In one of the sillier broadsides in the propaganda war over the worth of a New Jersey public pension a ‘think’ tank probably funded by unions released a report today claiming that New Jersey’s non-public-safety plans “rank 95th in pension generosity out of 100 top plans nationally” based on criteria they made up:
To rank each pension plan’s overall generosity, we first compare our 100 largest state pension plans on three separate measures of pension generosity:
- The strength of their automatic inflation protection (assuming 2.5 percent inflation).
- The amount by which pensions increase with each additional year of public service as a percentage of “final average salary,” an amount commonly referred to as “the multiplier.” (Final average salary is usually calculated as the average salary over the final three or five years of an individual’s public service.)
- The amount employees contribute to their own pensions. When employees contribute less, we consider their pension more generous.
Overall generosity is determined by giving each pension plan a score out of 100 based on its rank on these three separate dimensions of pension generosity. A pension plan ranked first on one of the dimensions receives 100 points, a pension plan ranked 100threceives one point. Adding up the three ranks generates the plan’s overall generosity score. The 1st-place-ranked and most generous pension plan received an overall score of 225.5. The least generous pension plan by far, with a score of 24.5,covers municipal employees in California’s Contra Costa County. The pension plan ranked 99th, the New Hampshire Retirement System, received an overall generosity score of 74.5, not far below New Jersey’s 85.
Using their criteria I can easily design a plan that would rank in the top 5 in generosity without costing taxpayers a dime.
John Lanchester provides a useful service in his new book How to Speak Money – What the Money People Say And What It Really Means introducing his topic by noting:
There’s a huge gap between the people who understand money and economics and the rest of us. Some of the gap was created deliberately, with the use of secrecy and obfuscation; but more of it, I think, is to do with the fact that it was just easier this way, easier for both sides. The money people didn’t have to explain what they were up to, and got to write their own rules, and did very well out of the arrangement; and for the rest of us, the brilliant thing was, we never had to think about economics. (page xiv)
The details of modern money are often complicated, but the principles underlying those details aren’t (page xv)
“There was a fear that if it was made understandable, it wouldn’t seem important” Grayson Perry on art world terminology (page 5)
My theory is that the jargon was developed to mask really stupid concepts (usually benefiting the jargon-user in some way) that, were they to be explained honestly, would be laughed out of use.
For example, the California Institute for Local Government (CILG) offers a Guide to Pension Terminology where they seek to define some terms that I believe could have been defined better.
A few minutes ago a judge approved Detroit’s bankruptcy plan which included these benefit cuts that Detroit retirees approved back in July:
The story first appeared in the International Business Times (IBT) with lots of charts under the screaming headline:
Gov. Christie Shifted Pension Cash to Wall Street, Costing New Jersey Taxpayers $3.8 Billion
Today it was picked up by AOL, Esquire, and Daily Kos all using the angle that Christie wants to take money from retirees barely scrimping by so he can give it to his Wall Street friends who then donate to political campaigns of his choosing. But is that the real story?
I predicted they would be a combination of five patsies and quislings but apparently Governor Christie could not fill out that roster so he settled on some professional people but raised the number to nine so as to assure that his original intention (having this commission rubber-stamp whatever study the Divisions of Pensions is almost done with) will play out though not through blind obeisance as originally intended but through internal bickering which this commission is certain to have plenty of. The members, per the press release:
There have been those out there who do not see a public pension crisis including Teresa Ghilarducci who took to public TV yesterday to make that exact claim but…..when it came to New Jersey:
As in Decision Days.
Today a judge will hear arguments on whether the State can skip pension payments (it can for this year anyway) and tomorrow: