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Analysis: Wall Street skeptical of N.J.’s pension reforms

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Analysis: Wall Street skeptical of N.J.’s pension reforms

APRIL 10, 2014, 10:15 PM    LAST UPDATED: THURSDAY, APRIL 10, 2014, 10:20 PM
BY JOHN REITMEYER
STATE HO– USE BUREAU
THE RECORD

Governor Christie is calling for pension reforms, but analysts from the Wall Street ratings agency Standard & Poor’s said on Thursday that it’s unclear if that will put the state on a better financial footing.

Their concerns came a day after the agency lowered New Jersey’s bond rating, making it third worst among U.S. states.

In major speeches this year, and at many public events lately, Christie has said he wants to work with lawmakers to come up with new reforms, changes like those he negotiated with Democrats in 2011.

During a town-hall-style event in Fairfield on Wednesday, Christie said he would “force this discussion” again with lawmakers.

“I’m going to put a plan out there, and they’re going to have to deal with it,” Christie said.

But on Thursday, spokesman Kevin Roberts would not say exactly what Christie is considering at this stage.

“The governor has been clear that he is engaging the Legislature, and absent an indication from them that they are willing to recognize reality and negotiate next-step reforms in a bipartisan way, he will put forward a proposal of his own,” Roberts said.

Roberts also disputed the notion from the ratings agency analysts that recent changes to the pension formula and debt restructurings have pushed costs on to future budgets.

And it’s that uncertainty from Christie, along with his recent budget practices, like over-eager estimates for tax revenues that fall short, that have analysts concerned.

After years of skipped or only partial contributions from the state, the public employee pension system remains grossly underfunded and continues to weigh down New Jersey finances.

The burdensome pension payment — Christie’s latest spending plan calls for a record, $2.25 billion contribution that is still only a fraction of what actuaries say the state should be spending on an annual basis to bring the fund closer to solvency — was among the factors cited by Standard & Poor’s in announcing its move on Wednesday.

The downgrade was bad news for Christie, a Republican who has tried to portray his administration as having improved New Jersey’s finances after years of Democratic mismanagement. But the analysts said New Jersey is still dealing with some economic struggles while most other states have enjoyed fuller recoveries that have put their budgets back on solid ground.

The lower rating for New Jersey’s debt also comes just as state lawmakers are reviewing Christie’s latest spending plan, a $34.45 billion budget that is the largest in state history. The credit rating is an important factor in the budget talks because it helps determine how costly any future borrowing or refinancing will be.

Christie used the downgrade’s announcement to apply more pressure on Democratic lawmakers to enact new pension system changes, something they are reluctant to do yet again.

– See more at: https://www.northjersey.com/news/analysis-wall-street-skeptical-of-n-j-s-pension-reforms-1.898753#sthash.A1QigG3e.dpuf

75 thoughts on “Analysis: Wall Street skeptical of N.J.’s pension reforms

  1. #47 said, Pure silence on healthcare underfunded liability. Crickets chirping on reader question as to why we have public safety officials making more money than the person they report to.

    Trying to change the discussion yet again. We are on the topic of sick leave. Why do you want to change the subject? Could it be you can’t argue your point with facts and figures. You must be one of the architects of the faulty Financial Advisory Committee report.

    Stop trying to change the subject!

  2. With regards to #42 question why are public safety officials making more than the village manager. Answer because she agreed to work for that price. No one twisted her arm to take the job. The salaries of the top public safety officials were already in place upon he appointment. Statement from 42 were cutting other departments et to pay for public safety, is incorrect as public safety has been cut through attrition already, the village budget suffered from a combination of reduced state aid the town coffers , long term debt coming due, and the fact that the water dept. got caught over charging surrounding towns and allegedly putting the profit in to the town coffers, when Gabbert put a stop to it created a larger shortfall, as a result some people got layed off from various departments, violations, building, fleet service, and proposed hiring’s in the pd were put on hold.


  3. Anonymous:

    I will tell you why, because you believed the employees were responsible for the “Pension Hole”. That is until I proved to you, and everyone else reading this blog.
    Salary 65,000 a year / 2080 = $31.25 per Hour. $31.25 X 1.5 overtime rate = $46.87 per hour rate X 8 hours = $375.00 if sick day causes overtime.
    Payout at retirement – Hourly Rate 31.25 per hour / 2 = $15.625 X 8 hours = $125.00
    Now I would like to see you prove the figures above wrong.

