Pension-…And Da Big One

Good morning gentle reader.

I would like to take a step back for a moment and ask a few questions.  Based on comments, I feel there are some misguided persons.

  • Do you believe there is a pension crisis?

If not, why are you here?  If so, the next question is;

  • What is the estimated size of the crisis?

In a December paper, the Heritage Foundation Pension Paper mentions the pension crisis, all in both public and private, at more than $7 trillion dollars, a magnitude larger than the banking crisis.  Is this a figure you accept?  If not, what would you place the value of the crisis at?  Please let me know.

  • If you believe the pension crisis exists and is very large, should we do something or nothing?

If you believe the size of the crisis is close to what the Heritage Foundation cites, then we cannot afford to sit idle and do nothing.  To take trillions of dollars out of consumers when we are a consumer economy would permanently break the American economy.  I see visions of Argentina in my mind.

Many in the bond world believe muni and similar bonds (POB) are zero risk as the deep pockets of the states will cover any default.  Suppose NJPERS obtains $50 billion for pension relief.  Assume four percent (yields are rising) and a term of 30 years.  Using simple interest would suggest an annual payment of about $3.7 billion per year.  With the state a step above junk bond rating, could NJ cover this if the pension still fails, after the loan is received?  I do not see how.

What Toys R Us Shuttering Stores Means For Wayne”.  Toys R Us closing is also a loss to the NJ state income tax coffers, a topic not in the cited story.  “11 companies that are laying off up to 2,000 N.J. workers by April”.  Another case of NJ losing a tax base.  Both of these stories are from 2018.  “N.J. lost these 15 manufacturing plants in past few years”.  This story is from 2016.  Last year the state of NJ began asking why are companies fleeing NJ.  It is not just companies, but individuals are fleeing the state also.  The annual UHaul migration survey ranks NJ as the third largest outbound migration, again, in 2017.  A more important question than ‘are pensions sustainable’ should be ‘is the state sustainable’?  Mr. Bury works hard and presents interviews with the NJ administration.  The Governor and Treasurer speak to the pension crisis but what of the larger migration crisis?  I wonder, of the individuals fleeing NJ how many are retired on a government pension?  Remember, gentle reader, that if a retiree remains in the jurisdiction of his pension then the government can recover part of his spendings in the form taxes to the businesses he supports.  When a retiree flees the jurisdiction of his pension that money is forever lost to the government paying his pension.

While I am new to the pension crisis, I am well versed in finance.  I know a “lost cause” when I see it.  I find no evidence that New Jersey is sustainable, or that this fact is recognized by the administration.  If NJ were a corp., there would be a team of turn-around consultants working now to restore the state to a viable standing.

If a state presumes the primary source of revenue is taxation and the state does not preserve the tax base, but chases the tax base away, there is no more revenue.  A lesson many states have yet to learn.

There is no way I could recommend NJ as a candidate for pension “Reform and Refinance” so long as the state seems non-sustainable.  Harsh words but I know the crisis is too large and immediate for sugar coating.  Please share your thoughts.

Thank you and may your day be blessed.

Tim Alexander
Triune
805-402-4943
tim@triunegfs.com

32 responses to this post.

  1. Posted by Stanley on March 21, 2018 at 8:53 am

    There is no pension crisis. If an attempt is made to fund all promised pension and health care promises (you know, squeeze the taxpayers for the bucks, or induce the Fed to produce the new necessary media), there will be a very serious monetary crisis. It is high time for the American people to grow up and live within their means. An stop this infernal mooching. You don’t even add “God Bless” after your please for a handout. If you want to mooch, find yourself a street corner, get a chair and a sign and by all means put “God Bless” after your message. And grow up!

    Reply

    • Posted by Triune on March 21, 2018 at 9:07 am

      Thank you for your comments. If I understand your position correctly, you would see the crisis only if we fund the “unfunded liabilities”?
      It seems to me that many pensions are paying close to full amount, though the likelihood of running out of money quickly, is high. What would you imagine happens to our economy when we pull trillions out, annually?
      I would argue this is self-preservation. How did you fair during the last depression? Did you take a hit on the stock market? Friends or family unemployed? The dollars being discussed are a magnitude larger than the banking crisis.
      Finally, if you do not believe your own eyes, there is no pension crisis, why waste your time on a pension crisis blog?
      Tim Alexander
      Triune
      tim@triunegfs.com

      Reply

      • Posted by Anonymous on March 21, 2018 at 9:27 am

        I think he was being sarcastic. As in “I don’t care, no crisis, when it goes broke I won’t be affected…”. He thinks public employees are moochers and has a heart filled with hate. Not compassion as you do Tim.

