New Jersey Must Step Up…..But Not Yet

O Lord, help me to be pure, but not yet.
– Saint Augustine

When it comes to funding New Jersey pensions incoming governor Phil Murphy had this stump speech:
.

.

But when outgoing governor Chris Christie took Murphy seriously and got the actuaries to lower the funding interest rate in the July 1, 2017 valuations from 7.65% to 7% necessitating larger pension contributions in the FY19 budget his tune changed.

According to nj.com:

“Governor Christie is playing politics with the pension fund by rushing this decision at the 11th hour,” a spokesman for Murphy, Dan Bryan, said in a statement. “At a time when our taxpayers are already taking a hit, our focus should be on lessening the burden of property taxes, not increasing it.”

 

 

47 responses to this post.

  1. Posted by Tough Love on December 21, 2017 at 11:25 pm

    No surprise, most politicians are 2-faced.

    Still waiting for the axe to drop on NJ Property owners when the 2% Police Salary arbitration Cap is allowed to expire.

    Reply

    • Posted by NJ2AZ on December 21, 2017 at 11:48 pm

      i honestly don’t even know how they can gouge people the way they do. I can’t even comprehend having something like $800 a month (or more!) going to escrow just for property taxes.

      Reply

  2. Posted by Anonymous on December 22, 2017 at 1:40 am

    Yet millionaires love New Jersey, TL ain’t moving ever.

    Reply

  3. How does a small interest change in an actuarial guess make any difference in actual solution…which is also a guess?
    Seems completely drop NJ retiree Medical for individual Medicare/gap policies, as rest of us, will free up a closest guess dollar amount for actual pension funding. Under 65 age NJ retirees can pay cost of staying inNJ Medical Plan, if they wish.
    Along with changing now, and retro to actual funding done, to mentioned many times 401K-like (b) system, with individual values for each person involved.
    Pay stub regular totals will tell each how their retirement plans are working out w/o political false promises.
    Stops game playing abuses by those taking advantage of 3 years top salaries on top of low years of pay in political appointments/elections in present Defined Benefits system.
    Good for morale of regular workers for NJ, and taxpayers not employed by NJ…just pay most of the bills

    Reply

  4. Posted by Anonymous on December 22, 2017 at 4:42 am

    Shouldn’t this lower “actuarial guess” also require employee contribute more to their own pensions as well …it’s their pensions not ours why must the taxpayers be required to step up

    Reply

  5. Posted by steve on December 22, 2017 at 6:45 am

    We have truly now entered into a “murphys law” era—packing my bags as we speak-“alas poor jersey I knew it well”

    Reply

  6. Posted by Anonymous on December 22, 2017 at 8:12 am

  7. Posted by Anonymous on December 22, 2017 at 11:19 am

    Woops guess we missed this as the much lower Fed benefits that NJ should adopt?

    As a FERS participant, you receive matching contributions on the first 5% of pay that you contribute each pay period. As the table below shows, the first 3% of pay that you contribute will be matched dollar-for-dollar; the next 2% will be matched at 50 cents on the dollar.

    Reply

    • Posted by Tough Love on December 22, 2017 at 11:24 am

      FWIW,

      A DB pension (such as the Federal FERS) with a 1% per-year-of-service “formula-factor” + a 5%-of-pay DC match is a GREAT DEAL less costly than the TRUE (now substantially low-balled) cost of the current DB Plans in NJ.

      Reply

      • Posted by Anonymous on December 22, 2017 at 11:29 am

        Ok so I said I’m in are you??

        Reply

        • Posted by Tough Love on December 22, 2017 at 12:04 pm

          Would it matter ?

          Reply

          • Posted by Anonymous on December 22, 2017 at 12:10 pm

            Something has to…..

          • Posted by Anonymous on December 22, 2017 at 12:16 pm

            Actually yes it does! Too many times in negotiating anything either side may reach too far creating a path to failure. Even Tim committed to reforms under his Fed bailout secnario. I believe it’s reasonable to expect no more than a Fed P&B level if Fed $s are involved in righting this ship. Let’s focus on this and not start with the exceptions like the Fed can print money and the private sector etc…..

          • Posted by Tough Love on December 22, 2017 at 5:28 pm

            Quoting Anon ……….

            “Even Tim committed to reforms under his Fed bailout scenario. ”

            A “bailout” (of Public Sector pensions) is NOT “reform”. It’s a Taxpayer giveaway to an ALREADY well-overcompensated group.

          • Posted by Anonymous on December 22, 2017 at 5:33 pm

            TL partial copy & paste from Tim’s reply on John’s previous post, his words not mine not yours; ‘YES! Reform is a requirement of my work. An absolute requirement!’

          • Posted by Tough Love on December 22, 2017 at 5:40 pm

            Anon ……

            “a requirement of my work” ………. “my work” ????

