N.J.’s pension crisis growing deeper
JUNE 1, 2014, 10:52 PM LAST UPDATED: SUNDAY, JUNE 1, 2014, 10:54 PM
BY JOHN REITMEYER
STATE HO– USE BUREAU
THE RECORD
Governor Christie is following the well-worn path of New Jersey governors who skipped or barely made payments to the pension fund and used the money instead to balance the yearly budget.
But Christie’s decision to skip the full payments now will have a much bigger impact on the underfunded pension system than the same move by previous governors, according to a an analysis by The Record of pension data compiled by both the Christie administration and the Legislature.
That’s because each time a full payment isn’t made, the difference between what governors need to pay to keep the pension system afloat and what they end up paying gets bigger, and by a compounding rate, the analysis showed.
For example, the $1 billion pension contribution Gov. Jon Corzine made in 2007 accounted for roughly 60 percent of the amount actuaries said the state needed to pay that year to keep the pension fund solvent.
– See more at: https://www.northjersey.com/news/n-j-s-pension-crisis-growing-deeper-1.1027240#sthash.16Kl2960.dpuf
This is the real problem with our budgets and taxes, not relatively small amounts we constantly fight over in town.
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Pension Reform In Oklahoma Will Help Stop Fiscal Bleeding
Pension Reform: There’s an old saying in finance: If your outgo exceeds your inflow, it will be your downfall. Pretty simple message. It should be plastered on the walls of the office of every state legislator in the country.
Here’s why. The 50 states, along with municipalities, are now facing a ticking time bomb of unfunded liabilities in state and local pension plans estimated at between $1 trillion and $3 trillion , depending on the rate of return assumed on stocks.
Either way, the numbers are daunting. And without plugging these holes — and right now — an ever larger share of state and municipal budgets will be swallowed up by benefits paid to retired teachers, firefighters, police and others, rather than providing money for schools, roads, public safety and other basic services.
We’ve seen in Detroit and big cities in California what happens when the liabilities are swept under the rug. Depleted state and local coffers eventually end in bankruptcy, which isn’t such a great bargain for the taxpayers or the retirees who see promises broken.
So it’s worth a shout-out when state lawmakers show the courage to wrestle with this octopus and take on the thankless task of at least stabilizing these crippling debt loads.
Last week, with little fanfare, the Oklahoma legislature became one of the first to convert government worker pensions from defined-benefit to defined-contribution systems. Defined benefit programs offer city and state workers a guaranteed monthly benefit regardless of the fiscal condition of the state or the rate of return on the pension contributions. Oklahoma will instead put state workers into a 401(k)-type system, which is now the norm in almost all private-sector jobs.
Read More At Investor’s Business Daily: https://news.investors.com/ibd-editorials/053014-702873-oklahoma-passes-needed-public-pension-reform.htm#ixzz33UD3knQH
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We also see problems when you have governors that use pension funds to balance the budget.
As Thatcher said, “It’s easy to spend other people’s money”… Until, of course, it runs out. Now the long death march of the middle class is being blamed for the slow US recovery: https://www.ft.com/cms/s/0/753839f0-e75b-11e3-88be-00144feabdc0.html#ixzz33VC5zpO9
June 1, 2014 5:50 pm
Tepid US recovery – it’s the middle class, stupid
Economic forecasters have yet to internalise the fact that the US economy has fundamentally altered. The purchasing power of the majority of Americans has not only stagnated since the recovery began five years ago – it has actually declined.
At $53,000, the median US household is more than $4,000 – or 7.6 per cent – poorer in real terms than it was at the start of the recession in 2008, according to Sentier Research. Yet the economy as a whole has long since overtaken its pre-recession size.
The culprit is rising income and wealth inequality – a central economic truth of our time. As Mark Carney, the governor of the Bank of England, put it last week: “Within societies, virtually without exception, inequality of outcomes both within and across generations has demonstrably increased.”
People should not be able to start receiving pensions until the age of 65. That will help cut back on the problem.
No one should be able to retire at age 50 (45 Frank?) and begin taking distributions.
Agreed #4. The pensionistas will scream that we’re stealing food from their table but the FACTS are clear: according to a recent study here https://www.csinj.org/wp-content/uploads/CSI-NJ-Pension-Study-wCoverBleed-Rev.-1.20.14.pdf (see page 11), the average age of a PFRS retiree (that’s police & fire) in NJ is 52.4. Note only PFRS members in NJ are allowed to retire with “Special Retirements” after 25 years of service. There are just under 40,000 retired members and beneficiaries in that plan alone, including 794 +$100K pensioners (the elite 1%ers), but that number will balloon by 2016 when the effective % of final compensation calculation for pensions falls from 65% to 60% (anyone who had 20 years of service as of 2011 was grandfathered in at 65%). Given the average lifespan of +80, that means full pensions for 30 years and half pensions for the surviving spouse, i.e. these are fixed costs that never go away for 30+ years every time someone retires. We know from divorce settlements that these pension benefits today are worth $3.5 million or more per retiree. For that, the member has contributed 10% of their salary only since 2009, and prior to that much less, i.e. probably less than $250,000 over their 25 year career. Us private sector saps won’t get anything from our IRAs and 401Ks until 65, and that will only need to last 15 years if we live to 80, not 30 years.