        Reply

        • Posted by Triune on March 21, 2018 at 9:28 am

          🙂

          Reply

        • Posted by Tough Love on March 21, 2018 at 12:15 pm

          (1) He wasn’t being sarcastic.

          (2) When it comes to their pensions & benefits, Public Sector workers ARE “moochers”.

          (3) His heart is not full of hate because of his position …. see (2) above.

          (4) Tim has lots of compassion*, but doesn’t seem to “get it” that the money to make these pensions whole will (in one way or another) come from the taxpayers. It would just be moving from the pockets of the Taxpayers (making them POORER) to the pockets of the pensioners (to make them whole ….. and in the case of PUBLIC Sector workers to top-up LUDICROUSLY excessive pension promises).
          —————————–

          * That’s why Tim’s true calling is that of a preacher. Economics …. not at all.

          Reply

          • Posted by Anonymous on March 22, 2018 at 2:55 pm

            When you see state/muni pension managers resign or retire, you know that the time is near…

      • Posted by Stanley on March 21, 2018 at 12:34 pm

        Making the necessary adjustments will cause some difficulty for some, well so? Reality is an excellent teacher if it is allowed to deliver its lesson. There are and will be a staggering number of retirees relative to working stiffs. It is just plain sleazy for better-off retirees to demand an additional welfare benefit from younger people who are working hard and hopefully trying to prepare for their own eventual period of relaxation towards the end of life.

        This problem has only been coming on for the last two or three generations. If a problem develops over two or three generations and surprises you, then you deserve everything that you get from it. If you buy a bill of goods from a union huckster, you fully deserve to own a bill of goods.

        The economy will make the necessary adjustments to shifts in demand–you claim to be an economist–you should know that. Yes, my accounts grew smaller during the downturn in 08-09 as well as 00-03. That happens. I expect it and I also except it during the next 100 or will it be 500 year storm.

        Older folks are the ones who should be downsizing their living requirements and especially these union retirees learning to live within their means.

        Reply

        • Posted by Anonymous on March 21, 2018 at 1:54 pm

          I couldn’t agree more about balancing the budget on the backs of the young. Let’s start with a 10% cut in all social security benifits for anyone under age 75 and go from there. These folks had time to invest in 401k accounts. If they didn’t prepare better? Fuck em. Can’t keep voting down my kids school budget and expect those same kids ten/fifteen years from now to support you. I don’t care if you put into it all your lives either. Oh well.

          Reply

          • Posted by Tough Love on March 21, 2018 at 2:11 pm

            If you are the Anonymous that is the PFRS Officer, that’s pretty nice of you, considering that YOUR pension is (or will likely be) over $100+K annually and the average SS benefit is below $20K (and even the maximum SS benefit collectible at 66/67 is only about $32K for the most recent retirees).

            And what did Anonymous acuse in an earlier comment ….. “a heart filled with hate”. Sounds like that fits YOU.
            —————————————-

            Certainly qualifies for the “moocher” label.

          • Posted by Anonymous on March 21, 2018 at 2:46 pm

            Sarcasm TL. 🤔
            I don’t want it cut. After all my wife will get it and it can supplement my six figure pension. 😀😀😎
            It’s just funny how people that bitch about what others have are the first to complain when they are asked to sacrifice. Baby boomers are famous for this!!!! Fuck the schools fuck tha schools!!!! What? I only got a $20 a month SS raise?????? Waaah waaah???? Take care of me!!!! I put in all these years I shouldn’t have to cut back. Let this slacker kids support me. I don’t give a fuck that I voted down the school budget 10 years in a row. Why would I care since my kids graduated 15 years ago???? Of course I voted yes all those years. Hahaha.

            Folks like this are a fucking dime a dozen!!

          • Posted by Triune on March 21, 2018 at 3:12 pm

            A question for you. If Congress stole from Social Security, why should be be looking at cuts. Congress has been stealing the interest income since when, the ’70’s?
            I feel the primary problem is accepting less than responsibility from parties hired to run our country.
            Tim Alexander
            Triune

          • Posted by skip3house on March 21, 2018 at 3:34 pm

            “…..

            Posted by Triune on March 21, 2018 at 3:12 pm

            A question for you. If Congress stole from Social Security, why should we be looking at cuts. Congress has been stealing the interest income since when, the ’70’s?
            I feel the primary problem is accepting less than responsibility from parties hired to run our country.
            Tim Alexander
            Triune….”

            This is DEEP. Finally, admitting others are responsible for our own retirement funds. No, they are not, just us allowing creation of not understood complications beyond life expectancy to somehow create surplus money for over-promised retirement benefits.

          • Posted by PS Drone on March 21, 2018 at 8:22 pm

            Good idea. And then raise the benefit inception age for ALL public sector pensions to age 66, just like SS. Your sense of entitlement compared to the average private sector taxpayer is outrageous.

      • Posted by Stanley on March 21, 2018 at 2:14 pm

        “Finally, if you do not believe your own eyes, there is no pension crisis, why waste your time on a pension crisis blog?”
        ———————————————–
        How can you claim to be an economist and ask such a question? This isn’t my only go-to place for information but I have to know what is happening in the world so as to try to avoid pitfalls the best that I can. If you work in banking, you should know better than anyone that America has a financial management crisis–meaning that almost from one end to the other America is a subprime nation. Perhaps 20% of Americans have very strong finances and the balance more or less is a disaster looking for a banana peel or worse. Thinking that a new bailout will magically fix this foolishness is totally absurd. Another bailout is the last thing that is needed.

        Reply

        • Posted by Tough Love on March 21, 2018 at 2:21 pm

          The federal Gov’t pays for 40% of all expenditures with BORROWED money..

          Anyone who thinks that can go on forever (or even for decades) isn’t very smart.

          Reply

        • Posted by Triune on March 22, 2018 at 10:03 am

          Thank you for sharing your thoughts. If you read every one of my posts carefully you will see I never call for a bailout. What I do advocate is “Refinance and Reform”. Both together. As we have the ability to refinance now without taxpayer involvement, why not? Economically the problem is too large and will be much worse than the recent depression we just went through.
          I have observed that “Reform” is always easier when there is a carrot leading the way. I never call for the money to be given blindly, but that reform is part of the equation.
          We are sitting on the largest windfall in the history of the human race. I propose we use it to reform one of the largest financial calamities in the history of the human race.
          Tim Alexander
          Triune
          tim@triunegfs.com

          Reply

          • Posted by Stanley on March 22, 2018 at 12:21 pm

            ” If you read every one of my posts carefully you will see I never call for a bailout.”
            ——————————-
            The huckster resorts to euphemisms to disguise his effort.

            “We are sitting on the largest windfall in the history of the human race.”
            ——————————-
            Sounds like we are back to the magic beans. Drum roll please, “That box of money just setting there going to waste.” Heck! While we are spending the magic beans, why don’t we liquidate the student debt and pay off everyone’s mortgage, and heck further, look at all the jobs that we could create if everyone got a new Corvette. God Tim, just think of all the good works we could do with no more than just wishing. Tim, it is time to throw that college freshman hat away and join the real world.

          • Posted by Tough Love on March 22, 2018 at 1:12 pm

            I keep telling him that he should be a “preacher”. Clearly that’s his calling.
            ————————————————————————–
            And quoting Tim ……………. “There is no way I could recommend NJ as a candidate for pension “Reform and Refinance” so long as the state seems non-sustainable. ”

            Hey Tim, please tell us who in a position-of-authority to decide who gets help is waiting for YOUR recommendation ?

  2. Posted by Tough Love on March 21, 2018 at 2:14 pm

    Tim,

    You’re now 1 week BEYOND the date that you said that you expected to finish the1-st of 3 papers.

    If done, please share with this Blog’s readers.

    Reply

  3. Posted by skip3house on March 21, 2018 at 3:08 pm

    Dear Tim, Thank you for this blog. Sure to add to movement of people realizing ‘arithmetic’ is a fact, not a pleasurable excuse to hope for better times at retirement.
    As said all through these blogs/comments, promises w/o proper funding will not last forever……time to face reality, not constant delays by willfully ignorant politicians who play voters vs voters. Regards.

    Reply

    • Posted by Triune on March 21, 2018 at 3:27 pm

      I appreciate your kind message. Thank you. Economics is about numbers. But economics must be tempered by Humanity, else all is lost.
      We are in the third week of this month and my career is amazing. I can provide detailed analysis on a variety of topics, be it banking or finance or pensions. The opportunity for research is incredible. Just this morning I reached out to the Library of Congress for assistance on three separate research projects, looking for reports from the 1800’s through the 1970’s.
      Late this morning I was walking down the street, in the rain, and saw a shop I never noticed before. It is called Fishes and Loaves and is support for the homeless. I went in to look around and noticed a box with gloves, available to any that are cold. I looked and noticed my gloves, while wet, kept my hands very warm and dry. So I left my gloves and came home with cold hands. No big deal, I have more gloves.
      A man is not defined by testosterone but by compassion.
      Some few commenters scream “cut this” and “crook that”. I wish they could see in a mirror how blind and shallow they are. America is not made great by crushing your neighbor but by helping when he stumbles.
      I am working now to get before Congress. I am spreading my work far and wide.
      To any concerned about your pension. I cannot promise any change. But I can promise intelligent and determined individuals are working hard for dignified retirement, not one dumpster diving for food.
      Tim Alexander
      Triune
      tim@triunegfs.com

