Murphy’s Fix for NJ Pensions

According to what is available to a non-subscriber to The Bond Buyer:

New Jersey Gov. Phil Murphy’s administration took the first step toward leveraging state assets to tackle its steep pension burden. State Treasurer Elizabeth Maher Muoiu issue a Request for Qualifications (RFQ) Feb. 7 for a state asset financial advisor who can determine the feasibility of using various assets to stabilize the seriously underfunded pension system. The move is in line with recommendations outlined by the bipartisan 25-member New Jersey Economic and Fiscal Policy Workgroup in August.

Here is what is proposed in the RFQ:

It is anticipated that this process will be accomplished in three phases. Phase 1 will consist of an asset/liability study and substantive analysis of the Assets and will provide for various options for maximizing the value of these Assets. Phase 1 must be completed by May 15, 2019. Phase 2 will consist of a more detailed analysis and structuring of some or all of the options which were the product of Phase 1. The State reserves the right, in its sole discretion, to not proceed with Phase 2. If the State determines to proceed with Phase 2, it is anticipated that Phase 2 will be completed within 90 days of its commencement. Upon completion of Phase 2, if such phase is pursued, the State will, in its sole discretion, determine whether to proceed with one or more of these options. In the event that the State decides to proceed with one or more of these options, Phase 3 will consist of assisting the State in accomplishing the full and complete execution of the chosen transaction(s).

What will happen is that some law firm will get $20 million to recommend that the state sell the Turnpike and/or the Garden State Parkway to the pension fund so that, as with the NJ Lottery sale charade, those phantom assets achieve these Murphy goals for the Retirement System:

  1. a higher funded ratio,
  2. lower contributions, and
  3. no benefit cuts.

The first two, being illusionary, will make the third item even harder to achieve in a real world.

24 responses to this post.

  1. Posted by skip3house on February 12, 2019 at 1:06 pm

    Or,…. it will make the Tolls too steep to afford, thereby losing more pension income, plus jamming other roads to an unusable state?


    • I don’t think it’s about raising tolls since this is a gimmick to get pretend-assets into the system to achieve the first two items above. One of the requirements of the sale may be to cap toll increases (though shoddy service by whatever conglomerate buys it might not be addressed).


  2. Posted by NJ2AZ on February 12, 2019 at 1:24 pm

    hah…i remember wondering aloud (mosting jokingly) if the state would consider hocking assets to meet their liabilities…and now here we are


  3. Posted by Anonymous on February 12, 2019 at 1:59 pm

    Wasn’t this Corzine’s scheme to sell the turnpike, etc


    • Posted by geo8rge on February 12, 2019 at 2:35 pm

      Corzine planned to ‘monetize’ state assets, really sell or lease. The problem might be that the assets are not really that valuable. If the Turnpike is worth 20 billion, and pension costs are upwards of 10 billion a year, the Turnpike buys 2 years of pension payments. search terms: corzine turnpike monetize privatize

      Corzine fails to avoid Turnpike-sale minefield

      It was no secret Corzine was considering use of state assets to generate cash, especially with some estimates indicating the state could reap $20 billion from the Turnpike sale alone.

      But what’s the plan? Put the toll roads into the pension scheme and stop making contributions? They have to come up with probably $11 billion this year for payments to retirees. I am wondering where they are going to get that? Liquidate pension assets while replacing them with toll roads? This does sort of allow the state to shift tax collection from localities to the state through tolls.


  4. Posted by Tough Love on February 12, 2019 at 3:02 pm

    Logically, we should assume that the tolls now collected on the TPK or GSP are used for the maintenance of those roadways, and if excess revenue exits, it is now used for needs that would remain (and STILL require the same funding) in future years.

    That being the case, monetizing either of these roadways would become nothing but a new (and rather large) tax in the form of increased tolls by whomever buys them. Isn’t that obvious given that all the money currently collected is “obligated” (and not going away) and any buyer will demand an attractive return on his investment (implemented in the form of increased tolls ……….. and likely, letting the road infrastructure deteriorate via minimal maintenance and then turning them back over to the State to deal with 20 years from now).

    Murphy (and his carefully-selected “Workgroup”) is WAY too supporting of NJ Public Sector Unions to be a source of EFFECTIVE solutions to NJ’s pension mess.

    And there are NO EFFECTIVE/REAL SOLUTIONS that don’t (as just 2 of many needed steps) include
    (1) VERY material (and very quickly phased-in) reductions in retiree healthcare subsidies for everyone, including those already retired, and
    (2) VERY material (think 50+%) reduction in the value of FUTURE service pension accruals for all CURRENT (not just new or those with less than 5 years of service) workers.


