Cost of a New Jersey Public Pension

According to State Treasurer Elizabeth Maher Muoio at this week’s Senate Budget and Appropriations hearing:
.

.
You might also think about the black hole of political payback that those missed tens of billions of dollars in contributions went into but let’s focus on that $750 million number placed on one year of benefit accruals for participants in the system for which the state is responsible.

Based on data from the June 30, 2019 valuation reports here is the breakdown of active participants, annual costs, and contributions made by participants and taxpayers for the entire retirement system:

For the state portion only:

 

Perhaps the $750 million number was at a later year but I get only $565,765,782 as the state part of the annual cost which represents $2,574 per participant, a ludicrously understated value based on the benefits being provided.

Ye, New Jersey skipped tens of billions of dollars of pension payments that developed massive shortfalls but the funding requirements themselves developed such low contribution amounts that funding shortfalls were inevitable.

 

43 responses to this post.

  1. Posted by Tough Love on September 11, 2020 at 1:12 pm

    True, but as I have previously stated, the lack of full funding is not the CAUSE of the pension mess, but a CONSEQUENCE of the real ROT CAUSE ……….. ludicrously excessive pension generosity.

    Reply

    • Hmmm…have you been saying that? lol.
      Never would have guessed.

      Reply

      • Posted by Tough Love on September 11, 2020 at 3:10 pm

        As a future recipient of one of the pensions. I’m sure you disagree that the ROOT CAUSE is excessive pension generosity.

        If so, then how do you EXPLAIN/JUSTIFY a TRUE level annual TAXPAYER cost (as a %-of-pay) to fully fund PUBLIC Sector pensions over the working careers of the employees (using assumptions and methodology identical to that required by the US Gov’t in the valuation of single-employer Private Sector DB Pension Plans) that is about 5 TIMES greater than the ~4%-of-pay 401K contributions that is all PRIVATE Sector workers typically get in employer-sponsored retirement security from their employers ?

        And that 5 TIMES greater is for NON-Safety workers, rising to about 10 times greater for Safety workers like yourself.

        It’s nothing but legalized THEFT from the Taxpayers. Reneging on a 50+% share of these ludicrous promises is CLEARLY justifiable.

        Reply

        • Justifiable? In the eye of the beholder.
          Legal? Nope.

          Reply

          • Justifiable? No one seems to believe the dozens of articles about nationwide police (and teacher) shortages. Supply and demand is a simple concept, but it does get complex in real life applications.

            Edward Ring:
            ” One may have a civil debate over public safety compensation. There is a strong case to be made that police and sheriffs are not overpaid, since in California they face ongoing challenges to recruit new officers.”

            *Note, the challenges are not just one city out bidding another. For the right applicants, there are private sector opportunities with equal or better pay/working conditions. That goes for teachers as well as cops. Or engineers, plumbers, accountants, etc.

            Edward Ring:
            “If their pensions were reduced to a financially sustainable level, more police and sheriffs could be hired, and their base pay might even be increased without breaking municipal budgets.”

            *Of course! You can pay me now, or you can pay me later. Deferred compensation. It may be a personal preference, or it may be a policy decision. Even in the private sector, a job seeker may compare two jobs; one with higher wages and no pension, or one with lower wages and better pensions/benefits. That’s the way it works. (Almost… IRL, the choice isn’t always his. He may settle for his second choice because a better candidate took the other.)

            “Hiring more officers would also reduce overtime expenses.”

            *Except… it may –sometimes– be cheaper to use overtime than to hire and train new employees.

            ” But part of restoring financial health to California’s cities and counties requires making smart personnel decisions.”

            *Thank you, Captain Obvious. If it was easy, any pseudo-expert could do it. How ’bout… just reducing everyone pension accrual Goin forward by 50 percent.

            Or more?

        • E, good to know that TL is willing to grandfather you in as “very near retirement “.

          According to the way back machine, I, too have been grandfathered…

          Posted by Tough Love on March 8, 2014 at 11:43 pm

          If you read my recent comment in a prior post from Mr. Bury’s, a quick “proposal” I came up with suggested a ZERO reduction for retirees with a pension up to $50K annually.

          Perhaps the cutoff should (or will simply have to) be lower.

          Reply

  2. Posted by Marine1 on September 11, 2020 at 2:51 pm

    NJ figured it out. People who pay $10,000 per year in property taxes don’t want to hear anything about police defunding. Shocked they could figure it out.
    https://www.nj.com/politics/2020/09/nj-takes-hardest-stance-so-far-on-defund-the-police-movement.html

    Reply

    • Hard for me to get over Oliver for what she did to us ten years ago. She sold her soul to Joe D and Christie.
      However, I appreciate the support. Especially from a black female.

      Reply

      • Posted by NJ2AZ on September 11, 2020 at 4:48 pm

        Whats the deal with Oliver? Is she legit or a stooge like Murphy? I’m not sure i remember the last NJ politician (or really any politician) who wasn’t an empty suit but i guess every now and again some might be worth something

        Reply

        • Posted by Tough Love on September 11, 2020 at 5:10 pm

          Anyone willing (and BRAVE) enough to take on the Public Sector Union is a HERO.

          Bravo for Gov Christie who succeeded in suspending (hopefully PERMANENTLY) COLA-increases on NJ’s Public Sector pensions …….. a provision extraordinarily rare in Private Sector DB pension.

          There is ZERO justification for Elected Officials to grant Public Sector workers better pensions or benefits ……….. which is also a reason why ALL Taxpayer subsidies towards Public Sector retiree healthcare benefits should END……. as such employer-sponsored benefits are all but GONE in the Private Sector.

          Reply

          • She and Christie never should have messed with the cops.
            You want to stay in good graces TL with your best virtual buddy don’t you? Like the Hannity and Colmes if yester year. Support the GOOD men and women in blue. Not the bad ones.
            Nice to see the Yanks wearing NYPD and FDNY hats for 9/11. Oliver and the yanks on the same day? Must be driving the BLM folks crazy.

        • ZERO justification?

          Meh

          Andrew Biggs, and others, have written about the “proper” income replacement for retirees. Not just for public, but for private pensions, including Social Security and private savings.
          One interesting concept is that for the lowest income groups, with no pensions, saving for old age doesn’t make financial sense at all. Social Security pays a much higher percentage of lifetime wages, and social programs make up the difference. (With a little help from my friends. Or family?) So why short yourself on current needs. For a lot of people, including some very fine people in my family, this isn’t even a choice. Living paycheck to paycheck is a given.

          “Everybody knows”, public workers receive a larger share of compensation as benefits, rather than wages, than the private sector.

          Rethinking retirement, could the benefit share of compensation reasonably be reduced for public workers? (Got a problem with EQUAL?)

          Surely…

          Edward Ring:

          “Impose a ceiling on pension benefits to retirees, based on the principle that pensions are supposed to ensure retirement security, not lavish affluence. Similarly, establish a floor for pension benefits to retirees, based on the principle that employees at the low end of the pay scale are nonetheless entitled to retire with an income sufficient to live with dignity.”

          That makes sense. The caps on California pensions will eventually do away with the $200k+ pensions with all their shock value, and those workers will no longer be forced to contribute a percentage of pay on salaries above $130k, or whatever the cap is. They can save and invest that however they want, on top of their “reasonable retirement security”.

          But the middle and lower income state workers? That is debatable. “Deferred” compensation (MANDATORY deferred compensation, by the way) may be just the ticket. Face it, many middle income private workers are not saving enough, or will lose substantial savings to health problems, layoffs, recessions, or other emergencies.

          I personally believe public pensions serve an economic purpose above and beyond individual security. In times of recession, they level out overall spending, prevent a death spiral from lost wages in the private sector. I can’t recall, or find the latest numbers, but have heard that more than one in ten retired Californians have some level of public pension. And one in seven is a current public employee.

          The claim that everyone’s compensation should be equal is not logical.

          The idea that everyone’s wages should be equal is dumb.

          The opinion that everyone’s pension should be equal is ludicrous.

          It’s a policy decision.

          Reply

          • Posted by Tough Love on September 11, 2020 at 9:07 pm

            First, the obvious ……….. cut, paste, rinse, repeat.

            Next ……. Ok (and as I HAVE stated many times before), lower public Sector “wages” (where they are demonstrably lower on an apples-to-apples basis —– hours worked, productive output, etc.) do justify higher pensions and/or benefits but ONLY to the extent that the richer pension/benefits erases any lower wages.

            But Stephen Douglas, we know that is NOT the case in both our home States of CA and NJ, where Dr. Andrew Biggs has shown (in his AEI state-specific Public/Private Sector compensation study) that on the all encompassing TOTAL COMPENSATION basis (wages + pension + benefits), for the groups taken as a whole, PUBLIC Sector workers in both States have a 23%-of-pay Total Compensation ADVANTAGE.

