N.J. pension debt soared to $58B last year

That is the headline you may soon see (replacing $49B) when someone in the media adds up the numbers from the July 1, 2017 actuarial reports or, more likely, takes it from a press release from the governor’s office.

Of course it’s a ludicrously low value developed by using methods* designed to grossly understate contribution requirements but, for those who want to believe, here is a spreadsheet of numbers from those official valuation reports (with tabs for similar data going back to 2016,2015, 2012 and 2000). More numbers on the combined plans:

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.

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* The accrued liabilities are based on an interest rate of 7% this year (down from 7.65%) so the annuity factors are slightly higher but far below the honest interest rate that should be used for a fund with this type of massive unfunded liability and liquidity needs.

60 responses to this post.

  1. Posted by Anonymous on December 20, 2017 at 4:49 pm

    Why the big difference between State v Local unfunded??

    Reply

    • Main reason is the state shorting their contributions but the breakdown between state and local is 52.5% – 47.5% in participant count and 58% – 42% in benefit value so even if contributions were being made as suggested the state unfunded would be bigger.

      Reply

  2. Greed/Lies/Politics strictly by all NJ Leg’s/Politicians wanting popularity/reelection with promises to both NJ government workers and NJ Taxpayers,plus getting actuaries to lie, too.
    Need 401K type now, plus retro to fix this, PLUS stop abuses by’ those in the know’…

    Reply

  3. Posted by Tough Love on December 20, 2017 at 6:03 pm

    Oh My………….

    Tim, did you see that? ANOTHER source that total NJ “pension” payouts in fiscal year 2016 was $10.4 Billion.

    Quite a few comments back I simply pointed that out YOUR figure of $17.3 Billion was wrong because it included OPEB, but instead of checking to see if I was correct, you decided to double-down, insisting that you were correct and starting a litany of fights and name-calling with me because I strongly disagree with a Treasury-funded BAILOUT of the now grossly excessive Public Sector pensions & benefits.

    Happy how things are going ?

    Reply

    • Posted by Anonymous on December 20, 2017 at 6:16 pm

      Sore… “winner”?

      Reply

      • Posted by Tough Love on December 20, 2017 at 6:25 pm

        It’s not a contest.

        Tim’s proposal for a Treasury-funded bailout of the now grossly excessive Public Sector pensions & benefits (THAT being the ROOT CAUSE of the problem) is a terribly irresponsible “solution” and he would be far better off applying for an apprenticeship with Joel Osteen…… with “preaching” (NOT economics) clearly being his true calling.

        Reply

    • Posted by Anonymous on December 20, 2017 at 8:04 pm

      You mean this one?

      burypensions on December 19, 2017 at 5:08 pm
      Haven’t followed that part of the blog recently but if there was a $17.3 billion payout number that would have included OPEB payouts since that is a pass through for some reason and $7 billion seems about right for OPEB cost.

      Reply

      Reply

  4. Posted by George on December 20, 2017 at 7:30 pm

    Is this correct-ish?

    The NJ Div of Investments claims to have $77 B in assets. This report claims they need $80 B more assuming they get a 7% return for the next half-century at least, and retirees and their spouses die as predicted. A fully funded pension scheme would be 77+80 = $156 B This only addresses cash payments to retirees, not healthcare or other benefits.

    Healthcare and other benefits seem to be similar in payouts so a lazy person like myself would guestimate pension plus all other benefits would be twice the amount, $312 Billion.

    Reply

    • Posted by George on December 20, 2017 at 7:34 pm

      BTW, the COLA is gone (or maybe just dormant) on the cash pensions but not healthcare. Healthcare benefits are whatever they are that year, which is usually higher sometimes much higher.

      Reply

      • Posted by Anonymous on December 20, 2017 at 8:09 pm

        See above JB copy & paste, close but no cigar (appears to be ~70% of pension cost) on the double up for opeb cost

        Reply

        • Posted by George on December 20, 2017 at 8:21 pm

          Yeah, I didn’t read it right. I will blame my cellphone screen size. The Value of Benefits total is $167 billion. So my lazy doubling to include healthcare and everything else would be $334 Billion or so. I don’t see the .7 factor, where did that come from?. But I am just gestimating. The Dept of Inv most recent report claims assets are $77 billion.

          Reply

          • Posted by Anonymous on December 20, 2017 at 8:35 pm

            I’m just guesstimating as well based on the back and forth between TL & Tim regarding ‘actual’ annual payouts of ~$10B (apparently for pensions) versus $17B (apparently for pensions & open). Realizing one year actuals is certainly not representative of future accrued benefits value.

    • Posted by Anonymous on December 21, 2017 at 8:33 am

      PLEASE you’re just covering your a** you and yours are hardcore GOP all the way!

      Reply

      • Posted by Tough Love on December 21, 2017 at 11:19 am

        If I said I was poor, you would say that I was rich, and if I said I was rich, you would say that I was poor………….. because somehow you believe doing so is constructive.

        Reply

    • Posted by stanley on December 21, 2017 at 11:31 am

      “Dheck out this Trump kiss-ass fest:” What is your point? That they should have left the health care requirement in place? That they should have bellied up and repealed Obamacare? Some folks want the health care commissar to take over everything.

      Reply

      • Posted by Tough Love on December 21, 2017 at 1:18 pm

        My “point” was that (a) the net impact is a HUGH benefit to the wealthy, crumbs to the middle/lower class, and a HUGH increase in the National debt, and (b) I believe most of those PRAISING Trump really DESPISE him.

        Reply

      • Posted by Anonymous on December 21, 2017 at 4:06 pm

        Irony comes in all sizes! Now I’m not saying all but I’d venture to say a majority of active/retired military supported (maybe not all of them still support) Trump. Why? Well first he’s Republican and the military feel their self interests are best supported with the RED party. The ironic part is the GOP (ie Trump) swore to repeal Obamacare, which of course has zero impact on military personnel b/c they get free coverage anyway. Save the usefulness of that coverage for another blog.

        Reply

  5. Posted by Tough Love on December 21, 2017 at 12:48 am

    This change will be going straight into the Property Taxes of NJ’s Residential & Commercial real estate.

    http://www.nj.com/politics/index.ssf/2017/12/christie_accounting_change_drives_pension_price_ta.html

    Another reason why these ludicrously excessive Public Sector Pension Plans in NJ should be FROZEN for all CURRENT workers ….as recommended by the NJ Pension & Bbenefit Study Commission.

    Reply

  6. Posted by George on December 21, 2017 at 10:55 am

    Possibly important social trend affecting pensions: Boomer hate. A Very contrived article, but their point is unlike people born before 1946 those born after really don’t deserve all their benefits packages.

    How the baby boomers — not millennials — screwed America
    “The boomers inherited a rich, dynamic country and have gradually bankrupted it.”

    https://www.vox.com/2017/12/20/16772670/baby-boomers-millennials-congress-debt

    Reply

    • “I hear you, man…”. (Sean Illing)

      What did those damn boomers do?

      They “have committed “generational plunder,” pillaging the nation’s economy, repeatedly cutting their own taxes, financing two wars with deficits, ignoring climate change, presiding over the death of America’s manufacturing core, and leaving future generations to clean up the mess they created.”

      Therein lies the problem. We haven’t been paying enough taxes?

      Reply

  7. Why You Should Care About the Multiemployer Pension Crisis

    Even if Congress does not provide direct assistance, all will feel the consequences of fewer jobs, less consumerism, and greater reliance on state programs.

    https://www.uschamber.com/series/above-the-fold/why-you-should-care-about-the-multiemployer-pension-crisis

    And if you think that’s bad, wait till the public pensions start to fall.

