How Much Should NJ Be Putting Into Its Pension System?

Steve Malanga had this answer:
.

.
He is wrong.

The believable numbers from the latest actuarial reports:

The state puts in those Taxpayer Contributions except for Local PERS and Local PFRS which for the year ended June 30, 2017 would put the state deposits at $1,815,883,300. Raising that to $5 billion would be quite a jolt but even that additional $3,184,116,700 would put the total deposits from all sources at $8,863,585,565. Total outflow of payouts and expenses comes to $10,472,393,292. Negative cash flow: $1,608,807,727.

The NJ Division of Investment values their assets at $77.55 billion as of 12/31/17. Of that amount $46 billion is in “Global Growth” and $15 billion is in “Income”, either of which could be euphemisms for the various investments in hedge funds, private equity, and other self-valued investments. In reality there may be $50 billion in real money in the fund and, of that amount, about $30 billion are the employees’ own contributions that will need to be returned to them upon dissolution of the plan.

This makes it difficult to put a price tag on the amount the state would need to deposit annually to honestly fund promised benefits but one thing is certain: $5 billion is not it. $15 billion might be.

 

29 responses to this post.

  1. Posted by NJ2AZ on March 11, 2018 at 1:13 pm

    If Murphy is smart he’ll be one and done. I think whoever is elected in 2021 is going to be captaining the ship when it actually sinks.

    Reply

    • Posted by Anonymous on March 11, 2018 at 2:09 pm

      Not for Pfrs if they let it split.

      Reply

      • Posted by Anonymous on March 11, 2018 at 2:17 pm

        About $23 billion in assets. If all payments stopped from members, towns and no return on investments. They would have about a decade or so before the money ran out. The fund collected about $1.4 B and paid out $2.3B. If the fund makes about 5% it will break even for the year. Or is my math really off?

        Reply

        • Posted by NJ2AZ on March 11, 2018 at 2:36 pm

          I meant for PERS and TPAF. PFRS i agree has some time.

          Reply

          • Posted by Anonymous on March 11, 2018 at 3:43 pm

            And that funds crisis date will be pushed back further once tier 3 employees begin to make of the majority of members. That will happen in about 8 or 9 years. If they institute a minimum retirement age of 55 it will push the crisis date back even further. The other funds are toast.

        • Posted by Tough Love on March 12, 2018 at 12:30 am

          You’re forgetting that the annual payout will RISE as the number of retirees (under the older formula) AND the $$ amount of their pensions continues to grow for 20 more years before the impact of the formula change kicks in..

          Reply

  2. Posted by skip3house on March 11, 2018 at 1:43 pm

    “.. to deposit annually to honestly fund promised benefits but …”…Could take Malanga’s words as ‘after unfunded promises dropped’?

    Reply

  3. Posted by Analyst on March 11, 2018 at 2:25 pm

    This s a more realistic portrayal of the NJ fund . I hoe that the value of the assets is closer to 77B than your 50 b estimate . Maybe a good rule f thumb s that the contribution should be enough to avoid negative cash flow AND contribute to future earnings . Having the actual annual projections of payments and contributions would make this a lot easier .!on should also show the fund consulting and asset management fees . Lee u the good work , this is one of the best blogs in terms of real info .

    Reply

    • Posted by dentss dunnigan on March 12, 2018 at 7:05 am

      What happens if the SC rules joining a union not mandatory for all workers …

      Reply

      • Posted by Tough Love on March 12, 2018 at 7:33 am

        Less Union dues to BUY the favorable votes of our Elected officials with BRIBES disguised as campaign contributions.

        Likely little shirt-term impact, but hopefully a very material POSITIVE mid and tong term impact for the betrayed and beleaguered Taxpayers.

        Reply

      • Posted by NJ2AZ on March 12, 2018 at 10:26 am

        hopefully its followed up by a lawsuit by an employee who doesn’t want to be forced to participate in the pension system.