            23% of pay year-in, year-out ………. that a LOT of money !

          • Non responsive –and– repetitive.

            ………. that a LOT of hooey !

          • Posted by Tough Love on September 12, 2020 at 11:14 am

            No Stephen, It was VERY responsive.

            You just have no way to upend those statistics ……….. the 23%-of-pay Public Sector Total Compensation ADVANTAGE in both our home states of CA and NJ.

          • Posted by Tough Love on September 12, 2020 at 11:50 am

            Quoting Stephen Douglas ………….

            “The claim that everyone’s compensation should be equal is not logical. ”

            That’s no my goal ………. only that there is no justification for compensating a PUBLIC Sector worker more than what the typical PRIVATE Sector worker doing the SAME job gets in compensation.

            What you have, is a warped sense of fairness, and/or the deliberate goal of compensating Public Sector workers at a higher level.

          • Those aren’t actually statistics, they are “authors calculations.” And the point I was alluding to is that this pension reform actually changes the proportion of benefits to wages.* Above the cap, the employee receives –no– pension benefits. His take home pay is increased by the 8-12 percent (in California) that is no longer deducted.

            This is pension reform. The state saves that portion of normal cost contributions above the cap. Yay, taxpayers! But…

            TANSTAAFL

            According to Ed Mendel. According to Ed Ring. Even according to Andrew Biggs, this is effectively a reduction in total compensation, and for –some– employees, will require an offsetting wage increase to attract and retain qualified employees.

            *Quoting Moi… ““Everybody knows”, public workers receive a larger share of compensation as benefits, rather than wages, than the private sector.”

            Excuse me, something just came up. While I’m gone, I just now found this document. MJ wanted new information.

            https://www.google.com/url?sa=t&source=web&rct=j&url=https://www.calhr.ca.gov/state-hr-professionals/Documents/2018-California-State-Employee-Total-Compensation-Report-2.pdf&ved=2ahUKEwjSzLCYiOTrAhVPSK0KHUvCDgsQFjAPegQIAhAB&usg=AOvVaw2fXcqcIJgGsQ5QuUJPOL2f

            I’ve only read the introduction, so don’t give away the ending yet.

          • TMI?

            I am making some notes I found interesting, but in the meanwhile,

            1. Why CA data on a NJ pension blog? Because it’s there. If you have similar info on NJ state workers, I would be interested to see it. Or Illinois, Idaho, or Texas…

            2. Is this data relevant? Job specific data is different from Biggs’ and others human capital studies. Each method has its own strengths and weaknesses.

            3. Is this data reliable? Some of it is. Raw data on wages in different occupations and in different areas of the state… probably. Benefits… not so much. I haven’t looked at their methodology, but a wild guess says they underestimated pension and OPEB costs. Best case scenario, they also underestimated local and federal benefits. And maybe private sector benefits too.

            4. Back from my break. The damn auto vacuum on my pool locks up when it tries to swallow a snail. Or a twig over three inches long. Pool service should be included in every California pension. And lawn care.

          • Posted by Tough Love on September 12, 2020 at 2:50 pm

            uoting Stephen Douglas ………

            “According to Ed Mendel. According to Ed Ring. Even according to Andrew Biggs, this is effectively a reduction in total compensation, and for –some– employees, will require an offsetting wage increase to attract and retain qualified employees.”

            True …… but as you stated, “for some”. But for the vast majority of those workers at the cap, and all workers below the cap (unaffected by this change) it LEAVES their Total Compensation materially greater (that darn 23% of pay ADVANTAGE) than that of their Private Sector counterparts ……….. for which there is ZERO justification.

          • “True …… but”

            I think “for some” is about as close as you can get with the available data.

            There isn’t sufficient data to show that the “vast majority of those workers…and all workers below the cap…” are overcompensated.

            Not in this report, and not in Biggs.

            There are over 230,000 state workers in California. This report covers only 23,000 in the 21 occupations in 5 bargaining groups. Enough to be interesting, but not definitive.

            The big groups that are missing…

            1. BU 1, Administrative, Financial, and Staff Services.. 50,000 employees, 22 percent of the state workforce. (that’s twice as many as this entire report.)

            2. BU 4, Office and allied.. 25,000, 11 percent of workforce.

            3. BU 6, Corrections, 27,000, 12 percent.

            Also smaller but significant Units like Attorneys, CHP, and Firefighters

            If any of that info is available, I would be glad to see a link.