      Reply

      • Posted by Tough Love on March 21, 2018 at 8:02 pm

        Quoting …………

        “America is not made great by crushing your neighbor but by helping when he stumbles.”

        Not when that neighbor is a Public Sector worker who’s (via their ludicrously excessive pension and benefits) is robbing you blind.
        _______________________

        Quoting …………. “I am working now to get before Congress. I am spreading my work far and wide.”

        Be sure to let us know when that happens. Perhaps it will be televised and we can tune in.

        Reply

        • I must say I do enjoy reading Triune as a source of ENTERTAINMENT, but I do not believe a word of what he says. A CHARLATAN by any other name. Sorry, T. It just doesn’t ring true. And know, I will not call you to discuss it. lol

          Reply

        • Posted by El gaupo on March 22, 2018 at 2:04 pm

          Robbing would indicate some kind of crime is taking place. I entered into a lawful agreement. I agreed to be enrolled into PFRS as a condition of my employment. No choice. You want the job, you need to enroll in the pension plan. Nothing more than that. You may not like the terms of the agreement and in your mind it is unfair and I am a moocher. So be it. Not looking to change your mind. This is America after all. Doesn’t mean squat what your opinion is quite frankly. Just like mine doesn’t matter as to your compensation. I didn’t make the rules, just play by them. You can stomp your feet all you want. But you have two choices 1) run for office 2) move out of state. Because you’re life is obviously lacking something, hopefully not happiness, you feel the need to call us names. Last time I checked I am human just like you. Imagine that? Public employees have families to raise and lives to lead too. You are not any more special than anyone else because the taxpayers don’t pay your salary.

          Reply

          • Posted by Triune on March 22, 2018 at 3:00 pm

            El gaupo-well said sir!
            You will notice those that squeak the most offer no fact, just shrill cries.
            At this moment I am working on a new submission. I have been reviewing both the NJ State budget and actual financial results. It is not good. The documentation is lacking and leaves one with many questions. For example, the 2018 budget contains a Gas Tax Reserve of almost a billion dollars. Wow! And no discussion that I can find. See Page 10 of the NJ 2018 Budget.
            Page 32 of the budget states;
            “Total and individual revenues reflect the impact of the second phase of the tax reductions adopted during fiscal 2017. Revenue adjustments have been made to reflect the lowering of the sales tax from 7% to 6.625% and the elimination of the Estate Tax. Income tax revenues also are reduced to reflect a new personal exemption being provided to veterans, an increased pension and retirement income exclusion and an increase in the Earned Income Tax Credit from 30% to 35% of the federal benefit amount.
            For fiscal 2018, total revenues are projected to increase 3.6%.”
            When I look back at the ability of NJ to hit their budget, it is spotty and the budget lacks considerable disclosure. One thing is certain. NJ elected leadership is certain they can balance the budget with taxation. A lesson not yet learned is that a tax base is not infinitely inelastic. I salute the above quote as a plan to lighten some taxes and bring relief to the taxpayers. But based on the massive increased taxes I have seen since 2014, and with the documented tax base migration, I would estimate that NJ leadership is about to learn a rude lesson.
            If you look at the NJ Pension 2016 audited statement, you will see some depressing news. As of 2015, the fund was negative about $2B. for 2016, the fund was negative about $6.2B. Even if the new Administration can find the promised $3.2B to pay into the fund, the fund will still fail. It needs much more.
            El gaupo-please ignore the ignorant screaming others. Do not let your esteem be shaken. Part of the reason I am working as hard as I am is that you are like my sister and her family, playing by the rules and about to lose half of their CalPers pension. I do not find this tolerable.
            Stay tuned and write any time.
            Tim Alexander
            Triune
            Tim@triunegfs.com

          • Posted by Tough Love on March 22, 2018 at 4:04 pm

            Quoting Tim,

            “At this moment I am working on a new submission.”

            A NEW one ? ……………. you haven’t yet shared (with this Blog’s readers) all the OTHER ones you’ve referred to over the past few months.