            WHAT “work” ? I have seen nothing of substance but preaching and a taxpayer-funded “bailout”.

      • Posted by SMH on December 22, 2017 at 1:06 pm

        Posted by Tough Love on December 22, 2017 at 12:28 am

        SMH,

        Yadda, yadda, yadda…

        “…. anything you say should be carefully considered for it’s accuracy, completeness, and important omissions. “
        =======================================

        Posted by Tough Love on December 22, 2017 at 8:52 am

        Here is a link to the (VERY modest and WAY lower than NJ’s) Fedeal FERS pension calculation:

        Yadda, yadda,… link.
        =======================================

        Comparing Federal and Private Sector Compensation, Biggs/Richwine 2011

        “Estimating the overall wage and benefit premium. The cross sectional regressions
        indicate a federal salary premium of 14 percent over otherwise similar private sector workers employed by large firms. We estimate a federal benefits premium of approximately 63 percent
        relative to benefits paid by large private employers. Combined, these generate a total wage and
        benefit premium of 37 percent.”

        “Summary. In previous sections we calculated a federal salary premium of 14 percent and
        a benefits premium of 63 percent, which together produce a wage and benefit premium of 37
        percent. Adding a job security premium of 17 percent of compensation generates an overall
        federal compensation premium of approximately 61 percent.”

        In their nationwide study using the same methods at about the same time period, Biggs and Richwine found for state workers about a 12 percent salary deficit, and a total premium (nationwide) of 10 percent.

        For individual states, the highest premium, with job security, was 56 percent for Connecticut.
        ========================

        Tru-ish… Federal pensions are  (VERY modest and WAY lower than NJ’s) or California.

        Also true, Federal wages, therefore total compensation, is WAY higher.

        Please stop me if you have heard this before… “You cannot compare pensions outside the context of total compensation.”

        And…
        “…. anything you say should be carefully considered for it’s accuracy, completeness, and important omissions. “

        SMH

        Reply

        • Posted by Tough Love on December 22, 2017 at 5:30 pm

          Yadda, yadda, yadda

          Reply

        • Posted by Anonymous on December 24, 2017 at 9:29 am

          The state of NJ will not default on its debts. The question of overall compensation is a fair one. However as our schools struggle to find teachers, one must ask, if the compensation is so great, why can’t we find enough teachers?

          Reply

  8. Posted by SMH on December 22, 2017 at 1:27 pm

    For What It’s Worth…*

    https://www.aei.org/publication/are-california-public-employees-overpaid/print/

    Biggs/Richwine also did a California specific study concurrent with the Federal comparison to the private sector. This study included state and local workers and did not exclude safety. The result was a 15 percent compensation advantage plus 15 percent job security advantage for a total 30 percent (compared to 61 percent federal advantage).

    *FWIW, meaning, you figuratively (or literally) cannot “take it to the bank”. These studies can give us some idea of comparison, but they are fraught with errors and disagreement among experts.

    Bonus points…FWIW

    US Soldiers Are Paid Significantly More than Civilians with Similar Skills and Education

    https://mises.org/blog/us-soldiers-are-paid-significantly-more-civilians-similar-skills-and-education

    Reply

    • Posted by Anonymous on December 22, 2017 at 3:22 pm

      Now I’m definitely in, and you??

      Reply

    • Posted by Tough Love on December 22, 2017 at 5:35 pm

      SMH,

      Did I miss something or did you just CONFIRM that CA Public Sector workers have a 30%-of-pay Total Compensation ADVANTAGE over COMPARABLY SITUATED Private Sector workers?

      If so, ALL of CA’s Public Sector workers should get an immediate 30% reduction in compensation. If that is not possible, their salaries should be frozen for 10+ years.

      Don’t like it? Quit.

      Reply

    • Posted by SMH on December 22, 2017 at 6:34 pm

      Missed it by a mile, Mr. Love.

      I said “according to Biggs and Richwine”, using the same methods, California workers have a much lower total compensation than federal workers.

      Higher pensions, but lower wages. Please stop me if you have heard this before… “You cannot compare pensions outside the context of total compensation.”

      But keep on trying, and…

      Reply

      • Posted by Anonymous on December 22, 2017 at 7:06 pm

        Actuary smd you make a good point and while things are burry bad they could be worse tl

        Reply

      • Posted by Tough Love on December 22, 2017 at 8:17 pm

        No SMH, You VERY clearly stated that VS PRIVATE Sector workers, CA’s PUBLIC Sector workers have a 30%-of-pay Total Compensation ADVANTAGE.

        P.S. Federal employee compensation is not relevant BECAUSE the wages, pensions, and benefits of CA’s Pubic Sector workers are paid from the Taxes paid by CALIFORNIA’S residents.

        The reference to FEDERAL worker compensation is there ONLY to divert attention from the VERY CLEAR need for materially reduce CALIFORNIA Public Sector worker compensation.

        Reply

        • Did not.

          I said that according to Biggs they were overpaid. Following immediately…

          I “VERY clearly stated that”…

          “….. you figuratively (or literally) cannot “take it to the bank”. These studies can give us some idea of comparison, but they are fraught with errors and disagreement among experts.”

          To wit…

          The Truth about Public Employees in California: They are Neither Overpaid nor Overcompensated
          University of California, Berkeley › irle › …

          California public‐sector workers are neither overpaid nor overcompensated | Economic Policy Institute
          Economic Policy Institute › publication

          “The reference to FEDERAL worker compensation is there” specifically because Mr. Love @ 8:52 stated that FEDERAL pensions are “VERY modest and WAY lower than NJ’s” (or CA).

          True…
          But
          Total
          Compensation
          Is
          Higher

          Ergo… “Please stop me if you have heard this before…” You cannot compare pensions outside the context of total compensation.

          1) “Federal employee compensation ..is.. relevant BECAUSE” Mr. Love brought up the comparison between pensions.

          2) “FEDERAL worker compensation is ..NOT.. there to divert attention” It is there BECAUSE Mr. Love brought up the comparison between pensions.

          C) Come on, Mr. Love. You’re not even trying.

          Reply

          • Posted by Tough Love on December 22, 2017 at 10:31 pm

            Oh, so YOU, a light-bulb-changer is challenging Andrew Biggs … with his PHD from the London School of Economics.

            And yet you seem to relish the attention from the Blog’s new wanna-be “economist”/commentator, Tim Alexander. Did you not notice that Tim likes “attention”, and especially likes anyone who agrees with him (reminds me of Pres. Trump)? The only “credential” I see for Tim is a Bachelors degree in economics.

            The Following is Mr. Biggs Bio:

            “Before joining AEI, Biggs was the principal deputy commissioner of the Social Security Administration (SSA), where he oversaw SSA’s policy research efforts. In 2005, as an associate director of the White House National Economic Council, he worked on Social Security reform. In 2001, he joined the staff of the President’s Commission to Strengthen Social Security. Biggs has been interviewed on radio and television as an expert on retirement issues and on public vs. private sector compensation. He has published widely in academic publications as well as in daily newspapers such as The New York Times, The Wall Street Journal, and The Washington Post. He has also testified before Congress on numerous occasions. In 2013, the Society of Actuaries appointed Biggs co-vice chair of a blue ribbon panel tasked with analyzing the causes of underfunding in public pension plans and how governments can securely fund plans in the future. In 2014, Institutional Investor Magazine named him one of the 40 most influential people in the retirement world. In 2016, he was appointed by President Obama to be a member of the financial control board overseeing reforms to Puerto Rico’s budget and the restructuring of the island’s debts.
            Biggs holds a bachelor’s degree from Queen’s University Belfast in Northern Ireland, master’s degrees from Cambridge University and the University of London, and a Ph.D. from the London School of Economics.”

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

            And STILL trying to divert the focus to Ferderal compensation so as to move the discussion AWAY from the URGENT and eminently justifiable need to very MATERIALLY reduce Sate & Local pension ….. including those in CA and NJ.

          • Alicia Haydock Munnell 

            (“California public‐sector workers are neither overpaid nor overcompensated | Economic Policy Institute)

            Is an American economist who is the Peter F. Drucker Professor of Management Sciences at Boston College’s Carroll School of Management. Educated at Wellesley College, Boston University, and Harvard University, Munnell spent 20 years as an economist at the Federal Reserve Bank of Boston, where she researched wealth, savings, and retirement among American workers. She served in the Bill Clinton administration as Assistant Secretary of the Treasury for Economic Policy and as a member of the Council of Economic Advisers. Since 1997 she has been a professor at Boston College and director of its Center for Retirement Research, where she writes on retirement income policy.

            They are both internationally recognized experts on pensions. I believe I read they are friends and have worked together in the past. They happen to disagree, and there are other experts on either side of the debate. You are free to believe who you will. As am I.

            YOU are the one who brought up Ferderal compensation, Mr. Love. I merely pointed out that your statement… “should be carefully considered for it’s accuracy, completeness, and important omissions.“

          • Posted by Tough Love on December 23, 2017 at 2:33 am

            SMH,

            If you Google-search…..”California public‐sector workers are neither overpaid nor overcompensated ” ……..the following article (with that title) from the EPI comes up:

            http://www.epi.org/publication/california_publicsector_workers_are_neither_overpaid_nor_overcompensated/

            The first sentence in that article says:

            “Full‐time state and local government employees in California earn about 7% less, on average, when compared with otherwise similar private‐sector workers.1”

            There is a #1 footnote at the end of that sentence. Scrolling down, the #1 Footnote says:

            “1 See the 2010 CWED Policy Brief, The Truth About Public Employees in California, by Labor and Employment Relations Professor Jeffrey Keefe (Rutgers University) and Research Economist Sylvia Allegretto (UC Berkley). The study uses data collected primarily from the National Compensation Survey, and in accordance with standard survey practice, focuses on year‐round, full‐time public‐ and private‐sector employees.”

