While a reasoned report put forth by pension experts fades away and politicians fiddle with otiose gimmicks in an election year in New Jersey we have former governors recognizing the crisis:
and a prospective governor stepping up:
Archive for the ‘New Jersesy Pension’ Category
More out of a sense of obligation at having to get through it (which is pretty much how New Jersey Governor Chris Christie treated it) here are pertinent excerpts from today’s state of the State speech where the big initiative for 2017 turned out to be coddling drug addicts.
Fortunately the audience did get through it with only one casualty.
Now that politicians in New Jersey have run out of their own stupid ideas to (not) deal with the massively underfunded state pension system, according to njspotlight, they have turned to soliciting other people’s stupid ideas*. This time, according to a Request for Proposals sent out on December 9, 2016, from investment bankers.
Tier 5 was supposed to exclude part-time employees hired on or after June 28, 2011 from the pension system. But a review of active employees in the New Jersey retirement system as of September 30, 2016, as taken from the state’s YourMoney website, lists 391,283 people of whom 75,485 are Tier 5. Removing recently hired employees for whom a full year’s salary does not seem to be reported we get 62,770 Tier 5 employees hired by 9/1/15 of whom 203 made under $10,000 and 56 made under $5,000.
How did these people get 32 hours a week in a state with an $8.38 minimum hourly wage?
Pension Obligation Bonds (POB) are a stupid idea sold to desperate governments looking to camouflage debt for a few years rather than dealing with it. They are not solutions to but rather portents of either public pension defaults or government bankruptcies.
The ProPublica website has a handy chart on the 20 largest POB issues since 1996 with the warning:
Governments that borrow money to fund their pensions often pay less into their pension funds in future years than they’re supposed to. That can leave the funds in a worse shape than they were when the debt was sold, even if the pensions earn more on the borrowed money than taxpayers owe in interest.
It is no coincidence that the worst funded public pension systems (NJ, IL, CT, PR) all tried the POB gambit not because it made any fiscal sense but because they chose not to look at immediately unpleasant alternatives (i.e. cutting benefits or affording honest contribution amounts).
The POB money suddenly appeared in trust assets making the plans seem better funded which would theoretically reduce future contributions. In practice, in New Jersey at least, future contributions were reduced anyway as politicians simply chose to pick their contribution numbers with expediency as the primary determinate.
A look at the 1997 Official Statement for New Jersey’s POB sale lists the costs:
Are public employers in New Jersey keeping long-service part-time employees on their books only for pension service credits?
One of Governor Christie’s first initiatives was to call for transparency, especially in regard to pensions, which led to the creation of the YourMoney website.
Nothing much got done on the pension front but we do now have a listing of participants in the state pension, both retired and still working, updated through September, 2016 which yields this data: