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Trenton NJ, Senator Kristin Corrado has introduced legislation that will strip public officials of their pensions if they are convicted of certain serious crimes that touch on their office or employment.
JOHN REITMEYER | JULY 28, 2017
Starting this month, New Jersey’s chronically underfunded public pensions are going to benefit from Lottery funds as well as from more regular payments by the state
The New Jersey public-employee pension system traditionally has received cash contributions from the state in one lump sum — and only if the annual budget has been healthy enough at the close of each fiscal year to provide the full amount set aside by lawmakers.
But thanks to two recent policy changes that took effect earlier this month with the start of a new fiscal year, the pension system is going to receive more regular cash infusions from the state, and from two different revenue sources.
Monthly contributions will come in from the state Lottery under a complicated new law that was enacted earlier this month by Gov. Chris Christie and lawmakers that effectively transferred the Lottery enterprise into the pension system for a period of 30 years.
In fact, official figures that were outlined during a public meeting of the New Jersey State Investment Council yesterday indicate pension-fund managers expect to receive just over $1 billion throughout the 2018 fiscal year from the Lottery, with monthly infusions averaging $83.4 million.
Posted July 26, 2015 12:54 pm by WirePoints
By: Mark Glennon*
Nobel Prize winning economists aren’t the hyperbolic type. They usually speak in measured tones, careful to protect the precision of their academic viewpoints. Two of them have spoken openly about public pensions, including one about Illinois pensions. They are uncharacteristically harsh.
First, there’s William F. Sharpe, a Stanford professor who won 1990 Nobel Prize for Economics for his work in developing models to aid investment decisions. The Financial Analysts Journal interviewed him last year. Here’s what he said:
Is this a disaster? You bet…. It’s a crisis of epic proportions…. [Pensions] value liabilities at 7.5% or 8% on the grounds that they are pretty sure they’ll earn that in the long run. This is crazy. It gets even worse. Because they want to minimize the reported value of the liabilities, they want to use a high discount rate, and in order to justify it, they have to build really risky portfolios. Consequently, they believe that one of the great hings to do is put money in private equity, or maybe a hedge fund, because then they can assume an extra 300 or 400 bps of expected return for an iliquidity premium (or just because hedge fund managers are so smart). So, the tail wags the dog.
Idiotic accounting drives even worse investment decisions. This is the classic case of an organization that borrowed money while issuing purportedly guaranteed payment and then used the money to invest in risky securities. Where have we recently heard that this is not a good thing?
Of course, you can point to the politics to see why politicians might give benefits that are very large to employees, especially those who may be
able to influence elections in various ways. By making sure the benefits are mostly in the future, politicians can pretend that they cost a lot less than they’re going to cost. It’s a very bad situation. [Emphasis added.]
N.J. Senate President Sweeney calls for $1 trillion in US loans to save pensions
JULY 29, 2015, 11:24 AM LAST UPDATED: WEDNESDAY, JULY 29, 2015, 3:14 PM
ASSOCIATED PRESS
https://www.northjersey.com/news/n-j-senate-president-sweeney-calls-for-1-trillion-in-us-loans-to-save-pensions-1.1382539
Published: June 30, 2015 10:23 a.m. ET
When Chicago Public Schools announced on June 24 that it would borrow $1 billion to make a $600 million-plus pension payment due June 30 an eerie feeling spread across bond investors and taxpayers alike.
It was the same feeling that gripped investors when Moody’s Investors Service downgraded Chicago’s credit rating to junk based almost entirely on the city’s pension problems.
The fear was that elevated pension costs, in cities like Chicago, might push these public entities into insolvency, wiping out much of the holdings of municipal-bond investors.
Once a sleepy corner of the municipal bond market — often not even properly reflected on cities’ balance sheets — public pensions have recently turned into the biggest headache for taxpayers and municipal-bond investors, threatening to bring down the finances of U.S. cities and states.
In some places, like Puerto Rico, Illinois, New Jersey and Chicago, entire balance sheets of cities or states hang in the balance.
Detroit, as well as three Californian cities — Vallejo, Stockton and San Bernardino — had to declare bankruptcy because of their overwhelming pension costs.
In those cases, the courtroom turned into a brutal battlefield pitting bond investors trying to save the money they invested in those cities’ municipal bonds on one side. And on the other side have been public employees trying to save the dwindling pensions that were promised to them.
Recent cases have shown that bond investors are clearly losing this battle.
While Democrats look to stamp out Free Speech , Christie and Teachers Union agree to Historic Pension Reforms
Christie lays out $33.8B budget; wants to make public pensions more similar to those in private sector
FEBRUARY 24, 2015, 1:00 PM LAST UPDATED: TUESDAY, FEBRUARY 24, 2015, 10:42 PM
BY MELISSA HAYES AND DUSTIN RACIOPPI
STATE HO– USE BUREAU |
THE RECORD
Pitching what he said could become a “national model,” Governor Christie used his budget speech Tuesday to speak almost exclusively about pension reform, returning to the issue that won him national acclaim and one that sets up fights with unions and Democrats that control the Legislature.
The governor’s reforms – a sweeping package of pension freezes, new union-controlled benefit plans and health care changes — would need approval from lawmakers and from voters who would be asked to rewrite the state constitution. And it is unclear how long the changes would take to enact, how much taxpayers would save and what it would ultimately mean for the more than 400,000 active public workers — including teachers, police, firefighters, and state and local employees — earning pensions and benefits.
Christie delivered his budget address before the full Legislature.
“I am here today to ask you to do what may be politically difficult, but what is morally the right thing to do,” Christie said. “This is the type of leadership our state requires.”
Christie’s team began the morning with a 15-second social-media video publicizing the address and touting his plan as having the backing of the New Jersey Education Association, the powerful union that spent millions against him and opposed initial pension changes he signed into law in 2011. By Tuesday afternoon, the union’s leaders blasted the announcement of a partnership, calling it “embellished” and “overstated,” and saying enacting such reforms would be a lengthy and complex process.
Republican Leaders praise Christie’s pension ‘roadmap’
TRENTON — Two of Trenton’s top Republican leaders applauded Gov. Chris Christie’s commitment to fixing an ailing pension and benefit system moments after the executive delivered his latest budget address during a joint legislative session on the Assembly floor here today. (Brush/PolitickerNJ)
Christie focuses budget address on pension system
It was a rousing welcome but an unusual budget speech. (Aron/NJTV)
https://www.njtvonline.org/
Stile: Teachers union unlikely partner in Christie’s pension overhaul
Governor Christie sold it as one of the biggest political coups of recent New Jersey history — a plan to dramatically restructure New Jersey’s public-employee pension system with a new and very improbable partner, the New Jersey Education Association. (Stile/The Bergen Record)
Judge rules Christie’s $1.6 billion pension cut must be reversed
February 23, 2015, 4:13 PM Last updated: Monday, February 23, 2015, 4:36 PM
By MELISSA HAYES
State House Bureau |
The Record
A Superior Court judge has ruled that Governor Christie must reinstate a $1.6 billion cut he made to the state’s pension payments for the current fiscal year.
Mercer County Superior Court Assignment Judge Mary C. Jacobson issued her ruling Monday, one day before Governor Christie is set to deliver his budget for the next fiscal year, which begins July 1.
Jacobson said the state must also reimburse the public employee unions for legal costs.
“The word for me is not vindication, it’s hope that in fact hundreds of thousands of workers will not have their pensions taken away from them,” said Hetty Rosenstein, state director of the Communications Workers of America, one of the unions in the lawsuit.
The governor’s office did not immediately comment Monday.
file photo Boyd Loving
Public pensions: The big bill
Jun 10th 2014, 16:25 by Buttonwood
STOCKMARKETS may be close to all-time highs but that hasn’t eliminated final salary pension deficits. In the corporate sector, Mercer says US schemes are just 84% funded, while in Britain, the Pension Protection Fund estimates the number at 91%. Assets may have risen, but so have liabilities, thanks to low interest rates.*
The remarkably-productive folks at the Centre for Retirement Research in Boston havererun the numbers for state and local pension schemes. They find that the average scheme is just 72% funded, despite buoyant equity markets in 2013; back in 2001, the average scheme was 103% funded. On the plus side, the ratio may go up a bit. Up until last year, asset prices were smoothed over five years, which means 2009 is still dragging down the numbers; as it drops out, the funding ratio may rise.
