This morning John Stossel had an interesting piece centering on New Jersey Governor Chris Christie bailing out Atlantic City after promising to “reform” and “rebuild” the city “without government money.” Stossel portrayed Christie as another traitorous politician though I suspect that when Christie made that ‘promise’ he believed it – even if it was primarily because he believed his advisers and he was too dumb (or conveniently disinclined) to understand the real situation.
So it is with another piece that came out this morning by New Jersey Senate president Stephen Sweeney again pimping for an otiose constitutional amendment on public pensions with the same series of fallacious arguments debunked here previously though he added one wrinkle:
The New Jersey State Investment Council held a public meeting yesterday and three news sources covered it – all a little differently.
NorthJersey.com: Investment gains for New Jersey’s $79 billion pension fund fell sharply in the fiscal year that ended June 30, and those pension investments are in negative territory so far this year, state officials reported Wednesday…..Venture capital, real estate and equity investments performed the best. But the state’s investments in commodities tumbled 20.85 percent largely due to crude oil prices falling by half in recent months, and bets on emerging and developing economies around the world turned out to be losers.
nj.com: The pension fund supports the retirement of nearly 800,000 active and retired public employees in New Jersey. It pays out roughly $700 million a month in benefits. Its market value over the past year decreased dramatically from $79 billion at the end of June to slightly more than $71 billion at the end of December. About $27 billion of the fund’s assets were invested in alternatives including global diversified credit, hedge funds, private equity, real estate, and real assets as of June 30. For the fiscal year that ended June 30 and the calendar year that ended Dec. 31, the best performing asset classes were those that are part of the state’s controversial alternative investment program…..For the calendar year, alternatives had a one-year annualized return of 5.6 percent, compared with .63 percent for the total fund and –1.88 percent for traditional investments. Over five years, alternatives’ annualized returns were 9.22 percent, higher than all other investments’ 6.56 percent. “The alternative investments program (net all fees) has outperformed the broader pension fund and a mix of broader global public markets… on an absolute and risk-adjusted basis,” the division said. A consultant, Aon Hewitt Investment Consulting, also reported favorably on the fund’s alternative investments, saying the division’s “alternative investment program has achieved higher returns with less risk” and “may be viewed favorably from a cost-benefit perspective.”
njspotlight: Still, pension-system officials yesterday defended their overall alternative-investment strategy, pointing to the numbers compiled by Aon Hewitt that showed the investments have produced 9.2 percent net returns over the last five years. That beats the pension system’s assumed rate of return of 7.9 percent, and the overall 7.3 percent rate of return the system experienced during the same five-year period.
Steven Malanga had an interesting article in City Journal today:
that touched on some history of the false idol of investment return as cure-all for the public pension crisis (with New Jersey prominent):
This was a blog I was going to save until Chris Christie got his 1% in Iowa and 4% in New Hampshire* and left the race after trying to broker an ambassadorship (to Texas?) for himself from Trump but, since he started early:
Jake Tapper, with all due respect, could have followed up with either:
- John Kasich was elected governor of Ohio in 2010; or
- Jeb Bush at the end of his second term as governor of Florida was “as popular as ever”.
When he drops out I see Christie claiming to have run a solid campaign but what got him in the end was the absolute fiscal mess that is New Jersey which he did all he could to clean up.
Who knows? Under Corzine or Buono would we have had:
- Atlantic City bankrupt already?
- 15 credit downgrades?
- no Transportation Trust Fund?
But there are two areas I have experience with and I grade Christie an F on both. Here are my first-hand examples:
It looks like Moody’s has released another report on the sad state of the New Jersey Public Employee Retirement System but the article on nj.com did not fire as many flares as New Jersey itself did in a recent bond statement. After the SEC found some fraud in these statements before the state has introduced some harsh truths into their disclosures.
Notable excerpts follow:
Bloomberg came out with a story today reviewing the sad fiscal state of New Jersey with some neat charts (reproduced at bottom) that kicked off with:
The fight in New Jersey over funding government workers’ pensions is coming to a head — and no one disputes that it’ll be costly to taxpayers.
But later in the story (emphasis added):
The measure, which has the support of public-employee unions, was introduced by Senate President Steve Sweeney, a Democrat, after state courts upheld Christie’s ability to pay less than called for under the 2011 law. If approved by voters in November, the constitutional change would put the state on track to make full actuarially required payments by 2022, save taxpayer money and cut the unfunded liability by $4.9 billion over three decades, he said.
I would be fine with the reporting on this statement if it ended with qualifiers like:
Donating to Planned Parenthood might top the list (and it’s a long list) but among Chris Christie’s what-should-be-obvious lies-for-votes one of the most pernicious is:
Counting on nobody doing the math (even himself) this passes for an accomplishment in his mind. But Moody’s did the math.
“Most states made budgetary contributions at or close to their actuarially determined contribution levels,” according to a report released Friday by Moody’s. Thirty-six gave more than 90 percent. Only two — New Jersey and California, at 48.2 percent — fell below 60 percent.
Where did New Jersey fall?