Murphy on NJ Pensions

Taking over the governorship of the state with the worst-funded pension system in the nation Phil Murphy invested almost a full minute-and-a-half on the issue in his first budget address:
.

.

Where can we expect the New Jersey Retirement System to end up with this policy of benign neglect?

Puerto Rico.

34 responses to this post.

  1. I forget — when do you project NJ pensions to be on paygo basis?

    Reply

  2. Posted by MJ on March 13, 2018 at 6:16 pm

    Look at Sweeney’s face and the other guy’s face in the background…I think that says it all!!

    Reply

    • Posted by PS Drone on March 13, 2018 at 11:09 pm

      I don’t care what taxes are raised so long as we get pre-K for all. . C’mon, its only money New Jersey!!

      Reply

  3. Posted by geo8rge on March 14, 2018 at 9:58 am

    Isn’t $3.2 Billion less than the $3.6 Billion listed as Taxpayer Contributions from your “How Much Should NJ Be Putting Into Its Pension System?” post.

    Reply

    • That $3.6 billion number from the post was the total government contributions including local. The state part of that was $1.8 billion (40% of ARC) and that was for the 6/30/17 year-end. The 6/30/18 year-end was $2.5 billion (50% of the ARC) and this one for the 6/30/19 year-end will be $3.2 billion (60% of ARC).

      Reply

  4. Posted by Tough Love on March 14, 2018 at 12:09 pm

    Quoting from Tim Alexander’s last posing ………

    “I am trying to complete my first of three papers as early as Tuesday . ”

    Anybody see that paper ???

    Reply

  5. Good morning Mr. Bury. I do like your work. May I ask the odds you think the governor can deliver on $3.2B in 2018?
    It seems to me that by 2020, we could see one or more states test the idea that a state cannot go bust. Looking at the volatility of the Dow Jones over the last few weeks, I get a sense of a possibility of a correction. Such would disrupt NJ state plans.
    It is no secret that states like IL and NJ are close to insolvent. If IL needs $130B for pension relief, what is the cumulative value of the IL liabilities, I wonder?
    It seems to me the larger problem is the tax base exodus. No comments on that. If a state is financially non-viable, no amounts of loans can help. Too bad. The Garden State is the prettiest place I have ever visited.
    Tim Alexander
    Triune
    805-402-4943
    tim@triunegfs.com

    Reply

    • Posted by Anonymous on March 14, 2018 at 4:45 pm

      I think you would see defined benifit plans frozen for current and ended for new employees long before a state would declare bankruptcy. Quite frankly, who would ever trust them to do business again. What contractor in their right mind enter into a contract to perform a service?? Everything would have to be done in house. Construction jobs, bridge building etc.

      Reply

      • Posted by NJ2AZ on March 14, 2018 at 5:02 pm

        even if they froze the plans, without cash coming in from current and future employees they’d like have to issue bonds to have the cash to keep making payments…

        i’m not sure there would be a market for that much paper

        Reply

  6. Posted by MJ on March 14, 2018 at 5:13 pm

    John, I have a question…do you believe that Gov Murphy, Sweeney, and the rest of the NJ legislature KNOW that the pensions will go bust and that these measures are nothing more than kicking the can down the road or do you think that in their minds they believe it can be fixed and payments carried as as usual to current and future retirees including the free life time health care

    Christie appeared to speak quite openly about just how bad it was and if significant reforms were not enacted it would go belly up…..

    Reply

    • I don’t see these guys understanding the extent of the problems. In part because politicians here have so much of their time taken up with getting and staying elected and one way to do that is to come off as if you have the solutions. For anyone who fully grasps the scope of the pension problem it’s hard to come off as having any solutions – much less palatable ones. Better to spout bromides and task some flunkies (or committees) with fixing it.

      Reply

    • Posted by Tough Love on March 14, 2018 at 6:54 pm

      MJ,

      Remember, from the Public Sector workers’ perspective, their pensions are contractually “guaranteed”, and “must/WILL” be paid even if the Plans assets run out. They don’t look at the rundown to zero as as-big-a-deal as would be the case in Private Sector contractual guarantee where no sucker (called “Taxpayer”) exists and can be forced to pony-up.