But that is small comfort, because the liabilities are calculated by discounting future pension promises at the assumed rate of return, currently 7.7%. Even if one accepted the argument that this is the right way to discount a bill (the riskier your portfolio, the lower your pension bill appears to be, so the problem disappears if you put all your money in Venezuelan bonds), this seems a bit odd. In a world where 10-year treasuries yield 2.6%, 7.7% is a stretch.
The CRR calculates that the pension shortfall, on the states’ assumptions, is $1.1 trillion. A more realistic 5% discount rate pushes that up to $3 trillion, and 4% would make it $3.8 trillion. One could, of course, use a Treasury bond yield as the discount rate on the grounds that the liabilities are guaranteed but as the CRR has shown elsewhere, that doesn’t seem to be the case; states have been cutting benefits, mainly though skimping on inflation-linking.
Assuming too high a return eventually catches up with you. Returns fall short of assumptions so the deficit grows, and schemes must put in more money. The CRR shows that the required contribution rate has more than doubled from 6.7% of payroll in 2001 to 17.6% this year. Even then, the average state is only paying around four-fifths of the required rate sot the bill is merely being postponed.
https://www.economist.com/blogs/buttonwood/2014/06/public-pensions?fsrc=scn/tw/te/bl/thebigbill
A limit to pension investing oversight as political donations from executives can go unchecked
MAY 27, 2014, 11:10 PM LAST UPDATED: TUESDAY, MAY 27, 2014, 11:11 PM
BY MELISSA HAYES AND JOHN REITMEYER
STATE HO– USE BUREAU
THE RECORD
Last year, nearly 2,000 businesses doing $6.4 billion in public work reported — as required by state law — that they made $10.1 million in contributions to New Jersey’s various political parties and candidates.
But when it comes to New Jersey’s pension fund — and the increasing share of the nearly $77 billion in assets going to hedge funds, private equity and venture capital funds — such disclosures aren’t so clear-cut.
The pay-to-play law makes it clear that executives and their employees working on the state’s pension fund investments cannot make political contributions to New Jersey candidates and political committees. But those venture capital firms and hedge funds often take the state pension dollars and invest them in other companies whose executives do not have to disclose their political donations.
Now the pension fund’s directors are putting more money into those alternative investments. The complex nature of those investments, the inability of the pay-to-play law to cover all their financial relationships and the lack of any accompanying public database like the one for state contractors make tracking political connections difficult. That comes as Governor Christie has built a national fundraising network that includes donors with backgrounds in the finance industry.
And the state Department of Treasury relies on the investment firms themselves to determine which employees are covered by the law, and to disclose any political contributions made by them. The Election Law Enforcement Commission, which regulates other businesses with state contracts, also relies on companies to self-report contributions. But the commission also maintains a public database of campaign donations and state contractors that allows for increased scrutiny of the donors doing public business.
The council that oversees the state’s investments will meet today for the first time since Christie announced last week that he would cut nearly $900 million from this year’s pension payment to close a budget gap.
The New Jersey State Investment Council, which manages the $76.76 billion pension system, is set to discuss three alternative investment proposals and get an update on its plan for the coming fiscal year. The meeting comes as questions have been raised over the legality of Christie’s scaled-back pension payments and amid claims that the state awarded investments to campaign contributors who support the governor.
From the council’s agenda, it’s unclear whether it will discuss Christie’s reductions or the pay-to-play allegations. A spokesman did not respond to a request for comment Tuesday.
The New Jersey Education Association and the Communications Workers of America, which represents state employees, are already threatening to sue Christie after he signed an executive order last week setting the pension payment for this year at $696 million, down from $1.58 billion. The governor is also calling on lawmakers to approve a $681 million payment for the fiscal year beginning July 1, down from the $2.25 billion the state was supposed to contribute under phased-in payments Christie signed into law in 2010.
The governor said the state cannot afford to pay for the “sins of the past” and acknowledged that the contributions he agreed to are too burdensome. Christie said he plans to announce additional changes to public employee pensions next month.
– See more at: https://www.northjersey.com/news/a-limit-to-pension-investing-oversight-as-political-donations-from-executives-can-go-unchecked-1.1024284#sthash.0VZzacRs.dpuf
