Archive for the ‘New Jersesy Pension’ Category

Lottery Enterprise Contribution Act: Politicians Dictating to Actuaries

We have a bill introduced that proposes to move proceeds from the New Jersey lottery for the next 30 years  into the state retirement system. The state is hoping that GASB allows this to be considered an asset of the plan so that the funded ratio looks better even though on page 19 of the law we have:

The contribution shall be computed by actuaries for each system or fund based on an annual valuation of the assets and liabilities of the system or fund pursuant to consistent and generally accepted actuarial standards and shall include the normal contribution and the unfunded accrued liability contribution. Notwithstanding the provisions of any law to the contrary, the assets to be included in the calculation described in is paragraph shall not include the special asset value.

as defined on page 20:

The special asset value shall initially be the value set forth in section 5 of P.L. , c. (C. ) (pending before the Legislature as this bill), and shall be revalued periodically

with section 5 on page 8 reading:

5. (New section) a. For the purposes of this act, P.L.,c.(C.) (pending before the Legislature as this bill), the Lottery Enterprise shall be valued at $13,535,000,000 as that value was determined by the independent valuation service provider engaged by the State.

Meaning that the value of the lottery will not be counted as an asset when the actuaries compute their version of the ‘required’ contribution. The reason for this is that the state wants to take no gambles on losing revenue. However much the lottery brings into the pension will be of no consequence to those who previously got that lottery money as on page 19 we have:
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NJ Pension Lottery: Reporting Lies

In the maneuvering over another New Jersey sham budget nj.com reported:

But state Senate President Stephen Sweeney(D-Gloucster) and Assembly Speaker Vincent Prieto (D-Hudson) say they’re willing to play ball on what could have been a controversial component in budget talks: Christie’s desire to boost the public pension fund with proceeds from the state lottery.

“The governor wants to get two bills,” Prieto said Thursday. “I may give one of the two. I think that’s a nice average. If it were a baseball player, you’d be Hall of Fame right away.”

A gimmick that will partially mask the depth of the problem while lowering contributions which will lead to an earlier depletion of assets – but you people already knew that. The problem is that people who get their news from the Star Ledger and other mainstream media sources remain in the dark as obvious lies are allowed to to pollute the discussion unchallenged. For example:

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NASRA ARC Outlier

The National Association of State Retirement Administrators (NASRA) released an issue brief comparing Actuarially Determined Contributions (ADC) to Annual Required Contributions (ARC), a concept introduced by GASB Statement 25 and defined essentially as the sum of the normal cost (the estimated cost of  benefits earned each year); and an amortization payment. They conclude:

On a weighted average basis, states’ percentage of ARC/ADC paid since FY 2001 ranges from less than 40 percent to more than 100 percent. In the median, state plans received 97.0 percent of their required contributions, and 85.3 percent as a weighted average. The average actuarially determined contribution received for the period was 90 percent, as a few larger plans pulled down the average because they received a relatively lower portion of their ADC.

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And the state that really pulled down the average:
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Truth Behind NJ Lottery Gimmick

New Jersey Treasurer Ford Scudder appeared before lawmakers yesterday to make a pitch for the administration’s proposal to use the revenue-generating state Lottery to help prop up New Jersey’s beleaguered public-employee pension system. As njspotlight reported:

The bill was only put up for discussion yesterday, and several lawmakers praised the proposal, including the bipartisan sponsors of the legislation. But Sen. Jennifer Beck (R-Monmouth) suggested she’s hoping to hear from Wall Street rating agencies before making a final decision on the measure, which the Christie administration is looking to enact by July 1.

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“I don’t really see there being a risk to this. It’s going to improve our funded ratios tremendously, such as our investors are going to see us having improved our fiscal situation,” Scudder said. “At the same time, we’re not impacting programs funded by the Lottery, so I don’t really see negatives to this.”

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Beck, the GOP senator, said she would like one of the major Wall Street rating agencies to weigh in before any final votes on the bill are cast. Scudder said Treasury has been updating the rating agencies on the proposed transfer, but has yet to provide them with a formal presentation.

“I certainly would feel more confident if I knew that those that are doing this on a regular basis, and those that do this kind of analysis for a living, embrace this,” Beck said. “It would be nice to know now, if possible.”

That analysis was done here but I fear:
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If not, here it is:

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Pension Byrne

I submitted a letter to the Star Ledger which is what led me to pick up today’s paper (since letters are no longer online at nj.com). I did not find my letter* but there was a letter from Thomas J. Healey, co-chair with Tom Byrne of the  Pension and Health Benefits Commission that objected to an op-ed written by Charles Wowkanech blaming the chairman of the State Investment Council (also Tom Byrne) for the public  pension funding crisis.

There were conflicting numbers about how New Jersey fared with their investment returns as compared to other unidentified plans over varying periods but what struck me was an accusation of Wowkanech’s that I disagree with:

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New Low In NJ Pension Issue

After months of mindless politicking we get to the weekend before a primary election in New Jersey and it’s all about who will win with only token (and obviously misinformed) references to real issues:
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Yes that is a state senator speaking and among the inconvenient facts he appears to be completely ignorant of:

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Illinois Down; New Jersey Out

According to Bloomberg:

Illinois had its bond rating downgraded to one step above junk by Moody’s Investors Service and S&P Global Ratings, the lowest ranking on record for a U.S. state, as the long-running political stalemate over the budget shows no signs of ending. S&P warned that Illinois will likely lose its investment-grade status, an unprecedented step for a state, around July 1 if leaders haven’t agreed on a budget that chips away at the government’s chronic deficits. Moody’s followed S&P’s downgrade Thursday, citing Illinois’s underfunded pensions and the record backlog of bills that are equivalent to about 40 percent of its operating budget. Illinois hasn’t had a full year budget in place for the past two years amid a clash between the Democrat-run legislature and Republican Governor Bruce Rauner. That’s left the fifth most-populous state with a record $14.5 billion of unpaid bills…

Illinois could have gotten the money to pay those $14.5 billion in bills had they followed New Jersey’s lead.

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