March 26,2017
the staff of the Ridgewood blog with a little help from readers
Ridgewood NJ, The Status Report of the New Jersey Pension and Health Benefit Study Commission issued on September 25, 2014 all but said NJ Governors beginning with Whitman stole the pension money to buy votes with many pet projects with the following statements…..
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Page 3) Both public employees and taxpayers as a whole, however, have been poorly served by a long-standing and bipartisan tradition of increasing benefit levels without adequate funding. Successive Governors and State Legislatures have committed the State to providing these benefits based on relatively optimistic financial assumptions without adequate consideration of the long-term costs to taxpayers if economic reality were to fall short of these assumptions.
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Page 6) the failure of the State to make required pension contributions when they have been due has made a bad situation much worse. Local governments participate in the same plans but have made more of their required payments with greater regularity, resulting in the local government share of the funds having a funded ratio of 75%, compared to the State’s 54% funded ratio.11 Under-funding the State’s share of the plans has been consistent under the stewardship of both major parties, as shown by the chart on the following page:
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Page 6) All that being said, however, the failure of the State to make required pension contributions when they have been due has made a bad situation much worse. Local governments participate in the same plans but have made more of their required payments with greater regularity, resulting in the local government share of the funds having a funded ratio of 75%, compared to the State’s 54% funded ratio.11 Under-funding the State’s share of the plans has been consistent under the stewardship of both major parties, as shown by the chart on the following page:
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Page 15) As the table below indicates, largely due to the extremely high investment returns of the late 1990s, at the turn of the century the funded ratio of the plans based on actuarial values approached or exceeded 100%, even during the 2000-02 economic downturn. However, the apparent resiliency of the plans during that downturn is misleading. The actuarial asset values are rolling multi-year averages. For some time after the flush years of high returns, those averages continued to reflect high actuarial asset values for those years even though the market value of the assets was declining. Statutory changes also increased the expected rate of return from 7% to 8.75% and modified the actuarial funding method to allocate more costs to future years, thereby reducing the apparent value of the liabilities. This further reinforced the misperception that the plans were safely and permanently in surplus.
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he reported asset values and statutory changes enabled the State, in full compliance with the standards then in place, to discontinue making contributions to the funds. While there were clear warnings then that this could lead to huge fiscal problems in the future, at the time it permitted hundreds of millions of dollars to be diverted to other purposes ranging from education to tax relief. Compounding the problem, during the years when the pension plans were apparently well-funded (but actually lapsing into deficits), the Legislature enacted a series of benefit enhancements, including a retroactive 9% increase in TPAF and PERS pensions in 2001, which increased State pension liabilities by $4.2 billion.35
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https://www.state.nj.us/treasury/pdf/NJPHBSC.pdf