  3. Off topic…

    Pension cuts coming for some California retirees after state Supreme Court ruling.

    I can’t find this outside a paywall, (what’s up with that?)

    Excerpts…

    “County-run pension systems up and down California are preparing to reduce some retirees’ income based on a recent state Supreme Court decision that disqualified certain kinds of pay from pension calculations.”

    “The reductions could affect retirees and employees from 20 counties that run pension systems regulated by the County Employees Retirement Law of 1937. The court’s decision won’t affect state workers or retirees from local governments that contract with CalPERS, which is regulated by a different state law.”

    “The changes vary from county to county, based partly on how each system chose to implement PEPRA when it was passed. In Sacramento and Stanislaus counties, reductions are expected to range from 1 or 2 percentage points to up to about 10%.”

    “Lower courts, which the Supreme Court left to work out some of the details, also could address clawbacks or refunds.”

    In other news… Trump lied, people died.

    Reply

    • Key word… “clawbacks” seven years worth? This could get interesting.

      Reply

      • Posted by Now Retired Pat on September 11, 2020 at 8:27 pm

        hmmm. I blame biased actuaries for the “professional” estimates that resulted in underfunding.

        Reply

        • ⬆️ this.

          Reply

        • Posted by Tough Love on September 11, 2020 at 8:57 pm

          I blame the moocher Public Sector Unions in collusion with the Elected Officials (they own via campaign contributions and election support) who granted these ludicrously excessive pensions …….. the ROOT CAUSE of the pension mess.

          Excessive pensions are VERY VERY costly to fully fund without extreme financial abuse of the Taxpayers.

          Reply

          • Are you drinking again? You hurting the feelings of your best bud in here ☹️😤

          • Posted by Tough Love on September 11, 2020 at 9:11 pm

            He’s talking about “blame”……….

            Well, that’s how I (and those not benefiting from this absurd structure SHOULD, if they have any brains) see it.

          • I have a very, very large brain.

            And I know more about pensions than anybody.

  4. Hey E, and here I am thinking I was your best bud 🙂 🙂

    I was surprised to see that statement from Sheila Oliver too but also glad to see it…..I sure hope that the BLM folks don’t decide to ransack her home. Could it be possible that she is a black female who doesn’t believe she is a victim of the racist police???

    Maybe she should make sure that she stays home for dinner for awhile 🙂 🙂

    TL and A, you guys have to give a rest with that copy and paste. We get it, you each have different views. If you must, at least present some new information to support each of your arguments

    Reply

    • She has none. And I am trying to bring her into the cool guys/best buds club. You’re already in. Lol.
      She is on her way though. Look at the progress she has made over the last year or so. I’ve grown on her. My pension and bennies she can handle. But… She WILL lose her shot if Trump gets in.
      I’ve found in my 25+ years of service that you attract more flies with honey than vinegar.

      Reply

      • And again, I was thankful for Oliver’s remarks. She pissed off a lot of cops back in 2010 along with Sweeney. But yesterday, She really was speaking from the heart and that is something we are not seeing from other democrats.

        Reply

  5. 2018 California State
    Employee Total
    Compensation Report

    Working backward…

    Appendix D 11 Retirement age and years of service…
    Interesting, I thought…
    1. More highly paid employees seem to have higher retirement age/more years of service.
    2. All occupations studied have average retirement ages 62-67, but the overall state average is 60. Presumably because Safety is not included in the study but included in overall stats.

    Appendix D 9 Demographics… Gender
    1. The lowest paid group (Unit 12, Craft and maintenance) is almost all male (92 percent)
    2. Statewide, males are only 54 percent.

    Appendix D 7 Length of state service
    1. 78 percent of state workers tenure is less than 20 years.
    2. Almost half work less than 10 years.
    3. This is why someone keeps posting “We have met the enemy and he is us.” Most state workers are not state workers atall. They are private sector workers on one of several job changes in their career. If they have a pension at all, it is probably enough for a monthly car payment or annual vacation. And odds are 50/50 they have no retiree healthcare.

    Appendix D 4 OPEB for retirees
    1. OPEB costs for state workers is higher than for local or federal workers. All three are probably undercounted.

    Appendix C 1 Compare average benefit as percentage of average wage.
    1. Unit 12 (that is me) is number 1. “Benefits” are 81 percent of wages. (Overtime and the value of vacation are included in benefits.)