    Your words not mine #53. Why are are you putting words in my mouth ? Re-read the post and tell me where I “believed” the employees were responsible ? That’s garbage. I just stated the fact there was a pension hole. You didn’t prove anything – everyone knows the facts. As for your figures above, which public safety employees are retiring on $65,000 in salary a year as per your figures ? Where are the incentive payments for non-use ? Why do you keep assuming that you deserve to take all of your sick leave in a given year just because it’s in the contract ? Good health should be your bonus, not contracted sick days. Here’s where your figures are wrong: Police & fire officers annual salaries are well over $135,000 a year on retirement, plus accumulated sick leave payout is calculated including base wage + 10% longevity payment at retirement. Payout at retirement = salary + longevity $148,500 a year / 2080 = hourly rate $71.39 / 2 = $35.70 X 8 hours = $286/day + 25 years X 24 hours at straight pay rate for non-use incentive assuming no sick leave = 600 hours at straight pay rate over a 25 year career = $38.46 per hour (based on avg annual salary $80,000 over 25 years) X 600 hours = $23,076 / 2080 = hourly rate $11.09 X 8 hours = $89/day. Total = $375/day. But your example assumes that OT is pairs 100% of the time when an employee takes sick leave, which is just not accurate.

  4. Statement from 42 were cutting other departments etc to pay for public safety, is incorrect as public safety has been cut through attrition already, the village budget suffered from a combination of reduced state aid the town coffers , long term debt coming due, and the fact that the water dept. got caught over charging surrounding towns and allegedly putting the profit in to the town coffers, when Gabbert put a stop to it created a larger shortfall, as a result some people got layed off from various departments, violations, building, fleet service, and proposed hiring’s in the pd were put on hold.

    Thanks #53, so to be clear, has the budget for Public safety been cut since 2009 or has it increased ? Have Healthcare & Worker’s Comp insurance premiums for Public safety employees and retirees risen since 2009 ? Those need to be included in the cost of paying for public safety as well given they are paid for with our taxes. Thanks

  5. Sorry #54 but no sale, your attempted spin about not trying to blame the pension hole on village employees is so transparent it’s laughable.

    If you actually knew that the pension hole wasn’t the employees fault why did you lump it in with the sick leave and health care issues in your 1st post which you clearly believe are the Village employees fault?

    Were you trying to mislead the readers of this blog hoping to get them to hate Village employees like you do by lying to them?

    Why didn’t you say the Pension hole, which was NOT caused by the Village employees is 47 Billion dollars in your 1st post?

    I will tell you why, simply put you didn’t have a clue why the pension has a $47 Billion dollar hole!!

    You know what your right, Police & fire officers salaries are higher. So lets use those numbers.

    Salary $135,000 a year / 2080 = $64.90 per Hour. $64.90 X 1.5 overtime rate = $97.35 per hour rate X 8 hours = $778.84 if sick day causes overtime.

    Payout at retirement – Hourly Rate $64.90 per hour / 2 = $32.45 X 8 hours = $259.60

    Cost of overtime $778.84 – payout at end of career $259.60 = $519.24 more that the town paid if the town adopted a sick day use it or lose it policy.

    It would take 3 sick days paid out at $125.00 to equal the cost of overtime caused by one sick day.

    So what does that prove, the town saves money by paying out the sick day at 50% value even if only 1 out of 3 sick days causes overtime.


  6. Anonymous:

    why did you lump [the pension hole] in with the sick leave and health care issues in your 1st post…Why didn’t you say the Pension hole, which was NOT caused by the Village employees, is 47 Billion dollars in your 1st post?

    Wow #56, so if we wish a $47bn unfunded hole away it will disappear – poof – just like magic ! There’s lots of blame to go around, but taxpayers still have to make up for a $47bn underfunded liability. We all understand that. Get over yourself. NJ state and local taxpayers have to make up that hole, it’s just economic fact. As usual, you are trying to start a knife fight while our house is on fire. And please answer this: why do sick days cause OT ? Why don’t you include longetivity pay in your retirement payout ? What about non-use incentive payouts ? Based on your logic, taxpayers are either going to pay out OT or 6 months of accumulated leave at your highest comp upon retirement, or both, for non-work related illness & injury. We get hit either way. Have you got your talking points from your union masters yet on the $60bn unfunded healthcare liability ?


  7. Anonymous:

    You keep whining about the pension contributions or lack thereof from the state. What about the healthcare costs ?

    It’s taken 56 posts to ignore the question posed in post #3, impressive dodge

  8. # 57 said, Wow #56, so if we wish a $47bn unfunded hole away it will disappear – poof – just like magic ! There’s lots of blame to go around, but taxpayers still have to make up for a $47bn underfunded liability.

