COVID-19 pushes nation’s weakest public pension plans closer to the brink

Wirepoints released a report on that topic this morning. Here are the parts where I am quoted with some exposition.

The New Jersey Teachers’ Fund had $26 billion in assets in 2018 – enough to cover only six years of payouts. The state’s public employee plan can cover just eight years of payouts. John Bury, a New Jersey actuary who writes on pension issues at Burypensions, warns that funds in his state could start bouncing checks to retirees. Plans like the teachers’ fund are stuck with alternative investments, private equity and other complex products and very little cash. He says that if the state stops making its full contribution and “this downturn lasts through this year, then New Jersey’s funds won’t have enough liquidity to issue checks.” (page 4)

Some funds, like some in New Jersey, are already in deep trouble. Bury says that if New Jersey’s funds were using honest accounting, “the plans would likely b e pay-go already. (page 5)

John Bury thinks that bailouts are likely given that so many funds are running out of assets. There will be a lot of financially responsible states that reject the idea of a pension bailout, he says. But if the federal government does get involved, it “should have some pension-reform strings attached.”Most states with failed pension plans will complain about having to reform. But they are running out of options. New Jersey and others “still have enough money to keep going for two to three years,” Bury says. “But after that, who knows?” (page 7)

The New Jersey Retirement System has been pay-go for some time as much of the $12 billion being paid out is coming from the roughly $8 billion being deposited into it ($4 from the state, $2 from localities, and $2 from employees). The ‘trust’ fund was supposed to have $75 billion in assets but market declines, forced liquidity, and honest accounting might bring that down to $50 billion. Then you have about $30 billion of the employees’ own contributions that have not been returned to them yet and those outstanding 1997 Pension Obligation Bonds which brings the net position of the fund (assets minus those liabilities) to just enough to cover a year of payouts (which can also be expected to increase as public employees are pushed to retire or take loans).

Seeing the real situation, New Jersey Senate president Steve Sweeney is seeking a federal bailout which is unlikely if it is earmarked for public pensions. What may happen is that New Jersey would funnel more money into the pension system from general revenue, also dwindling, in anticipation of getting bailout money this year that they can designate as being for Covid-19 and then wait for the first Biden bailout.

8 responses to this post.

  1. Posted by Tough Love on April 27, 2020 at 12:00 pm

    Quoting ………… “Then you have about $30 billion of the employees’ own contributions that have not been returned to them yet and those outstanding 1997 Pension Obligation Bonds which brings the net position of the fund (assets minus those liabilities) to just enough to cover a year of payouts (which can also be expected to increase as public employees are pushed to retire or take loans).”

    The portion of the above wrt the POBs is laughable, but unfortunately it was and still is a bad joke perpetrated upon on NJ’s Taxpayers. Those POB “assets” belong TO THE PLAN and will indeed be used to pay benefits, with NJ residents responsible to pay the interest and payoff the principal even after the POB assets are all gone. In fact, other than perhaps a bookkeeping entry, I doubt that the POB assets are distinguishable from other Plan assets.

    Quoting………..”What may happen is that New Jersey would funnel more money into the pension system from general revenue, also dwindling, in anticipation of getting bailout money this year that they can designate as being for Covid-19 and then wait for the first Biden bailout.”

    That is my guess as well, at least for the 1-st quarterly payment.

    Reply

  2. Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on April 27, 2020 at 9:26 pm

    The end game is near for NJ, IL, CT, KY and Chicago.

    Reply

  3. Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on April 27, 2020 at 9:33 pm

    We found tree trimmers in Chicago making $106,663; nurses at state corrections earning up to $277,100; junior college presidents making $491,095; university doctors earning up to $2 million; and 111 small town managers who out-earned every governor of the 50 states ($202,000).
    Very typical in all large Metro Governments today, across the nation.
    More laughable compensation for unskilled labor:
    Chicago (22,000) – We calculated that the city paid out $521.2 million in extra pay (overtime, vacation, supplemental, fitness, etc.) above base salaries. Four deputy fire chiefs made between $314,983 and $351,715. Police officers made up to $272,672 and EMT’s up to $270,851. The Chicago Transit Authority (CTA) paid line workers up to $300,135, telephone line workers up to $282,123, and escalator mechanics up to $203,855.
    Cannot wait until the roof caves in on these greedy, stupid, trough feeding LOSERS!
    https://www.forbes.com/sites/adamandrzejewski/2020/04/27/why-illinois-is-in-trouble–109881-public-employees-with-100000-paychecks-cost-taxpayers-14b/#7d6529f57ee9

    Reply

    • Posted by Marine1 on April 28, 2020 at 7:40 am

      Rex, I’m going to tell you something that no one else wants to say to you because they are too kind. No one on this board likes you or respects you at all. Even TL for all her flaws is more accepted and well liked on here. End of story.

      Reply

      • Posted by E on April 28, 2020 at 7:59 am

        I concur with that assessment. It is so true. What the hell is this shit anyway?🦴🐕🐶🐕🦴
        Grow up.

        Reply

        • Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on April 28, 2020 at 6:31 pm

          I concur with that assessment. It is so true. What the hell is this shit anyway?🦴🐕🐶🐕🦴
          Grow up.

          Pipe down you GED Wonder. You two little bitches are still fuming from that royal OWNING I laid down on you two dorks last week, when I slapped both of you two ass clowns to the curb.🦴🐕🐶🐕🦴

          Reply

      • Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on April 28, 2020 at 6:28 pm

        Rex, I’m going to tell you something that no one else wants to say to you because they are too kind. No one on this board likes you or respects you at all.
        MarineDork1, I’m going to tell you something that no one else wants to say to you because they are too kind. No one on this board likes you or respects you at all. Even EG for all his GED flaws is more accepted and well liked on here. End of story.
        Fixed! 🙂

        Reply

  4. […] states, the worst being New Jersey and Illinois, but others as well have poorly funded pension funds for state workers. In fact, they […]

    Reply

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