    Reply

    • Posted by Tough Love on December 21, 2017 at 1:04 pm

      SMH,

      What is the OTHER side ?

      Doesn’t the amount of ADDITIONAL taxpayer payments INTO Public Sector Plans (to fully fund them) ….. mean LESS for Taxpayers to spend ?

      You know it does ….. and you do this all the time …… which is why anything you say should be carefully considered for it’s accuracy, completeness, and important omissions.

      Reneging on the ludicrously excessive Public Sector pension & benefits has ZERO net impact on the economy. The SAME amount of money will spent in total, just more of it by the taxpayers and less by Public Sector retirees.

      Reply

    • Posted by SMH on December 21, 2017 at 3:49 pm

      All in the timing. At the first sign of recession, lots of workers start spending less in anticipation of layoffs or cutbacks. Bad time for new business to start or existing business to expand. It is a downward spiral. Regular pensions, including Social Security and private and public pensions tend to dampen the effect, because they don’t have to worry (as much) about unemployment.

      Ask Aliya Wong, Executive Director of Retirement Policy, U.S. Chamber of Commerce
      It is a very conservative lobbying group (The Chamber was created by President Taft as a counterbalance to the labor movement of the time.)

      PARADOX OF THRIFT RECESSIONS

      http://www.nber.org/papers/w19443.pdf

      Also, It is their damn money. It is called deferred compensation. I suppose the taxpayers would be happy to have public employees work for less wages, so the taxpayers can “contribute” more to the net impact, but…

      Reply

      • Posted by Tough Love on December 21, 2017 at 4:33 pm

        All “spin” coming from a retired PSU who doesn’t want his pension or benefits RIGHTFULLY reduced.

        It “works” as I stated above:

        “Reneging on the ludicrously excessive Public Sector pension & benefits has ZERO net impact on the economy. The SAME amount of money will spent in total, just more of it by the taxpayers and less by Public Sector retirees.”

        And as to …………

        “Also, It is their damn money. It is called deferred compensation.”

        Baloney. The grossly excessive Public Sector pension/benefit “promises” were NEVER necessary, just, fair to taxpayers, or affordable. They were simply STOLEN from the taxpayers via the underhanded deal-making between their Unions and our Union-campaign-contribution BOUGHT Elected Officials.

        Reply

      • Posted by SMH on December 21, 2017 at 5:28 pm

        Déjà pu

        Reply

  8. Posted by Anonymous on December 21, 2017 at 12:54 pm

    If only SOMEBODY had a plan to save the union pensions. That would benefit ALL of us.

    And the public pensions. It’s for the good of the country.

    Reply

    • Posted by Tough Love on December 21, 2017 at 1:07 pm

      Sure, as long as it does NOT involve more Taxes or less services.

      Reply

      • Posted by PS Drone on December 21, 2017 at 4:31 pm

        I will go for fewer services. Not to “fund” the outrageous PS pensions, but to reduce the ongoing burden on society of so many under-productive drones. In my view, we could eliminate 1/3rd to 1/2 of the drones and few would notice. If the citizenry has to pick up any slack on a part-time basis, so be it.

        Reply

    • Posted by Tough Love on December 21, 2017 at 1:12 pm

      With respect to NJ’s Public Sector pensions mess, there EXISTS such a Plan, the Plan proposed by the NJ pension and Benefit Study Commission.

      But we know that’s not acceptable to the Unions/workers/retirees, because they want to KEEP all of the now ludicrously excessive, unnecessary, unfair to taxpayers, and clearly unaffordable pensions & benefits that their Unions have successfully BOUGHT from NJ’s Elected Officials with BRIBES disguised as campaign contributions and election support.

      Reply

      • Posted by Anonymous on December 21, 2017 at 4:21 pm

        Speak for someone else not me. I think the proposals can be a working model for a fair resolution for everyone.