            Which of course explains the FALSE conclusion.

            You and I have discussed Rutgers Professor Jeffery Keefe’s flawed work before. And Andrew Biggs has repeatedly pointed out major flaws his work. One MAJOR flaw is that Prof Keefe counts as the value of Public Sector employee pensions & benefits the actual employer contributions PAID in the year, not the (true, conservatively valued) MUCH MUCH greater value of the pensions & benefits ACCRUED in the year. That being the case (as Mr. Biggs points out) he vastly understates the TRUE value of pensions & benefits, which would explain Prof. Keefe’s patently absurd conclusion the CA Public Sector compensation is 7% lower than that of comparable Private Sector workers.
            ***************************************

            And you, KNOWING that the source behind you last comment is unreliable is more justification for my telling readers …………. that anything you say should be carefully considered for it’s accuracy, completeness, and important omissions.

  9. 7.0% is too much from these inflated asset values. That’s what used to be assumed when 5.0% of it was just inflation, not less than 2.0%.

    Reply

  10. California Must Step Up…..But Not Yet

    Mary Pat Campbell did an article on pensions that “paid 100 percent” of their ARC, but their unfunded liability was still growing, like CalPERS.

    Theoretically CalPERS should lower their discount rate immediately, if not sooner, but absent other pension reforms, I don’t see how they could do that without starting an avalanche of city/local bankruptcies.

    I’m amazed at the mindset of gubernatorial candidates who voluntarily go into this lion’s den.

    Reply

    • Posted by Tough Love on December 23, 2017 at 2:50 am

      SMH,

      You are correct. In fact, ALL DB Public Sector pension Plans should be valued using assumptions and methodology similar to what PRIVATE Sector Plans are required to use by the US Gov’t. And they SHOULD HAVE been doing so from day 1. And HAD THEY been forced to do so, the generosity of Public Sector DB Plans would be MUCH MUCH lower and more in line with those granted Private Sector workers by their employers, because it would have been obvious that richer Plans would not be “affordable”.

      Which gets us to the APPROPRIATE & NECESSARY pension reforms……….. a VERY material reduction in their now ludicrously excessive level of generosity.
      ————————————————————————————–
      By the way, you appear to respect (actuary) Mary Pat Campbell. Does that not extend to her referring to Tim Alexander’s proposal as ………… “DIFFERENT BAILOUT IDEA: DRAIN THE TREASURY”

      Reply

    • Posted by Tough Love on December 23, 2017 at 5:26 pm

      SMH,

      Follow-up ………..

      The difference between you and I is that YOU want CalPERS to lower the Plans interest rate assumptions while KEEPING the current (ludicrously generous) pensions*, while I want to lower the PENSIONS to the level that would have been affordable if the lower interest rate were in place from day 1.

      * essentially saying yeah I’m greedy. I want to KEEP the pension generosity level associated with the HIGH interest rate, but at the same time, I want the added security of the additional TAXPAYER contributions associated with LOWERING the interest rate.

      Reply

  11. Posted by S Moderation Douglas on December 23, 2017 at 4:40 am

    From day one…

    Posted by S Moderation on November 14, 2017 at 1:12 pm

    That’s not going to happen, Mr. Alexander. All money is fungible, but any money the government has can only come from one place, ultimately… The taxpayer. If there is a windfall, it belongs to the taxpayer, to be refunded (LOL) or redirected to other government needs, not just pensioners.

    The line is long. One recurring theme I see in social media is “Not one thin dime to illegal immigrants until ALL homeless veterans are taken care off. And you could use the same sentence substituting any number of special interest groups. I don’t recall ever seeing pensioners, especially public pensioners, in the second half of that sentence.

    Reply

  12. Posted by Anonymous on December 23, 2017 at 9:54 am

    Happy Holidays, Merry Christmas, and to a Never Fully Funded New Year! Holy scrambled eggs Batman no it’s the PW DBP Robin.

    Reply

  13. Posted by Anonymous on December 23, 2017 at 10:07 am

    I just had an ah hah moment, well not really. I started wondering if this GOP corporate giveaway, to not generation greed but rather always been greedy, would result in lower cost to consumers. Probably less likely than a Fed bailout of pensions.

    Reply

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