    • Posted by El gaupo on February 12, 2019 at 9:43 pm

      Sorry TL. This post should be on the last long thread. In a nutshell, this is why Trump got elected. Because of ridiculous decisions like this from the Glen Rock School district. Um… soldiers carry guns and the decision is a ridiculous disgrace. Veterans should be honored. In the real world, soldiers carry guns. I’m sorry. The only dopey school district in the state that wouldn’t allow kids to color pictures of soldiers with guns!!! Wow. Cops and soldiers carry guns as part of their uniform. Heaven forbid we have children draw pictures of that. OMG!!! Moderates like me HATE this shit. In fact, the vast majority of liberals can’t stand it either. If anything, my issue with the picture would be that would it kill them to maybe have the 2019 soldier be a female??? The others are fine because they reflect the era in which they served, but throw a female in for the last one. Or maybe a male and female. Couldn’t hurt. I betcha The dopey ass PC crowd would be satisfied and the contest would again be allowed in Glen Rock.
      OK. Back to pensions again for tomorrow.


  5. Posted by Anonymous on February 12, 2019 at 3:53 pm

    What about the lottery sale….wasn’t that going into pensions??


  6. Posted by bruce paterson on February 12, 2019 at 4:18 pm

    the key word from above is “leverage” not monetize—-all that means is more debt with the security to back it of either our open greenspaces, or our hard assets like the turnpike. great, pob’s baby!


  7. Posted by Anonymous on February 12, 2019 at 7:21 pm

    The politicians failed to make payments into the pension fund years back when times were good and money was easy. Why Ms. Whitman did you stop all contributions as well as subsequent Governors ? You guys did it and now the chickens have come home to roost. It’s time to fix it these people payed their share and deserve their due..


    • Posted by Tough Love on February 12, 2019 at 7:41 pm

      Quoting ………….

      ” these people payed their share and deserve their due.

      Oh, “their share” ………. do you mean the 10% to 15%/20% of the total cost
      of a pension easily 2 to 3 times for teachers (4 times for NJ POs) that typically granted comparably situated Private Sector workers ?

      Think about that.


    • Posted by skip3house on February 12, 2019 at 8:36 pm

      While we’re at it, let’s raise/repair the Titanic so it will not sink again?


  8. Posted by Anonymous on February 13, 2019 at 8:59 pm

    What about the recent ballot question that was voted in that allows the state to either raise the sales tax and/or our real estate taxes to pay for borrowed money if they can’t meet the obligation?


    • Posted by Tough Love on February 13, 2019 at 9:18 pm

      More details on this ballot question please.


      • Posted by Tough Love on February 13, 2019 at 10:16 pm

        I thought you might be referring to the $500MM School Bond approved in Nov 2018 so I looked up the Bond details.

        For anyone enamored by legalize, the following is ONE sentence………..

        “The State of New Jersey hereby covenants with the holders of any bonds for which government securities or moneys shall have been deposited in trust with the trustees or escrow agents as provided in this section that, except as otherwise provided in this section, neither the government securities nor moneys so deposited with the trustees or escrow agents shall be withdrawn or used by the State for any purpose other than, and shall be held in trust for, the payment of the principal of, redemption premium, if any, and interest to become due on the bonds; provided that any cash received from the principal or interest payments on the government securities deposited with the trustees or escrow agents, to the extent the cash will not be required at any time for that purpose, shall be paid over to the State, as received by the trustees or escrow agents, free and clear of any trust, lien, pledge or assignment securing the bonds; and to the extent the cash will be required for that purpose at a later date, shall, to the extent practicable and legally permissible, be reinvested in government securities maturing at times and in amounts sufficient to pay when due the principal of, redemption premium, if any, and interest to become due on the bonds on and prior to the redemption date or maturity date thereof, as the case may be, and interest earned from the reinvestments shall be paid over to the State, as received by the trustees or escrow agents, free and clear of any trust, lien or pledge securing the bonds.”


    • Posted by boscoe on February 14, 2019 at 12:04 pm

      That “backstop” language is included in every General Obligation bond issue enacted by the state. It basically promises that repayment of principal and payment of interest on the bonds is the first and highest calling on any and all assets of the state. Which means, that if the state is unable to service its G.O. debt in any given year from general revenue coming into the state treasury, the state will do what it takes to raise the money, including raising the sales tax or imposing a state real estate tax (not the existing local real estate tax). This provision has never been required or implemented.


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