          • Posted by Tough Love on March 22, 2018 at 4:09 pm

            Quoting Tim ………

            “If you look at the NJ Pension 2016 audited statement, you will see some depressing news. As of 2015, the fund was negative about $2B. for 2016, the fund was negative about $6.2B. Even if the new Administration can find the promised $3.2B to pay into the fund, the fund will still fail. It needs much more.”

            Specifically ………. “It needs more”.

            Absolute BRILLIANT deduction………….. given that in the past year, NJ contributed 50% of it’s ARC, an ARC calculated assuming that Plan assets would earn 7.65% forever and that it is appropriate to discount Plan liabilities ALSO at 7.65%.

            Certainly NOBODY other than an “economist” could have similarly come to that conclusions. Bravo !

          • Posted by Tough Love on March 22, 2018 at 4:58 pm

            El gaupo,

            I suppose robbery has a legal definition, but in common spoken English, is that NOT an accurate way to describe someone (i.e., being “robbed”) who is forced to pay an unnecessarily high/unjust amount in taxes BECAUSE excessive promises were made that assuredly were the result of collusion between the insatiably greedy Public Sector Unions and our self-interested, contribution-soliciting, vote-selling, taxpayer-betraying Elected Officials?

          • Posted by Stephen Douglas on March 23, 2018 at 12:16 am

            Mr. Love,

          • Posted by Tough Love on March 23, 2018 at 12:51 am

            Ah yes Mr. Douglas …………. words of wisdom from a CA Public Sector retiree, who while feeding at the trough, fights any and all evidence (no matter how clear or straightforward, or how strong) that Public Sector pensions are simply too darn generous.

  4. Posted by Anonymous on March 22, 2018 at 3:08 pm

    1. Admit that the currently underfunded public/muni pensions are corrupt and just not survivable. All sides are arguing and pre-positioning:
    * Taxpayers will not allow good money going for bad; they’re tapped out.
    * Current pensioners will not allow their COLAs to go away, let alone their pensions.
    * Current legislatures will not take ownership.
    2. Immediately liquidate all public/muni pensions that are not survivable and distribute based on years in the system.
    3. Immediately replace with 401k style DC plans w/ percentage match by taxpayers.

    Unless we’re honest and understand that these systems are unsustainable, we’ll get nowhere. Yes I understand that everyone will “position” to grab what they can. When you set the distribution levels based on real data, everyone shares in the misery.

    Reply

  5. Posted by alex hidell on March 22, 2018 at 10:23 pm

    Published: Dec. 11, 2017

    MSU SCHOLARS FIND $21 TRILLION IN UNAUTHORIZED GOVERNMENT SPENDING; DEFENSE DEPARTMENT TO CONDUCT FIRST-EVER AUDIT

    Contact(s): Mark Skidmore, Andy Henion

    Earlier this year, a Michigan State University economist, working with graduate students and a former government official, found $21 trillion in unauthorized spending in the departments of Defense and Housing and Urban Development for the years 1998-2015.

    The work of Mark Skidmore and his team, which included digging into government websites and repeated queries to U.S. agencies that went unanswered, coincided with the Office of Inspector General, at one point, disabling the links to all key documents showing the unsupported spending. (Luckily, the researchers downloaded and stored the documents.)

    Now, the Department of Defense has announced it will conduct the first department-wide, independent financial audit in its history (read the Dec. 7 announcement here).

    The Defense Department did not say specifically what led to the audit. But the announcement came four days after Skidmore discussed his team’s findings on USAWatchdog, a news outlet run by former CNN and ABC News correspondent Greg Hunter.

    “While we can’t know for sure what role our efforts to compile original government documents and share them with the public has played, we believe it may have made a difference,” said Skidmore, the Morris Chair in State and Local Government Finance and Policy at MSU.

    Skidmore got involved last spring when he heard Catherine Austin Fitts, former assistant secretary of Housing and Urban Development, refer to a report which indicated the Army had $6.5 trillion in unsupported adjustments, or spending, in fiscal 2015.

    Given the Army’s $122 billion budget, that meant unsupported adjustments were 54 times spending authorized by Congress. Typically, such adjustments in public budgets are only a small fraction of authorized spending.

    Skidmore thought Fitts had made a mistake. “Maybe she meant $6.5 billion and not $6.5 trillion,” he said. “So I found the report myself and sure enough it was $6.5 trillion.”

    https://msutoday.msu.edu/news/2017/msu-scholars-find-21-trillion-in-unauthorized-government-spending-defense-department-to-conduct/

    Reply

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