Trusting Murphy Is S.O.S.

To date candidate, and now governor, Phil Murphy’s response to the pension funding crisis in New Jersey has always started (and ended) with:


And the first action of the Murphy administration on pensions…….

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, and in line with what other states were doing, Murphy cried foul and yesterday he got his acting treasurer to do something about it:

20 responses to this post.

  1. This is absurd.

    I’m just… okay, NJ is gonna go down before Illinois.


  2. Posted by MJ on March 2, 2018 at 7:13 am

    Mary Pat, with all of your expertise, do you really believe NJ is going down or will the politicians just keep raising our taxes, fees, tolls, etc…..look what Illinois has been doing to the taxpayers……… one seems to really care


    • Oh, they will =try=. It’s a race between New Jersey, Connecticut, Pennsylvania, and New York to run their rich people out while trying to pay for the pensions.

      The tax reform bill may have accelerated some of this.


      • Posted by dentss dunnigan on March 2, 2018 at 8:23 am

        What about California …?


        • From what I hear, the state itself is in reasonably good shape.

          Biggest problem in California right now is CalPERS has plenary authority on local governments. If any one city cannot, or will not, pay as required, they can be forced out of the system, and pensions reduced, as happened with Loyalton, but on a much larger scale. A slew of bankruptcies in the next year or two could be a game changer. Get two or three medium sized cities where future (and existing) pensions are reduced by 30-40 percent, and there just may be blood in the streets.

          Some cities right now are paying close to 100 percent of general funds on pay and pensions… and pension costs are still increasing.


          • Posted by Tough Love on March 2, 2018 at 7:33 pm

            Oh but they’re not “excessive” ???

          • Posted by Stephen Douglas on March 2, 2018 at 9:30 pm

            Interesting point, sometimes one hears the same thing constantly repeated, and they begin to accept it as fact. I don’t know how many times when I suggested California’s pension crisis was caused by the 2008 market crash and the ensuing “Greatest Recession.” I was repeatedly told that SB400 was the cause. I subsequently read that many local governments did not increase pensions, and only about 60 percent of safety workers opted for 3%@50. The remaining 40 percent seem to be just as underfunded, though.

            There were obviously governance and actuarial problems before 2008 that compounded the problem

            Are they excessive? If most cities had to pay only the normal cost, I think they might be affordable, even if the discount rate were lowered to the 5-6 percent range. But most, if not all local governments are paying more on the unfunded liability than on normal costs. Because… They lost $100 billion and haven’t been able to recoup it yet.

            1) Negative amortization is a bitch.
            2) Pension reform is needed to correct the pre-2008 problems.

          • Posted by Tough Love on March 2, 2018 at 10:07 pm

            Earth to light-bulb-changer ………

            Just because something may be “affordable”, does not eliminate the possibility that it may also be “excessive”.

            And the “point”…….

            Even if we (the Taxpayers) COULD “afford” the (very clearly) excessive Public Sector pensions, why should we not STILL fight to make then NOT excessive? Do we not have better and more appropriate uses for our taxes dollars than to unnecessary over-compensate our Public Sector workers?


            The ROOT CAUSE of the problem has ALWAYS been that Public Sector pensions (by every and any reasonable metric) are grossly excessive.

          • Posted by Stephen Douglas on March 2, 2018 at 11:25 pm

            “The ROOT CAUSE of the problem has ALWAYS been that Public Sector pensions (by every and any reasonable metric) are grossly excessive.”

            Déjà pu 

            Copy, paste, repeat.

  3. Posted by Tough Love on March 2, 2018 at 9:23 am

    RAISING the rate from 7% to 7.5% certainly won’t help these Plans precarious financial position, but it will lessen the money the State has to put into the State-sponsored Plans in the next budget, and will lower the big increase that would otherwise have hit localities (and therefore Local property taxes) for the Locally-sponsored Plans. I like the latter ….. less property tax increase. Who gives a crap if these thieving Plans die sooner ……… it’s inevitable anyway.

    Taxpayers in NJ have ALREADY contributed towards their Public Sector worker’s pensions FAR MORE than they get from their employers towards their own retirement security. This need to END, and for the future service of all CURRENT workers.