    Yes, there is a lot of blame to go around. And the Taxpayers are the ones to blame. We get the Government we deserve. Keep voting for people who lie and deceive you and this is what you get and deserve. Even if you didn’t vote your still to blame. You, #57, want to blame the Unions, Police Officers, Firefighters and all the other Village workers for everything, all while defending Teachers who have a part-time job with full time pay and benefits. Your actions are so transparent. Where is your outrage over the $51.405B HOLE in the teachers pension, which is larger than the Police and Fire pension hole? Why haven’t you mentioned that? Isn’t that just an economic fact also?

    Did you check the hourly rate of teachers vs. Police or Fire employees. If you have why aren’t you complaining that part-time workers are being paid more per hour than full time workers? As usual you are picking on one group while you ignore another, which makes your argument specious. When are you going to say you think the Teachers Unions are as evil as you think the Police and Fire Unions are?

  9. #58 said, It’s taken 56 posts to ignore the question posed in post #3, impressive dodge.

    Reply: Still trying to change the discussion I see. Have you run out of FAC talking points from the faulty FAC report you wrote?

  10. 60 posts to ignore the question posed in post #3, with lots of defamation and misinformation as usual. Now you’re on to the teachers and calling them part-time workers ? Where is that coming from, nothing in the previous 58 posts about teachers ? What does the FAC have to do with any of this ? Now you’re calling them names, too ? I’m not on the FAC. The $47bn unfunded pension liability is the TOTAL for the state of NJ, not just police & fire. The $75bn New Jersey Pension Fund supports the retirement plans of approximately 769,000 active and retired employees in seven public pension systems: the Consolidated Police & Firemen’s Pension Fund, the Judicial Retirement System, the Police & Firemen’s Retirement System, the Prison Officers Pension Fund, the Public Employees’ Retirement System, the State Police Retirement System and the Teachers’ Pension & Annuity Fund.

  11. I don’t know where the person complaining about the $47 Billion Pension “hole” is getting their information from but they are way wrong.

    If you check out page 13 on the attached report you will see the TOTAL pension “hole” is $128.53 Billion, not $47 Billion. This is the total Accrued Liability. It includes state and local workers in the Teachers Pension Fund, Public Employees Pension Fund and the Police and Firefighters Pension fund.

    https://watchdog-newjersey.wpengine.netdna-cdn.com/files/2014/01/CSI-NJ-Pension-Study-2014.pdf

    Interestingly the fund with the largest “hole” is the Teachers Pension Fund at $51.045 Billion, followed by the Public Employees Fund with $45.393 Billion and the lowest “hole” is the Police and Firefighters Pension Fund with a $31.732 Billion.

    The Teachers Pension Fund is 60.46% funded
    The Public Employees Fund is 63.6% funded
    The Police and Firefighters fund is 74.3% funded

    Isn’t it interesting that the poster ( #1) completely ignores the largest Pension “Hole” which is the Teachers only to mention municipal workers in his first post. Further proof that #1 and his subsequent postings are directed at only one group when there is more than enough blame to go around including teachers. How do you explain your actions #1?

  12. Looks like the person complaining about the PENSION HOLE has all of his facts wrong, which makes me wonder if anything he has said is accurate or factual.

  13. Throughout time the cops always contributed more per person to their pensions. The contribution went from 8.5% to 10%, the teachers were at 5% and the pers were @3.5% they were all raised over the past 5 years and a lot of people in pers were ousted, this along with revised pension computation will take some of the bleeding out of the pension systems at the employees expense. That in no way relieves the past politicians of raiding the pension system for political use. The trend today is to make the public employee’s the bad guy, for a situation they did not create.

  14. Back to pensions again then #60, okay, let’s get the facts straight. See page 7 of the report you posted the link to. The current UNFUNDED pension liability is roughly the difference between the $75bn value of assets held in the pension fund as of FY13 + the expected state & local pension contributions in 2014 of $3.3bn ($2.25bn from the state) as compared to the $128.5bn total accrued liability as of 7/1/12, i.e. the amount of total payouts promised to active & retired members based on a long-term assumed rate-of-return of 7.9%. “Unfunded” does not equal “total accrued liability”. The report does show that the average age of new retirees is 62 for teachers and 52 for PFRS, so the police & fire fund will have to make annual pension payouts to retirees for 10 years more, on average than teachers. It also notes on page 6 that in 2001, a statewide election year, the legislature increased pension benefits for state employees by +9%, which, according to Gov. Cody’s 2005 Benefits Task Force study, increased the unfunded liability of the pension system by $6.8bn. Nice benefit enhancement ! The pension fund will also make $10bn in interest and principal paymnets on Whitman’s original $2.75bn issuance of pension obligation bonds, which were issued on the theory that the pension system could earn more by investing that money than it would have to pay in interest costs on the borrowing. That was wrong by +$7bn. So please get your facts straight before you accuse, thanks.

    1. this debate is getting a bit old ,folks especially you Union folks , you voted for maccreepy and cozine and they robbed your pensions as for whitman she turned into another sell out (so i wont blame you for that one because we all know you voted for some other loser like florio ) and I bet you vote for the same dirt bags again so it is what it is suck it up and no I am not paying for it ,while I sympathize you got what you deserve and frankly its just way to late to fix it .


  15. Anonymous:

    Looks like the person complaining about the PENSION HOLE has all of his facts wrong, which makes me wonder if anything he has said is accurate or factual.

    See post #65 and get your facts straight. Classic move from someone who hates transparency… discredit actual facts and throw dust in the air.


  16. Anonymous:

    That in no way relieves the past politicians of raiding the pension system for political use. The trend today is to make the public employee’s the bad guy, for a situation they did not create.

    Hey, if you wanted a 9% pension benefit enhancement in 2001, which added $6.8bn to the unfunded liability, and agreed to $10bn in principal & interest repayments on the $2.75bn pension obligation bond in 1997 (260% return), then plan participants were party to the raid. Maybe you didn’t “create” this situation, but plan members happily accepted the sweeteners, and also agreed to annual wage increases in the CBAs well above the average core inflation rate of 1.7% over the last 15 years which has only increased the pension liability. If someone offers you a deal you can’t refuse… As we all know, healthcare is a bigger unfunded liability for state & local taxpayers at $60bn, any thoughts on how to close that gap ?

    1. Public employees did create it because they supported with union dues and voted for these same politicians , the politicians should go to JAIL and so should many of their supporters

  17. Interesting you “select” the information you want and ignore the fact that the teachers cost the taxpayer more than all other groups and STILL you ignore that simple FACT.

    Yes, let’s get the facts straight. You want to combine all of the Pension Funds together and ignore the fact that the Teachers Pension Fund is the one with the biggest “Hole”.

    You mention the 2001, a statewide election year, the legislature increased pension benefits for state employees by +9%, how about finishing the story?

    Here is a summary of the law….

    Chapter 133, P.L. 2001
    Date Approved: June 29, 2001.
    Effective Date: October 1, 2001.
    Division Section(s) Affected by this Law: Financial Services, Retirements, MIS, Client Services.
    Description:
    This law increases the retirement benefits under the Teachers’ Pension and Annuity Fund (TPAF) and the Public Employees’ Retirement System (PERS) for service, deferred and early retirement by changing the formula from 1/70 to 1/64 of final compensation for each year of Class A service and from 1/60 to 1/55 of final compensation for each year of Class B service. The law also increases the retirement benefit for TPAF and PERS veteran members with 35 or more years of service and reduces the age qualification for this veteran’s retirement benefit from 60 to 55. The law further provides that existing retirees and beneficiaries would also receive a comparable percentage increase in their retirement allowances (9.09%).

    This law also provides up to a 2% reduction in TPAF member contributions beginning with calendar year 2002. At present, the TPAF member rate of contribution is 4.5%. After calendar year 2001, the rate of contribution will be reduced equally with employer normal contributions, but not by more than 2%, from excess valuation assets if the State Treasurer determines that excess valuation assets will be used to reduce normal contributions by the State. This change provides that future reductions in TPAF and PERS member contribution rates will be calculated in a similar fashion.
    To fund the additional accrued liability for the increased benefits, the law provides that the actuarial value of assets for both TPAF and PERS, for the valuation period ending June 30, 1999, will be the full market value of the assets as of that date.

    To fund the additional annual employer normal contribution for the increased benefits, the law establishes a benefit enhancement fund for both TPAF and PERS which would be funded by excess valuation assets beginning with the valuation period ending June 30, 1999. The amount of excess assets credited to the fund cannot exceed the amount of member contributions for the fiscal year in which the normal contributions are payable. To prevent over funding, the amount of excess valuation assets that can be credited to the benefit enhancement fund is limited to the present value of the expected additional normal contributions for the increased benefits over the expected working lives of the active members for the valuation period. No additional excess valuation assets will be credited to the benefit enhancement fund after the maximum amount is attained. If the assets in the benefit enhancement fund are insufficient to pay the normal contribution for the increased benefits for a valuation period, the State will pay the amount of the normal contribution for both the State and local employers not covered by assets from the benefit enhancement fund.
    So why aren’t you angry that the teachers got a 9% Pension raise along with a 2% reduction in what they paid into the retirement system effectively giving teachers a 11% increase. Oh, and by the way, you will notice there is NO mention of Police or Firefighters receiving this benefit.

    Yea I agree with you, Nice benefit enhancement for the Teachers ! So please get your facts straight before you state something completely wrong, thanks.

  18. Looks to me like #65 fell into #60s trap. #65 keeps going on and on about Police, Firefighters and municipal workers pensions and completely ignores Teachers Pensions. Then he cites a 2001 law that gives a 9% Pension increase to public employees but fails to mention that it only applied to Teachers and municipal employees, in an obvious attempt at misleading everyone into thinking Police and Firemen also were recipients of that 9%, to use his words ” Nice benefit enhancement ! ”

    Someone is not being honest here and it isn’t hard to figure out who that is…..Hint – Hint #65.

  19. Exhausting ! The union hacks and pensionistas would have us all believe how great the CBAs are for tax payers. In reality, many of our highest paid public employees retire at age 52 with defined benefit pensions at 60% of their final comp (base + 10% longevity pay) and gold-plated healthcare coverage for life for a max of $20/month. They won’t discuss the cost of paying for that with us here, even though it will set back state & local taxpayers in NJ by $60bn as costs are incurred. Yep, we get to pay as we go on healthcare for current & retired beneficiaries. And those pensions ! We only ask our highest paid employees to contribute 10% of their base pay towards them, and that’s only since 2009 ! Let’s do the math: assuming a new hire contributes 10% of their average salary over their 25 year career before retiring, they contribute 10% X avg salary $100,000 X 25 years = $250,000. Remember that’s only new hires since 2009. For that, they get 60% of their final comp for life, i.e. 60% X $150,000 = $90,000/year. Average Americans live to 80, so that’s 28 years on average @ $90,000/year = $2.52 million. Just for pensions. Paid for with the tax dollars of private sector workers who retire at age 65 or older, not 52. Add in massively subsidized healthcare insurance coverage which is with worth even more, and we have many retirees with multi-million dollar benefits packages. Don’t believe me ? Look at a divorce settlement for a retired public safety official; the value of these benefits is the big asset. The whole set up is patently absurd and unfair to taxpayers. And yet all we get here is misinformation, efforts to discredit, and avoidance of the key underfunding problem: healthcare ! 71 posts ignoring the cost of PAYGO healthcare, brought to you by those who benefit the most from this taxpayer abuse.

  20. Once again the Financial Advisory Committee hack #72, is still ignoring the Teachers huh! Where are your calculation of the teachers pensions for what is actually a part-time job with full time benefits and pensions. How come your not talking about the 2001 law you mentioned earlier that reduced their already low 4.5% pension contributions by 2% and increased their pensions by 9%, including retired teachers. Is it because you got slammed because you didn’t know it only benefited teachers and municipal workers and not Police and Firefighters.

    Why no mention of teachers divorce settlements and their multi-million dollar pensions and health care as a major asset.

    You want to talk about Healthcare? Fine we can talk about Health care after you:

    1) State that you were wrong about who has the largest underfunded pension (hint Teachers union)

    2) Admit who is responsible for the pension “Hole” you keep repeating like a broken record (hint past governors and legislatures)

    3) Acknowledge that Police and Firefighters were NOT the beneficiaries of the 2001 law that you cited, which was passed by the legislature that increased pension benefits for TEACHERS and municipal employees by +9%, which, according to Gov. Cody’s 2005 Benefits Task Force study, increased the unfunded liability of the pension system by $6.8bn.

    Once you have done those three things we can talk about health care.


  21. anonymous:

    #10, I completely agree with you. Whitman, McGreevey and Corzine and successive state legislatures raided the state pension piggy bank, and local governments followed suit. Where did that money go ? But just wishing it away doesn’t remove the hole. It’s a fact; we have a $47bn pension hole. We can’t grow ourselves out of this.

    See post #11 above for your answer. That was 62 posts ago. Time for this chat to end, Happy Easter !

  22. Just as I thought #74, you can’t prove your crazy allegations or argue with facts so you just run away. But no matter anyone reading this discussion knows you lied, spun the truth and have an agenda.

    I wish you the best and hope you can get over your hatred.

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