        Reply

        • Posted by Tough Love on December 21, 2017 at 5:02 pm

          So far NJ’s Union-beholden/Democratically-controlled Legislature has taken no action on the Comission’s proposals.

          Reply

    • Posted by NJ2AZ on December 21, 2017 at 4:17 pm

      any plan that would save pensions, private or public, essentially involves finding a few trillion dollars that currently know one knows about. I tend to agree with TL that taxing to raise the revenue is just moving air around the balloon.

      ideally, GDP would suddenly increase by a few trillion and all the new found riches would be plowed into pensions, but i reckon the odds of that happening are…..low.

      Reply

      • Posted by Anonymous on December 21, 2017 at 4:42 pm

        Not to distract as my accusers allege! What is the difference if the Fed’s print money to fund their P&B’s and/or State and Local P&B’s? It’s just a lot more ink and paper not to mention dollar devaluing.

        Reply

        • Posted by SMH on December 21, 2017 at 5:54 pm

          “What is the difference if the Fed’s print money to fund their P&B’s and/or State and Local P&B’s?”

          Well, now that you put it in those terms…
          There is no difference.

          Reply

          • Posted by Tough Love on December 21, 2017 at 6:35 pm

            The pension & benefits of NJ’s workers impact me more directly.

            Besides, there is not much “pressure” on the Fed to “fund” their workers’ pension & benefits BECAUSE they have that printing press.

            Thank goodness NJ DOESN’T have one. What we need to do is AT LEAST what the NJ pension and Benefits Study Commission proposed. And there is MORE than sufficient justification to go further and reduce PAST service accruals…….. being as ludicrously excessive as would be a continuation of FUTURE service accruals under the current formulas/provisions.

          • Posted by Tough Love on December 21, 2017 at 6:55 pm

            And as far as SMH’s home State of CA, The proposals of CA’s “Little Hoover Commission” are VERY similar to those of NJ’s Pension and Benefits Study Commission. BOTH have very clearly recommended that a freeze or very material reduction in FUTURE service pension accruals for CURRENT workers is necessary.

      • Posted by Tough Love on December 21, 2017 at 4:42 pm

        In the very UNLIKELY case that the GDP increases by a few $ Trillion, do we (as a nation) not have MANY MANY MANY more worth* ways to spend (or save by paying DOWN the national debt) such money than topping up Public Sector pensions that are ludicrously excessive by ANY and EVERY reasonable metric ?

        * Healthcare for the poor who go without, support of the elderly-indigent, infrastructure repair and maintenance, enhancing educational opportunities, retraining of the under-employed, etc, etc, etc.

        Reply

        • Posted by Anonymous on December 21, 2017 at 4:47 pm

          IF the GOP are in power then clearly the rich will get an even bigger well deserved tax cut – LOL

          Reply

        • Posted by NJ2AZ on December 21, 2017 at 4:48 pm

          oh i know there are better uses for the money, my point was the since the pension promises were not funded as they were accrued, they became dependent on future productivity that simply never came to pass.

          on in less elegant terms: the situation is totally boned.

          Reply

          • Posted by Tough Love on December 21, 2017 at 5:14 pm

            Yes, but by saying …” the pension promises were not funded as they were accrued” …. you appear to be falling for the “trap” that Public Sector Union/workers bring up all the time …. that the CAUSE of the pension mess is the lack of “full-funding”.

            What the Union/workers DON’T tell you is that the calculation of the annual “full-funding” contribution is A FUNCTION OF (and moves in direct proportion to) the richness of the promises pensions. VERY generous pensions are VERY costly, and hence VERY difficult to fully fund. The lack of “full-funding” is not the CAUSE of the pension mess, but the CONSEQUENCE of the true underlying ROOT CAUSE….. grossly excessive pension generosity.
            ———————————————————————-

            Give this some thought……….. if Public Sector pensions were 2 or 3 or even 5 times MORE generous than the already ludicrously-generous level they are today, clearly we would be unable to “fully-fund” those “promises”, but wouldn’t the Unions/workers be saying the SAME thing ….. that the CAUSE of the problem is the lack of “full-funding”? Of course they would.

          • Posted by SMH on December 21, 2017 at 6:09 pm

            “the true underlying ROOT CAUSE….. grossly excessive pension generosity.”

            You will need a lot better data if you ever hope to get consensus there. Whether you approve of the pension levels is irrelevant. Whether you believe they were illegally or immorally negotiated is irrelevant.

            Even if you can prove the “average” pension is too high, that means you could only reduce the “average” pension. Leave all the other ones alone. Good luck collecting that “pound of flesh”.

            Give this some thought……….grossly excessive pension generosity is in the eye of the beholder.

          • Posted by Tough Love on December 21, 2017 at 6:58 pm

            At some point, the reality of the underlying MATH is going to butt heads with your claims of irrelevance.

            In the end-game, the math ALWAYS governs.

          • Posted by Anonymous on December 21, 2017 at 7:56 pm

            The math equals print the money Fed’s!

          • Posted by NJ2AZ on December 21, 2017 at 8:13 pm

            well, to clarify i also understand that if the real cost of the benefits had to be paid as they were accrued, they never could have been promised in the first place.

          • Posted by Tough Love on December 21, 2017 at 10:56 pm

            NJ2AZ, NOW you’ve got it right…………… the “Richness” of Public Sector DB Plan is well-hidden from Taxpayers by providing GUARANTEED pensions benefits but significantly low-balling the cost by completely ignoring all invest risk.

            Give this some thought ……….

            Private Sector Plans are required by the US gov’t (Treasury/IRS Regs.) to discount Plan liabilities using interest rates in the 3% to 3.5% range today. They are required to use these low rates to make it highly probably that the Plan sponsor can meet their financial obligation to Plan participants WITHOUT defaulting and sticking the PBGC (i.e., the Taxpayers) with the bill for the shortfall.

            Are big Corporate Plan sponsors stupid? Would they not vigorously protest being forced to use UNREASONABLY low rates? Of course they would … but they don’t. Everyone appropriately trained/educated knows that the rate required in the valuation of Private Sector Plans are reasonable. What is NOT reasonable is Public Sector Plans’ using not only MUCH higher rates (typically in the 7% to 8% range), but procedures that are also far more liberal than those allowed in the valuation of Private Sector Plans.

            You summed it up perfectly when saying ………..

            “if the real cost of the benefits had to be paid as they were accrued, they never could have been promised in the first place”

  9. Posted by SMH on December 21, 2017 at 9:42 pm

    “the math ALWAYS governs.”

    Nice bumper sticker, but.

    Still irrellevent.

    The money isn’t there. Whether from excessive pensions, failure to fund, and/or the Nigerian Prince scam. It’s gone, and who will lose? Public workers and taxpayers, many of whom are totally innocent and/or totally ignorant of the problem.

    There is no real difference in principle between underfunded state pensions and underfunded federal/military pensions. Unless somehow the intrinsic value of a pension system is now measured in what “impact” it has on TL. And no less reason the state/local systems should or should not be rescued.

    NJ2AZ, I don’t think your statement is true, either. It seems to be tied into the idea that the “cost” of pensions is measured by the risk free rate, or something similar. But that’s not the way it works .

    Reply

    • Posted by Tough Love on December 21, 2017 at 11:03 pm

      I have a lot of difficulty accepting that Public Sector workers are ….” totally innocent and/or totally ignorant”,

      While they (individually) are rarely hands-on in setting the level of their pension & benefits, THEY (the WORKERS) sure are the financial beneficiaries of the Union/Politician COLLUSION ……….. in the form of their oversized pensions & benefits.

      That being the case, THAT is exactly where the Taxpayers must look to “right this wrong”, by VERY materially reducing these workers oversized and unjustly-obtained pensions & benefits.

      Reply

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