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Volcker Alliance : New Jersey has funded Only 36% of its pension debt with an unfunded liability of $143.2 billion


the staff of the Ridgewood blog

Ridgewood NJ, the state of New Jersey received a report card for managing its pension debts . The non-partisan Volcker Alliance, founded by former Federal Reserve Chair Paul Volcker, rated the state a D- for its failure to have properly “provided adequate funding, as defined by retirement system actuaries, for pensions and other promised retirement benefits for public workers.”New Jersey was one of six states to receive the lowest possible grade in the analysis, along with Hawaii, Illinois, Massachusetts, Texas and Wyoming.

As of June 2017, the Garden State has funded a mere 36% of its pension debt with an unfunded liability of $143.2 billion, 2nd worst in the nation behind Kentucky’s 34% funding.

The 2018 Volcker Alliance report, Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis, which, in addition to legacy costs, grades and proposes a set of best practices for policymakers on issues including: budget forecasting, budget maneuvers, reserve funds and transparency.

The report adds fuel to the fire of support for New Jersey pension and benefits reforms proposed in the recent “Path to Progress” report issued by State Senate President Steve Sweeney’s bi-partisan New Jersey fiscal policy working group.

· Shift new state and local government employees and those with less than five years of service in the Public Employees’ Retirement System and the Teachers’ Pension and Annuity Fund from the current defined benefit pension system to a sustainable hybrid system and preserve the current system for employees with over five years of service who have vested contractual pension rights.

· Shift all state and local government employees and retiree’s health care coverage from Platinum to Gold.

· Require all new state and local government retirees to pay the same percent of premium costs they paid when working.

· Merge the School Employees Health Benefits Program into the larger State Health Benefits Plan and make the plans identical in coverage.While formal legislation has yet to be introduced regarding Senator Sweeney’s proposals, reports indicate that bills will be introduced by the end of the year or early 2019.

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Pennacchio & Corrado Bill to Combat Conflicts of Interest State Investment Council


March 26, 2018

the staff of the Ridgewood blog

Bill Aims to Stop Corruption on NJ State Investment Council In Wake of Pension Scandals
Legislation sponsored by Senate Republicans Joe Pennacchio and Kristin Corrado to combat corruption on the State Investment Council, by forbidding members from voting on investments that present a financial or familial conflict of interest, has passed the New Jersey Senate.

Ridgewood NJ, Sens. Joe Pennacchio and Kristin Corrado’s bill would combat corruption on the State Investment Council, by forbidding members from voting on investments that present a financial or familial conflict of interest. The bill was introduced in response to scandals involving the council and the state pension system. (Pixabay)
“State Investment Council members should serve the people of New Jersey, not themselves,” Senator Pennacchio (R-26) said. “We cannot turn a blind eye to the despicable violations of public trust that have occurred in recent years. People who handle taxpayer dollars must be held accountable.”

The Senators’ bill, S-396, was introduced in light of reports that in 2008, the State Investment Council invested in Lehman Brothers right before the firm went bankrupt. The Lehman Brothers managers who sat on the council did not recuse themselves prior to voting to approve the investment in their firm. The misguided vote cost the pension system nearly $116 million.
Additionally, in 2014, concerns arose that Robert Grady, the former chairman of the council, had invested public money into a fund which his own private firm also invested in. Such potential conflicts of interest would not be tolerated under the Pennacchio/Corrado legislation.

The State Investment Council was created by the New Jersey Legislature in 1950 to develop policies governing the investment of funds by the Director of the Division of Investment.
S-396, would require members of the State Investment Council to recuse themselves from a vote if the matter before the council involves one of the following conflicts of interest:
The member or their spouse is or was employed by the entity in which the investment is being made.

The member or their spouse has a direct investment exceeding $5,000 in the entity in which the investment is being made.

Under S-396, a member who breaks this law would be removed from the council, and must be immediately reported to the Governor and the Legislature.
“Any member who casts a vote despite an obvious conflict of interest does not deserve to sit on the State Investment Council,” Senator Corrado (R-40) said. “The hardworking families we represent must be able to trust that the state is investing and spending these funds wisely. This legislation will ensure council members who use public money for personal or political gain are punished accordingly.”

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N.J. lottery-pension plan “slightly positive,” Wall Street ratings agency says


Dustin Racioppi, State House Bureau, @dracioppiPublished 3:29 p.m. ET Aug. 15, 2017 | Updated 5:32 p.m. ET Aug. 15, 2017

Gov. Chris Christie’s new law shifting lottery revenue from education and social-service programs to the troubled public employee pension funds is being viewed as a “slightly positive” move by a Wall Street ratings agency, but not one that will fully relieve the pressure on the state to meet its obligations to workers.

The report by Moody’s Investors Service is the latest analysis by one of the three major ratings agencies that have collectively downgraded New Jersey’s credit under Christie a record 11 times. They often cited the state’s heavily underfunded pension system as the main driver of the downgrades.

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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.

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The New Jersey pension crisis | IN 60 SECONDS

Christine Todd Whitman

February 15,2017

the staff of the Ridgewood blog

Ridgewood NJ, the New Jersey pension crisis in 60 seconds . Reader says ,” the unions rule NJ and the politicians are at their beck and call. They’re bankrupting the state and municipalities, and taxpayers get screwed at every turn. Benefits should be diminished big time, but the unions get the vote out to keep the good times rolling. You keep voting in theives and you’re gonna get robbed. Any time the unions want something, assume it’s bad for state and local tax payers”

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Christie gets bipartisan plan that he calls ‘more fair than the previous proposals,’ but it offers no constitutional guarantee enforcing payments

After failing to find any common ground for the past several years over the best way to address New Jersey’s grossly underfunded public-employee pension system, state lawmakers reached a rare, bipartisan agreement yesterday, voting in favor of legislation requiring quarterly instead of yearly state pension contributions.

The measure — which legislative leaders say they are confident Gov. Chris Christie will eventually sign — would help the $73 billion pension system by breaking up the annual state pension contribution into smaller installments that the sponsors hope will be easier for the state to afford than the lump sum that administrations typically try to make at the end of each fiscal year.

Depositing the payments on a quarterly basis would also protect more of the pension contribution from end-of-the-year budget cuts and allow the pension system, which is professionally managed, to generate bigger investment returns by getting more money into the system earlier in the fiscal year.

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How Can NJ Rescue Underfunded Pension System?

Sweeney & Prieto


State public-employee pension systems across the country are facing a combined $1 trillion in debt, and many states, including New Jersey, aren’t getting much help on the investment side these days thanks to stubbornly low interest rates. Medical breakthroughs are also testing the math of pension systems as retired workers are now living much longer. John Reitmeyer, NJSpotlight Read more

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Pension Meeting Ends in Cliffhanger


It was supposed to be another staid meeting of the board that oversees New Jersey’s $71 billion public-employee pension system. It ended with a dramatic deadlocked vote on a key policy issue — how heavily pension assets should be invested in hedge funds — and an equally dramatic threat from one veteran board member to immediately tender his resignation. John Reitmeyer, NJ Spotligh Read more