  4. Christie should have left that assumption remain at 7.5 and leave it to the incoming Murphy to reduce it on his watch. It was a mean-spirited and gratuitous hamstringing of the incoming governor which effectively reduced the funds in Murphy’s budget. Christie took credit for something Murphy would have done. Putting it back to 7.5% just resets the pieces of the game to where they should have been.


  5. Posted by Analyst on March 2, 2018 at 9:44 am

    The move to ” lower the rate of return ” is a straw man. Corporate plans have even higher rates of expected returns .also no one talks about the time horizon … 10 year, 20 year, 30 year ?
    The fact , however is that it does impact the contribution levels , which is why many get overly concerned about this . The key question still remains , will funding policy and investment policy lead to being able to pay benefits . Only a thorough financial ( not actuarial ) analysis will
    Show this .


    • Posted by Tough Love on March 2, 2018 at 11:47 am

      Wow, and you’re trying to come across as “knowledgeable” ?

      Corporate Plans use DIFFERENT rates for the investment return assumption and the rate for discounting Plan liabilities, the latter governed by ERISA/PPA and other regulations.

      The investment return assumption is certainly NOT higher (on average) than those of Public sector Plans, and the liability discount rate is typically in the 3% to 4% range. The latter makes a HUGE difference in the resultant funding ratio and the ARC, the “official” Public sector ones being a complete farce.

      Looks to me like you’re looking to stall the already VERY clear and immediate need for major reductions in future service pension accruals.


      • Posted by dentssdunnigan on March 2, 2018 at 2:03 pm

        Why not just raise the rate to 20% and declare the pensions fully funded …same difference


        • Posted by Tough Love on March 2, 2018 at 3:01 pm

          I’d go for that, except (regardless of it’s absurdity) that it would justify reinstating the COLAs.


  6. Posted by Tough Love on March 2, 2018 at 12:07 pm

    John, Mary Pat,

    An astonishing example of gross incompetence, chicanery, and betrayal of the Taxpayers:


  7. Posted by dntss dunnigan on March 4, 2018 at 1:47 pm

    Some of the comments are great ….but what do the rest of us know Murphy is a GS graduate with honors ……of the housing crash ….


    • Posted by Tough Love on March 4, 2018 at 3:35 pm

      As usual, such article teeter in addressing the real underlying ROOT CAUSE of the pension mess, but never get quite there.

      Here, this article said………

      “The “admission” will not come as a surprise to readers who have followed our series on US public pensions (more recently here, here, here, here, and here) and who are aware that one of the key reasons behind the systematic underfunding of US public pension funds has been the chronic optimism that they can continue to generate outsized investment returns.”

      Very true, but it should have gone on the say that ONLY long-term realization of those out-sized returns (and WITHOUT the endless stream of benefit improvements) could have achieved reasonably close to full funding ….. because the out-sized “BENEFITS” necessitated such returns.

      The “ROOT CAUSE” of the Public Sector pension mess has ALWAYS been ludicrously excessive pension “generosity”.


  8. Posted by MJ on March 4, 2018 at 5:29 pm

    TL stop getting yourself so upset about these things…in the greater scheme of things who cares what public workers get or don’t get. You know that you will never get the publics to agree with you so chill and enjoy every moment of every day.

    Maybe the pension scheme will implode on itself and maybe it won’t but it doesn’t have to upset you as much as it does.

    Surely not many people read this blog, maybe you need a larger forum to get your thoughts and opinions across with more like minded people…..or find a better way to educate taxpayers on what you feel is excessive

    Just sayin…….


    • Posted by Tough Love on March 4, 2018 at 5:40 pm

      MJ, Of course I know that I will never get the “publics” to agree with me …. the GREED motive.

      What I’m tying to do is to educate and rile up enough PRIVATE Sector taxpayers that eventually something will be done to address this Govt-Orchestrated THEFT……. aiming for VERY major reductions (of AT LEAST 50%) in the value of future service accruals

      There is no question that NJ’s Plans (with their VERY low funding ratios) will eventually run out of assets. The concern is, what happens if the COURTS tell the Administration that we must still pay full pension on a pay-as-you-go-basis ……….. a $10 Billion tax increase?


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