        Reply

  4. Posted by Eric on March 12, 2018 at 7:44 am

    John:
    I doubt that the New Jersey Supreme Court would rule that contributions must be returned to members upon dissolution of the pension plan. I bet it will not so rule.
    People throughout the country laugh at this “court” in light of the Berg decision regarding the cost of living adjustment default for existing retirees at the time of the signing of Chapter 78.
    Remember, those who contribute to the pension fund through employee deductions only have a property interest in the corpus. What if there is no corpus? I guess having an interest in nothing is something.
    Also in Bergos, where having a contractual right to sue for not having made pension contributions is something, despite the fact that the debt limitation clause prevents any suit from materializing. Again, having an interest in nothing is something. Pensioners had a contractual right to sue that could never be brought to court due to the Debt Limitation Clause of the New Jersey Constitution. This was Christie at his best. Why Christie? We now know that the New Jersey Supreme Court was merely an annex of his office. It was perhaps a satellite office marching like “brown shirts” to his commands.
    The debt limitation clause was never meant to be used to prevent the state from paying its current operating expenses in its fiscal budget such as yearly pension contributions.
    Again, New Jersey’s Supreme Court is second to none in the area of corruption. Perhaps Al Capone would have served as a proud member were he alive. The fact that he had no law degree is meaningless when the test is raw political corruption, and the law be damned. Perhaps he would have served with distinction, and of course, we would have included his portrait to be viewed by all visitors.
    The Banana Republic of New Jersey is alive and well.
    Eric

    Reply

    • Posted by skip3house on March 12, 2018 at 7:58 am

      “….The debt limitation clause was never meant to be used to prevent the state from paying its current operating expenses in its fiscal budget such as yearly pension contributions…..”
      What makes this true?

      Reply

    • Posted by Tough Love on March 12, 2018 at 11:23 am

      Insistence by the actives for the return of their own contributions instead of continuing to run the fund down to zero by continuing the outsized pensions to current retirees could lead to a gunfight at the OK Coral between the actives and retirees.

      The “Blue brotherhood” concept will dissipate rapidly when the fight for the spoils begins.

      Reply

  5. Posted by Eric on March 12, 2018 at 8:09 am

    Long-term capital projects not current operating expenses.
    Eric

    Reply

    • Posted by skip3house on March 12, 2018 at 8:48 am

      O.K, so true. Now, since ‘yearly operating expenses’ should have been paid/kept current, just how does NJ get those back taxes due from the taxpayers that still owe for those services. Obviously, new/current taxpayers do not owe this unpaid/unfunded ‘politically promised’ pension/Rx debt?

      Reply

  6. Posted by Eric on March 13, 2018 at 8:17 am

    The New Jersey Supreme Court, had many opportunities, to force the politicians, in the legislature, to make the required pension contributions over the course of many years, by merely enforcing the existing law. It did not. The court took the position that so long as retirees are receiving their pensions, the court will not question the method of the funding. This is like asking how are things going when one is falling from the top of the Empire State Building, and everything is still “peachy” at the 30th floor.
    It is for this reason, that the Supreme Court of New Jersey, reversed the unanimous opinion of the Appellate Division of the Superior Court, regarding the cost of living adjustments, by now allowing the default to existing retirees.
    Eric

    Reply

  7. Posted by geo8rge on March 13, 2018 at 10:34 am

    Is the NJ pension burden really twice California?

    California 39 Million people $21B pension payments
    NJ 9 million people $10.5B pension payments

    On a california level NJ pension payments should be: $21B x 9 / 39 = $4.85B
    But NJ pays out $10.5B per year, which is more than twice $4.85B.

    New 2017 pension data released: CalPERS payouts approach $21 billion, up 43% over past 5 years

    https://blog.transparentcalifornia.com/2018/03/12/new-2017-pension-data-released-calpers-payouts-approach-21-billion-up-43-over-past-5-years/

    Reply

    • Posted by Stephen Douglas on March 13, 2018 at 11:18 am

      CalPERS handles state workers and contracts some cities and counties. Several counties (about 20, I think) and several cities have their own separate systems. All teachers come under CalSTRS, which is very large in its own right.

      CalPERS may be only half, or less, of total California retirees.

      Reply

    • Posted by Stephen Douglas on March 13, 2018 at 11:24 am

      “The state’s two largest public retirement programs, the California Public Employee Retirement System (CalPERS) and the California State Teacher’s Retirement System (CalSTRS), cover 65% of the four million state, county, and local employees who are eligible for public pension benefits.”

      http://www.ppic.org/publication/public-pension-liabilities-in-california/

      Reply

  8. Posted by Stephen Douglas on March 13, 2018 at 5:18 pm

    Incidentally, that is a typical Transparent California headline.

    “CalPERS payouts approach $21 billion, up 43% over past 5 years”

    With no context. The number of recipients increased from 551,627 in 2012 to 668,059 in 2017.

    The average pension increased from $28,904 to $31,760

    Kind of like Illinois claiming a 1,000 percent increase in pension benefits since 1987. Like it wasn’t failure to fund the pensions that caused the underfunding.

    Reply

  9. […] $15 billion is the real contribution amount to honestly fund benefits – $11 billion of which to come from the state assuming that the $2 billion each that localities and members put in remains steady. […]

    Reply

  10. […] Also $8 billion less than it should be. […]

    Reply

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s

%d bloggers like this: