One Last Otiose Christie Pension Reform

The New Jersey Pension and Health Benefit Study Commission just issued their final report and it basically paints the Christie years, as diplomatically as appropriate, a waste on the pension reform side.

While since 2010 a start has been made on benefits reform, much more remains to be done. Intransigence, inaction, apathy and denial are habits the State can no longer afford when it is at risk of losing the budget flexibility necessary to respond to emerging challenges and crises. This is dangerous for every one. As events in both Flint, Michigan and Puerto Rico show, financial stress can lead governments to make bad decisions with unexpected, catastrophic consequences. New Jersey is not at that point yet, but should do everything in its power to ensure it does not get there.
New Jersey is certainly not Puerto Rico (which is beyond pay-go as they are using debt to pay retirees) yet. You don’t get to be the worst funded state retirement system in a nation of badly funded state retirement systems by chance. A vital component is coming up with reforms that wind up doing  nothing of any significance while providing the illusion of action. The last piece of this type of legislation that Chris Christie is likely to sign as governor came out of a Senate Committee this week:

It calls for stress testing and a disclosure of fees though in a njspotlight article on the legislation:

In addition to requiring the stress tests, the legislation would also codify a policy related to the disclosure of outside investment-management fees that the New Jersey State Investment Council has been following in recent years. That’s come in the wake of concerns that have been raised by public-worker union officials about the practice of using the outside fund managers to oversee so-called alternative investments like hedge funds and private equity. Murphy, a Democrat, has criticized the hedge-fund investments, and he is pledging to get rid of them.

Still, the fees — which cover basic management duties and also reward good investment performance — totaled nearly $620 million during the 2016 fiscal year, according to the SIC’s most recent annual report.

Basically you have the State Investment Council disclosing fees which spurs the legislature to pass a law that these fees have to be disclosed.

As for the stress tests, per the law:

The bill requires the boards of trustees of the Teachers’ Pension and Annuity Fund, the Judicial Retirement System, the Public Employees’ Retirement System, the Police and Firemen’s Retirement System, and the State Police Retirement System to adopt a uniform method to conduct and report regular stress test analyses of these State-administered retirement systems. The bill requires the uniform method adopted by the boards of trustees to be a method recommended by an organization of actuaries in accordance with generally accepted and nationally recognized actuarial standards, and approved by a majority of the actuaries of the retirement systems……The Office of Legislative Services (OLS) estimates the bill will result in an indeterminate recurring increase in expenditures the Department of the Treasury incurs in operating the State-administered retirement systems. Consistent with current practice, the additional administrative expenses will be charged back to the retirement systems.

Apparently the projections of depletion dates in the latest GASB 67 notice for the Judicial Retirement System with all those zeroes after 2021 could, for an additional fee, be better presented for public consumption.

17 responses to this post.

  1. Posted by Anonymous on December 6, 2017 at 2:23 pm

    Webster to issue new definitions in their latest edition as follows:

    ‘fake news’ any news outlet or source reporting negatively on Prez T Rump!

    ‘real news’ I think you get it…..


  2. Posted by Tough Love on December 6, 2017 at 2:31 pm

    Quoting …………

    “The New Jersey Pension and Health Benefit Study Commission just issued their final report and it basically paints the Christie years, as diplomatically as appropriate, a waste on the pension reform side.”

    Is the fact that much more SUBSTANTIVE reform has not been implemented (including many of the Comission’s own recommendations) the fault of Gov Christie or the fault of NJ’s in-the-Union’s-pocket Democratic Legislature ?


    • Posted by Anonymous on December 6, 2017 at 3:00 pm

      Yeah but he came up a lot light on the paying in part of his reforms. And who knows what might have been had he done better to adhere to it. Possibly some of those Dems might have saw their way clear, past the Union’s pockets, to support more reforms. You can say black and I can say white but either of us will never know. But then again the NJSC, you know the judges who’s retirement system will run dry first, said hip hip hooray! Onward and downward we go…..


      • Posted by Tough Love on December 6, 2017 at 3:11 pm

        Ii is a shame that The Judge’s Plan will dry up FIRST.

        It’s a small Plan (in the scheme of things) and I’m quite sure they will (somehow*) continue to get their monthly checks. Unfortunately it sets up NJ’s Taxpayers for possibly being asked to do the same thing when (not IF) the HUGE Teacher’s Plan runs out of assets.