    Appendix A 1 Wage and Total Compensation Comparisons to the Market Average
    1. Not surprising…
    a. Maintenance workers… 15 percent over market value
    b. Stock workers, order fillers… 43 percent over
    c. Landscapers… 13 percent over.
    * These are the “high school or less” group that Biggs cites as highly overpaid.
    d. Electricians. Lamp changers and their ilk… 12% below market wage/ 5% below total compensation
    2. Surprising…
    a.Doctors… 38 percent over market
    b. Dentists… 46 percent over

    Biggs would call these guys underpaid, normally. The only explanation I could guess here is that most state employed doctors work for the prison system, where they get hazard pay and overtime pay.

    The first half of the report seems to be methodology and comparison of wages between between geographical areas of the state. If you see anything interesting, let us know.

    Reply

  6. Oh dear lord.

    Yeah, funny that the states that are most strained in making pension contributions are ones that haven’t done full pension contributions even in good years.

    Mary Pat Campbell, 9/12/2020

    Reply

  7. 2018 California State Employee Total Compensation Report

    Part 2

    (With apologies to John Bury for using up bandwidth, and to MJ for copy/paste.)

    One of the “interesting but not definitive” points I saw in the CAL/HR report was…

    Stock Clerks and Order Fillers… Total compensation 43% above market value

    Maintenance and Repair Workers… 16% above

    Landscaping and Groundskeeping … 13% above

    These are among those “high school or lower” workers Biggs says are overcompensated… due to pensions and OPEBs.

    Their average wages…

    Stock clerks… $4,194 mo.
    Maintenance… $4,878 mo.
    Landscapers… $3,545 mo.

    In the two largest Bargaining Units, (office workers) you will find many wages similar or lower.

    E.g., DMV Representative… $2,870 – $4,160 mo.

    On average, these workers and thousands like them, will retire at age 62 with 20 years service. About $20-$25k per year (page D11.) Some with health benefits, some without. These are the people driving that 23 percent advantage. Or the alleged 23 percent advantage.

    That’s where the money is. If you want to “reform” pensions by reducing them, this is where you start. These are the ludicrously excessive pensions. I don’t think you will find the popular support or political will to do that.

    Reply

  8. I just happened upon this report while searching for “California state worker median wage ” (haven’t actually found that yet.)

    According to the report:

    “Authority and Background

    According to Government Code section 19826 (a) and (c), when the
    state establishes or adjusts salaries, “consideration shall be given to
    the prevailing rates for comparable service in other public
    employment and in private business,” and CalHR must submit its
    findings to the parties meeting and conferring, and to the Legislature
    at least six months prior to the expiration of a Memorandum of
    Understanding (MOU). The law requires that the state’s report
    contains, “salaries of employees in comparable occupations in private
    industry and other governmental agencies.” The Budget Act, Chapter
    23, Statutes of 2019, Item 7501‐001‐0001, Provision 1, requires that
    in addition to salaries the report must include total compensation and
    geographic comparisons.”

    This leads me to believe there must be other reports on the remaining 220,000 state workers, and perhaps those in other states. How else can you establish or adjust salaries?

    Reply

    • Posted by Tough Love on September 13, 2020 at 2:04 pm

      They are like not done.

      Why? Because like everything else in the Public Sector, VERY VERY rarely is one held “accountable” for NOT doing their job.
      ——————————
      And as an aside, just look at he CIRCUS now embroiling the CalPERS Board and management.

      Reply

      • Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on September 15, 2020 at 11:20 pm

        Dougie, you progressive surrender monkey, STOP SPAMMING us with your War and Peace long propaganda “copy and paste” bullshit, we’re not reading your novel long copied bullshit (aka “comments”) 🐕 🐕 🐕 Woof Woof!

        Reply

      • Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on September 15, 2020 at 11:33 pm

        And as an aside, just look at he CIRCUS now embroiling the CalPERS Board and management.
        ==
        Fucking A- Naked Capitalism is ALL OVER the entire upper management of CalTURDS, and getting someone fired on an almost weekly basis. Susan Weber is all over their bullshit. HS Grad, and CalTURDS CEO, Marcie Frost has somehow managed to survive, but Weber has Frost in her gun sights and Frost’s days are definitely numbered. The fact is CalTURDS entire upper management is corrupt, or incompetent, one of the two. Marcie Frost has NO business running the biggest pubic pension fund in America. 🐕 🐕 🐕
        https://www.nakedcapitalism.com/

        Reply

  9. “They are like not done.”

    What does that mean?

    Reply

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