return.


  2. Posted by Tough Love on November 30, 2017 at 1:18 pm


    I suggest that you send a copy of this blog post to NJ’s current and next Governors, as well as every member of NJ’s Senate & Assembly, and to all of NJ’s major newspapers.

    You should identify yourself as a credentialed actuary with a specialty in pensions, strongly point out the EXTREME lack of reason to celebrate, and that a celebratory reaction to this very modest increase in the dollar amount of Plan assets shows either a complete lack of understanding of the seriousness of the problem or the lack of Political will to confront the Unions and implement pension/benefit REDUCTIONS …. which are without question a NECESSARY element of ANY “effective” solution to NJ’s pension mess..


  3. “State officials disclosed the fund held $76.3 billion in assets at the end of the October, its highest value in over two years.”

    At the peak of stock market bubble.

    “New Jersey is one of the highest taxed states in the nation even without paying the ARC for years.”

    Nope. About average, with above average public services. You want to see high taxes as a percent of income, look across the river.


    • Posted by S Moderation on December 2, 2017 at 12:48 pm

      One of my favorite sources: ITEP Who pays?

      “States commended as “low tax” are often high tax states for low- and middle-income families.”

      Californians also like to say they are the “highest taxed”. I often see in the blogs, people who can’t wait to get away from these high taxes. Better do your homework first.

      If you look at the different income quintiles, California “middle income” families pay a lower share of income than the national average (8.2% vs. national average 9.4%) They list NJ also slightly lower at 9.1%, and New York highest at 12%.

      (See Appendix A)
      California has the distinction of being the highest taxed “1%”, as a percent of income,
      at 8.7%. NY is second at 8.1%, and NJ at 7.1% is about the fourth highest.

      Note that in all cases, state and local taxes as a percent of income, the top 1% pays less than the national average for middle class taxpayers.

      Your mileage may vary. These are just averages. In any state, you could live next door to someone with the exact same income, and have radically different tax burdens. Look before you leap.


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