        * hopefully it will be informal ….. no more than pay-go out of general revenue. While this will work for the (small) Judge’s Plan is certainly WON’T work for the (huge) Teacher’s Plan.


        • Posted by Anonymous on December 6, 2017 at 4:26 pm

          It won’t ‘technically’ ever come to that b/c as John’s previously stated the State’s ARC can be indiscriminately allocated (JRS, SPRS, PERS & TPAF). That should cover JRS & SPRS (next to run dry). Which, among other factors, will expedite PERS & TPAF run dry date.


  3. Posted by Anonymous on December 6, 2017 at 3:45 pm

    Not happening, pensions are State’s obligation, if the systems aren’t fixed, the payments will come out of the budgets, state, county and local employers.


    • Posted by stanley on December 8, 2017 at 9:13 am

      “if the systems aren’t fixed, the payments will come out of the budgets, state, county and local employers.”
      I don’t think that I would bank on that. What would you have them do, shut down the fire department to pay the retiree firemen? The pensioner shouldn’t forget that he is an unsecured creditor. He will probably do better than bond owners when push comes to shove but as far as getting one hundred cents on the dollar–sooner or later it won’t happen.


  4. Posted by Tough Love on December 6, 2017 at 4:01 pm

    I just read the Commission’s Final Report (linked in the first line of this Blog post) and I encourage all of this Blog’s readers to do so.

    The Comission’s recommendations provided a reasonable balance between the Workers’ desires (for the greatest possible pensions and Platinum+ healthcare both while working and in retirement) and fairness to NJ’s Taxpayers called upon to pay for almost all of it.

    What they are recommending boils down to:

    (1) honor PAST service pensions accruals, but for the FUTURE service of current workers, replace the current DB Plan with a Cash Balance Plan (yes, although not specifically stated, of lesser “value” than the current DB Plans or what would be the point). Clearly the future service proposal is more generous than the typical 2% to 4%-of-pay “match” commonplace in the Private Sector.

    (2) reduce active-worker and retiree healthcare benefits from the current Platinum+ level to Gold ….. approximating the healthcare benefits now granted many (large Corporate-employed) Private Sector workers

    (3) dedicated the saving from (2) to fund the now materially-underfunded PAST service pension accruals.

    Will reason or logic prevail ………… or greed continue the stalemate ?


    • Posted by Anonymous on December 6, 2017 at 4:29 pm

      Hopefully the former and not the latter – IT JUST MAKES SENSE! Of course predicated on some formula for reasonably stable funding source.


    • Posted by Anonymous on December 6, 2017 at 5:16 pm

      buried deep in Obamacare is the Cadillac tax that states in 2018 ..a 40 percent excise tax on high-cost employer-sponsored health plans, also known as the “Cadillac Tax.” any employee (public or private) who’s employer grants healthcare that employee shall be taxed at 40% .Trumps tax bill makes that null and void …


  5. Posted by boscoe on December 6, 2017 at 11:58 pm

    Another useless legislative response that wants to appear to do something but actually does nothing. But I have to admit, I learned something new: the fabulous adjective “otiose” employed by Mr. Bury. It’s my new go-to descriptor for so many political responses.


    • Posted by Tough Love on December 7, 2017 at 12:44 pm

      No, not even CLOSE.


      • Posted by Anonymous on December 7, 2017 at 2:43 pm

        How so?


        • Posted by Tough Love on December 7, 2017 at 8:54 pm

          The Comission’s proposals include (with perhaps some accommodation to long-service employees) no further accruals under the current DB Plans for CURRENT (not just NEW) workers. Retirement accruals for their FUTURE service would be under (newly created) Cash Balance Plans far less in generosity than the current DB Plans.

          The proposals also include a VERY material reduction in the generosity of healthcare benefits for BOTH Active and Retired workers …… from the current “Platinum+” to what Obamacare calls the Gold-level Plan. The healthcare savings would be used to shore-up the underfunded Pension Plans.

          Neither of the above were included in the earlier changes.


    • Posted by Tough Love on December 7, 2017 at 1:09 pm

      Why, so instead of NOW paying 10 times more than the cost of public services that THEY receive, they should pay 20 times …… and just so our insatiably greedy Public Sector workers can CONTINUE to get pensions and benefits with a generosity level never necessary, just, fair to taxpayer, or affordable ?


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