How Stupid are Credit Rating Agencies?

New Jersey is planning to answer that question with S3637 which State Senate President Stephen Sweeney introduced by noting:

Taken together, New Jersey’s state and local pension systems have an unfunded liability of more than $60 billion — one of the worst pension problems in the country — and it affects everything from the level of taxes we pay to the bond ratings we receive, to the government services we can afford to provide.

Yes, unfunded liabilities as of June 30, 2020 are “more than $60 billion”. Much more ($128 billion under GASB68 and and $94 billion using understated valuation liabilities). But, setting that aside , how is Sweeney planning on reducing that massive debt?

Simple: lower pension payments…..

Clearly, we need to do everything we can to cut the cost of our annual pension payments at both the state and local levels in order to continue to guarantee the retirement payments our retirees have earned and to reduce the unfunded liability that is such a burden to taxpayers.

That is why we have developed legislation to enable our state and local pension systems to add revenue-generating assets like water and sewage treatment systems, High Occupancy Toll (HOT) lanes, parking facilities and real estate to provide new, diversified sources of revenue for their investment portfolios.

New Jersey is on this pretend-asset road already:

Lottery gimmick: New Jersey gets most of the money to deposit into the pension system from the income tax. Imagine if they decided to say that a percentage of income tax revenue would be an asset of the pension with annual income reducing the calculated contribution and the present value of all future revenue being considered an asset of the plan thus raising the system’s funded ratio with a phantom asset. That is exactly what they did with the state lottery and it is a scam that demands to be noted whenever reported on. Increased lottery revenue in any year makes no difference to the funding of the pension system since more revenue from the lottery reduces the state contribution (already grossly understated though actuarial gimmickry).

S3637 “New Jersey Retirement Infrastructure Collateralized Holdings Fund Act”; creates trust fund for conveyance of certain assets for benefit of State-administered retirement systems; requires remediation of emergent conditions for certain public assets; appropriates $20,000,000.
Budget and Appropriations
 


Sweeney, Stephen M.   as Primary Sponsor
Sarlo, Paul A.   as Primary Sponsor
        4/19/2021 Introduced in the Senate, Referred to Senate State Government, Wagering, Tourism & Historic Preservation Committee
6/15/2021 Transferred to Senate Budget and Appropriations Committee

Introduced – – 23 pages PDF Format    HTML Format

11 responses to this post.

  1. […] Posted on June 17, 2021June 17, 2021 by Mary Pat Campbell How Stupid are Credit Rating Agencies? […]

    Reply

  2. Posted by Rex the Wonder Dog!🐶🐶🐶🐾🐾🐾 on June 18, 2021 at 11:50 am

    How Stupid are Credit Rating Agencies?
    Almost as stoopid as Monkey Boi, but Monkey Boi still takes the prize 🐒🐒🐒

    Reply

  3. Posted by Stephen Douglas on June 18, 2021 at 3:10 pm

    “Simple: lower pension payments…..”

    Saving Defined Benefits Requires Lower Pensions for Existing Workers and Retirees
    December 6, 2012/by Edward Ring

    “For all pensions to existing retirees over $50,000 per year, whenever necessary, reduce the pension payout by an amount proportional to the amount the existing pension assets are underfunded. Restore them – but not retroactively – whenever and to the extent the funds move back towards being 100% funded. This can be accomplished by declaring a fiscal emergency.”

    “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. Assuming the pension ceiling is realistic, the savings from establishing a ceiling for benefits will greatly offset the costs of establishing a floor on benefits.”

    Reply

    • Posted by Rex the Wonder Dog!🐶🐶🐶🐾🐾🐾 on June 18, 2021 at 3:34 pm

      “Simple: lower pension payments…..”

      Saving Defined Benefits Requires Lower Pensions for Existing Workers and Retirees
      December 6, 2012/by Edward Ring

      “For all pensions to existing retirees over $50,000 per year, whenever necessary, reduce the pension payout by an amount proportional to the amount the existing pension assets are underfunded. Restore them – but not retroactively – whenever and to the extent the funds move back towards being 100% funded. This can be accomplished by declaring a fiscal emergency.”

      “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. Assuming the pension ceiling is realistic, the savings from establishing a ceiling for benefits will greatly offset the costs of establishing a floor on benefits.”
      No Shit Sherlock ⏫⏫⏫ But I will give Monkey Boi credit for FINALLY making, no, FOR posting, a common sense comment, even if it is yet another “copy and paste” job from Ed Ring from A DECADE AGO…. Lets give Monbkey Boi 🐒 a banana or two for this comment 🍌🍌🍌🍌🍌🍌🍌🍌🍌🍌🍌🍌🍌🍌

      Reply

  4. Posted by boscoe on June 18, 2021 at 3:29 pm

    John Bury: You need to go to Trenton when this bill is before committee, and testify as to what a dangerous and misleading farce it is. You are an actuary, your testimony could carry some weight. With the Senate President and the Chair of the Senate Budget Committee as sponsors, you know this bill will be fast-tracked; and also extremely likely that the Governor will sign it since it kicks dozens of cans further down the road.

    Reply

    • Posted by Rex the Wonder Dog!🐶🐶🐶🐾🐾🐾 on June 18, 2021 at 7:52 pm

      Welcome Back Boscoe! … You have no idea how much I have missed you 🙂

      Reply

  5. Posted by Stephen Douglas on June 18, 2021 at 7:09 pm

    “Simple: lower pension payments…..”

    Oops!

    Sorry!

    Not –those– pension payments.

    “State and local governments, and their taxpayers, would be able to lower their annual pension contributions based on the value of the asset transferred, which would be determined by third-party evaluators based on their current market value.”

    How stupid do you think we are?

    Reply

    • Posted by Stephen Douglas on June 18, 2021 at 7:21 pm

      That’s what my wife calls “ifcome”.

      Reply

      • Posted by Rex the Wonder Dog!🐶🐶🐶🐾🐾🐾 on June 18, 2021 at 7:51 pm

        That’s what my wife calls “ifcome”.
        Does Wifey every try to kill you Monkey Boi, to save her sanity 🤣🤣🤣 … I know SeeSaw’s Hubby probably sympathizes with, and relates to, your Wifey to a large degree … They both go thru a living hell being married to you two Gov Workfare imbeciles 💖💖💖
        .
        For some reason 🐒🍌🐒🍌🐒

        Reply

  6. Posted by geo8rge on June 19, 2021 at 8:50 am

    “How Stupid are Credit Rating Agencies?”

    About as stupid as credit card companies. The credit rating agencies only care if a particular bond is paid off. Look at Puerto Rico to see a possible NJ future as NJ takes the first steps toward privatization. I would speculate that the ideal situation for credit rating agencies is NJ issues so much debt NJ cannot issue any more debt, but can still pay off the old debt by some combination of belt tightening, tax increases, liens on property, ect.

    Power outage hits 337,000 in Puerto Rico amid growing outrage about repeated problems

    https://www.usatoday.com/story/news/nation/2021/06/16/puerto-rico-power-outage-service-interruption-luma-energy-complaints/7725268002/

    To be fair to the PR privatized operator LUMA, it seems PR might neglected training linemen. Or perhaps all the PR linemen used their privilege to move to the US and receive immediate citizenship.

    LUMA breaks ground on $10M training facility in Canóvanas
    https://newsismybusiness.com/luma-breaks-ground-on-10m-training-facility-in-canovanas/

    Reply

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