The two main reasons for the imminent collapse of New Jersey public pensions are the massive benefits promised but unfunded that the state can’t walk away from and the junk that now sits in the pension ‘trust’ made up of all those ‘alternative investments’ acquired for their inflated carrying values. On Monday Moody’s and the Carlyle Group pulled aside the veil a bit more.
‘Uninvested’ by Bobby Monks despaired of the rise of Defined Contribution (DC) plans in the private sector while an issue paper out of the Manhattan Institute sees DC Plans as cost-effective. Both provide some interesting information (which I excerpt below) but both miss THE major point as to why Defined Benefit (DB) plans dominate in the public sector:
Four years ago as part of a reform of public pensions in New Jersey Governor Chris Chritie pledged to make the predetermined contributions into the pension system. That didn’t quite work out.
On Tuesday he made another pledge.
A SurveyMonkey poll came out last night re-rating the Republican presidential candidates after their first mass-debate and showed both Jeb Bush and Scott Walker losing 3% of their support. But those guys started out with 10% and went to 7%. Chris Christie only had 3% going in and dropped to 1% and that’s not the worst part for him.
Local governments are piling up debt at such an alarming pace that this blogger called it the next crisis “nobody saw coming”.
New Jersey put a cap on the amount local governments can raise by taxation so to keep their gravy trains fueled at least one local government has taken to bonding to make up the difference and nobody with any oversight capacity seems to care. State governments, accountants, rating agencies, and the media all do not want to see the crisis because that would not be to their advantage.