      Reply

      • ” Let’s say that as a condition of your employment, your company agreed to pay you a set retirement benefit from its retirement fund, with the implied understanding that the company would make the necessary annual contributions to keep that fund solvent. How would you feel when you later discovered your employer wasn’t actually making those annual contributions? Instead there is a severe cash shortfall. More specifically, how would you feel if your employer cited that shortfall – the one it created – as justification to slash your retirement benefits — the ones you were originally promised?”

        https://pando.com/2014/01/30/the-pension-heist-how-politicians-raid-retirement-funds-to-enrich-their-corporate-masters/

        Reply

        • Posted by Tough Love on March 15, 2018 at 1:49 am

          Responding to the question ………… “How would you feel ….”

          While I wouldn’t be “happy” about it, if my pension was as ludicrously generous as many in the Public Sector, and because I understand pension funding and finance very well, I would have realized all along that there was a high probability that the absurdly generous promises might not be met.

          Again, being an employee in the PRIVATE Sector, no sucker (called “Taxpayer”) exists that can be forced to pony-up.

          Reply

        • Posted by NJ2AZ on March 15, 2018 at 12:40 pm

          I’d blame myself for leaving something so critical as my retirement in the hands of other people

          But in the case of the public pensions is a sort of chicken/egg/ argument. The benefits cannot be paid because the funds were not set aside, but i firmly believe that if the funds had to be set aside in real time, those benefits never could have been promised in the first place.

          Reply

          • Posted by Tough Love on March 15, 2018 at 1:00 pm

            Yes, That’s my point.

            If the promised Public Sector pensions had to be valued using the SAME assumptions & procedures required of Private Sector Plans, AND the full ARC had to be contributed each year INCLUDING that associated with pension enhancements (to avoid any developing unfunded liabilities), the promised pensions would be so costly and unaffordable that they assuredly would be no grater than 1/2 their current value* (likely 1/3 for Safety workers).

            * “Value” encompasses not just the formula benefits but the generosity of the Plans provisions, such as the existence and level of COLA-increases, the youngest age at which pensions can begin w/o actuarial reduction for early retirement, and the use of less-than-true-cost early retirement adjustment factors.

  7. “Quis custodiet ipsos custodes?”

    Juvenal
    …………………………
    The government was supposed to protect those private sector pensions from loss, either intentional or inadvertent. How could they protect private pensions, when government is the worst offender?

    Reply

    • Posted by Tough Love on March 15, 2018 at 2:02 am

      The Public Sector Unions and our Elected Officials are the ones who deserve the BLAME for the current pensions mess ….. because they colluded to low-ball the cost while promising WAY more than was necessary, reasonable, fair, or affordable.

      Right now it’s the Taxpayers who are the “victims” because they are being forced to pay for the cost of that collusion. But even IF (and that’s a big IF) pensions are materially reduced, it’s very difficult to call the Plan Participants real “victims”, because they, being the financial beneficiaries of that Union/Elected-Official collusion, never deserved these out-sized pensions in the first place.

      Reply

  8. “They”…never deserved these out-sized pensions in the first place?

    Who is this “they” of whom you speak?

    Reply

  9. More “averages”?

    And the irony is…

    You can have a $30,000 pension and be “overcompensated” (according to AEI).

    Or…

    You can have a $130,000 pension and be undercompensated (according to AEI)

    There are more things in heaven and earth, Mr. Love,
    Than are dreamt of in your spreadsheets.

    Reply

    • Posted by Tough Love on March 15, 2018 at 12:18 pm

      Yes, be as we BOTH know, if you average the +’s and -‘s from ALL workers taken together, there is a VERY material Public Sector Total Compensation ADVANTAGE…… and it’s the differential from ALL workers taken together that financially impacts the Taxpayers.

      Reply

      • Posted by Stephen Douglas on March 15, 2018 at 1:13 pm

        Déjà pu.

        “Yes, be as we BOTH know,..”(?)

        The -‘s* are a BENEFIT to the taxpayer. Earning less than equivalent private sector workers, and you want to punish them too, in the name of “average”.

        And you consider yourself knowledgeable in the field of finance?

        Reply

        • Posted by Tough Love on March 15, 2018 at 1:21 pm

          Now you’re up to 100’s +3 times saying the SAME thing.

          EARTH to Stephen …………. what financially impacts the Taxpayers is the sum of the “+” and “-” Total Compensation differences ……….. and the Public Sector has a VERY material Total Compensation ADVANTAGE.

          And YUP (per the AEI study) it’s 23% of pay in BOTH CA and NJ.

          I must be eliminated ……….. taxpayers are fed-up being the sucker in the equation.

          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 )

Connecting to %s

%d bloggers like this: