Readers says Financial Advisory Committee report and it contains inaccurate data, false assumptions
First of all the report does not say the village should not have a paid fire dept. I have read the Financial Advisory Committee report and it contains inaccurate data, false assumptions and more important than those it has incomplete data. The people complaining about high taxes here are only telling half of the story. You don’t hear those people complaining about the higher salaries they earn here than in other states do you? And of course they are not complaining of the high property values either especially when they are going up! By a percentage ratio N.J. residents pay a similar percentage of their homes value in property taxes when compared to other parts of the country.
The state of NJ and specifically the Village provides more services (like garbage pickup, recreation services for kids, local police & Fire services, assistance and social services for seniors, just to name a few) and an overall better quality of life for the tax dollars than most of the other states. When you look at the complete picture you see those who are complaining about property taxes are focusing on only one thing and not giving you the complete picture.
These are state averages of 2012 property tax as a percentage of home value.
New Jersey $7,318 2.32%
New Hampshire $5,230 2.18%
Connecticut $5,200 1.88%
New York $5,040 1.68%
Illinois $4,469 2.28%
Vermont $4,328 1.62%
Rhode Island $3,820 1.67%
Massachusetts $3,805 1.19%
Wisconsin $3,530 2.07%
Alaska $3,290 1.28%
The state of NJ and the Village provide more services (like garbage pickup, recreation services for kids, local police, assistance and social services for seniors) and an overall better quality of life for the tax dollars than most of the other states. When you look at the complete picture you see those who are complaining about property taxes are focusing on only one thing and not giving you the complete picture.
Ridgewood does not equal NJ, so saying NJ residents pay a similar ratio in property taxes isn’t accurate. Ridgewood residents pay 2.36% of their asssessed value on mich higher average home values. The only other state in your data above (what’s the source so we can be sure there are no inaccuracies ?) that’s close is Illinois, which is technically bankrupt. Why do you continue to blur the picture by making false comparasions ? The FAC report is a great basis for debate, but you just discredit, discredit, discredit. Speaking about not telling half of the story, what have you got to gain by discrediting the FAC report and anyone asking for higher doctors’ visit and drug co-pays than the current $15 and $5 from our current and former employees ? What does matter to you if we raise the cost of family health coverage to private sector based employer rates instead of the $400 annual plan coverage we give away today to our current and former municipal employees ?
As requested here is a link to the report. I was involved in the development of this report.
https://www.taxpolicycenter.org/UploadedPDF/412959-Residential-Property-Taxes.pdf
Because some communities provide more than just basic services for their community, making a true comparison city to city, town to town, state to state, would require the analysis of all services, determining the cost of additional services provided by each community and removing those costs, to arrive at a true comparison. This was not done because that would have made the analysis report more confusing.
For example, garbage pickup is normally provided by a private service company for most communities. When a community, such as Ridgewood, provides this service that increases the property tax cost basis. The costs are then shifted from an out of pocket expense, which is not tax deductible, to the individuals property taxes, which is tax deductible for high income earners. The cost for trash pickup paid for by property taxes becomes deductible on 1040 Federal Schedule A line 6 property tax deduction at the rate the taxpayer is taxed for ordinary income. This is true for any service provided by the community and paid for through the property tax system. The benefit of this is if a taxpayer is taxed at the 35% tax rate and the cost for garbage collection paid for through property taxes is say $1,055.39 per year the actual cost for trash pick up is reduced by the tax deduction, or in this example $1,055.39 – 35% = $686.00.
I am confident you can see how complicated the report on property taxes would have become if this was done for every service, above the basic services, that is provided by every community and factored into this report.
The FAC report is not completely without merit. However, when assumptions are made and calculations are given without backup or an example of how the numbers were developed, that leads me to wonder how the conclusions or calculations are justified. Some of the data appears to be valid and reasonable. Clearly you must have been one of the contributors to the report so of course you would defend it and it’s contents. I am not looking to get into a discussion on the merits or lack of merits in that report.
cmijc
I thing I’m moving to Canada. Thing are so much better. They don’t have these kind of problems.Eh
That would be. Un-American
Ummmm #1 The silence is deafening…..
Thanks #2, very informative.
to # 3 yeah hello. go you will see. I go up to a, land every year.
Their probably in a different time zone.
Despite the fact that Canada is the social utopia you guys clearly favor, I don’t think they’d have you – Canadians are nice. Too bad – you could have asked Ridgewood to send your pension checks up north and you could have had free health care, with no co-pays, instead of the $400 family plans you have now. BTW, you guys seem to be brilliant mathematicians in addition to your socioeconomic policy expertise: guess how much your +$100,000 annual pensions are worth using the 7.95% assumed rate by NJ’s municipal Pension Funds ? Assuming no change in principal, that implies your pension is worth over $1.2mn. Using a more realistic 5% rate of return given 30 year US treasury rates are 3.7% and only 3.0% in your favo(u)red Canada, eh, your pension is worth $2.0mn. How much did you contribute towards that from your take home pay ? Is that better than the Social Security check you gave up in exchange ?
I provided the source for my information #1 in my follow up comment to your comment which is listed as #2. I hope you have had time to review that report. So now my question to you #1 is tell me where my statements or calculations are wrong? I would like to hear what you have to say.
Thanks #10, your report shows that NJ pays the highest mill rate in the country, and Ridgewood is above that, ergo we pay some of the highest property taxes in the country given we have one of the highest average property values in the country. Is that accurate ? Why is that a good thing ? Makes it harder to justify further tax increases, doesn’t it ? Unless you want to just keep forever raising taxes ? Many on this blog have noted how the rapid escalation in entitlement benefits and wages are crowding out the Village’s ability to spend on providing other services. When we’re already taxed at above average rates, how do we resolve the longer run problem here which is how do we pay for all of these promises we’ve made ? If you can’t find people who are willing to pay for all of this to replace those who leave, then what do you do ?
I sure hope you are not in the investment business #9 cause you have no idea what you are talking about. Your 7.95% is well below the over 12% median return of the S&P 500 from 1970 to 2013.
See Total annual returns chart at – https://en.wikipedia.org/wiki/S%26P_500
There are even some mutual funds that can reach a 12% average annual return.
See story at – https://www.daveramsey.com/article/the-12-reality/lifeandmoney_investing/#a8
Having a pension worth $1.2 million, which you appear to be a bit jealous of, is not such a big deal. An individual saving $120.00 a month from age 25 to age 65 at a 9% to 12% growth rate will get you there quite easily.
Using US treasury rates as a return is not only foolish it’s downright dumb when you can get 7.6% dividend from a stock traded mutual fund such as Babson Capital Corporate Investors (NYSE: MPV) which is low risk.
My advise, don’t quit your day job, and find a good investor to handle your money matters cause if your handling them it’s obvious your doing a horrible job.
Are you going to answer the reader’s question #10 ? The new FAC report notes the status quo is unsustainable from a financial basis, but you seem to be suggesting the status quo is working for you – why is that ?
Thanks #2, the report states that the counties with the highest property taxes paid per homeowner are those surrounding New York City: Westchester, Nassau, and Bergen counties had the three highest average tax burdens, all in excess of $8,500; Ridgewood’s mill rate is 2.36% vs NJ mean avg 2.32%. Why are these good things ?
#12, do you understand the difference between median and mean ?
#12 said,
do you understand the difference between median and mean ?
Yes! I do.
Do you agree that an individual saving $120.00 a month from age 25 to age 65 at a 7% interest rate will net that individual over a million dollars? Yes or No?
#11, Is it fair to say that you have no questions about the Tax Policy Center Report or it’s data? Regarding your statement ” NJ pays the highest mill rate in the country, and Ridgewood is above that, ergo we pay some of the highest property taxes in the country”. Your statement is not completely accurate. To be completely accurate in the comparison from community to community you would have to insure the communities are providing exactly the same services. Many communities nationwide provide very basic services, with some not even providing a local police department. Comparing Ridgewood, which is a very service oriented community, to a community that only provides basic service is a faulty comparison for the obvious reasons.
According to the State Budget Crisis Task Force (Chaired by Former Chairman of the Federal Reserve Paul Volcker), New Jersey has just recently reduced its interest rate assumption from 8.25 percent to 7.95 percent — now more line with other state assumptions, but still greater than their average investment returns over the last three, five, and ten year period of time. If the pension funds’ investments earn less than what it assumes it will earn, unfunded liabilities accumulate.
Ridgewood charges more than New York City as a % of assessed value – are you saying they don’t have comparable services #17 ? And by your logic, we should have the best services of any Village in the entire country. We pay above NJ rates as a % of assessed value, and as you pointed out, NJ already has the highest rate of property taxes in the country. If that is accurate, why are people complaining about the decline in our Village services ? Your argument is akin to “you get what you pay for”, correct ? So if we pay the most, we should get the most, right ?
#19, clearly you have not researched and done your homework on this issue. One factor in the comparison you make of Ridgewood to New York City that you haven’t considered is the basic principal called the economy of scale. If you understood that principal you wouldn’t compare NYC to Ridgewood.
A far better comparison is other local communities in Bergen county and their tax rates compared to Ridgewood. Ridgewood provides more services than other communities on this list and most all cases charges considerably less. See 2013 comparisons below. (1)
Community Gen Tax Rate Effective Tax Rate
RIDGEWOOD VILLAGE 2.356 2.259
ALLENDALE BORO 2.357 2.170
BERGENFIELD BORO 3.031 3.011
BOGOTA BORO 3.531 3.191
DUMONT BORO 3.248 2.856
ELMWOOD PARK BORO 2.636 2.498
EMERSON BORO 2.443 2.303
FAIRLAWN BORO 2.989 2.724
FAIRVIEW BORO 2.781 2.539
GLEN ROCK BORO 2.680 2.492
HACKENSACK CITY 3.217 2.840
MIDLAND PARK BORO 2.719 2.412
OAKLAND BORO 2.566 2.323
RIDGEFIELD PARK VILLAGE 3.385 3.018
SADDLE BROOK TWP 2.579 2.346
WALDWICK BORO 2.454 2.544
By comparison The Village of Ridgewood provides more services for less cost than other Bergen county communities.
Source –
(1) State of New Jersey Treasury Division of Taxation.
On that list only Ridgewood and Hackensack have Paid FD, only Ridgewood provides garbage pickup, water and sewer service as part of it’s basic services. #19 doesn’t realize that if he lived in one of those other towns he would be paying a sewer fee and garbage fee over and above his taxes.
#13 said,
Speaking about not telling half of the story, what have you got to gain by discrediting the FAC report and those on this blog concerned about high property taxes ?
Are you going to answer the reader’s question #10 ? The new FAC report notes the status quo is unsustainable from a financial basis, but you seem to be suggesting the status quo is working for you – why is that ?
I have nothing to lose or gain in this discussion. I am just providing factual information to posters who are making statements without knowing the facts.
Regarding the FAC report, in my opinion their conclusions are based on incorrect, incomplete or inaccurate data. It appears to me the report may have been written to support an pre determined conclusion, in any case it does not appear to be a fair and unbiased analysis.
#19 I don’t know what your problem is but I have no complaints about the service in town. The police, sanitation, village hall, library and fire employees do a wonderful job and I have lived here for just over 18 years. Yes the taxes are high but the services and safety are worth the cost.
#22, the ink hasn’t even dried on the new FAC report and you are already saying their conclusions are based on incorrect, incomplete or inaccurate data ? That’s a union ploy, to discredit and undermine any challenge to the status quo…. a status quo that has clearly been favorable to public sector unions ($400 full coverage family plan health insurance, etc). Why are you so critical of work that has been for free by volunteers who are worried the status quo is unsustainable from a financial perspective ? You claim you have nothing to lose or gain from this discussion, but given you are using union talking points, how can we be sure you present a fair an unbiased analysis ? Maybe you’ve already got your pension and lifetime benefits, but I’m sure your friends who are still working – who can’t post on this blog – don’t want any challenge to our status quo ?
#23, I never complained about Village services – it’s heroic what they do given the resources they’ve lost. Where did I complain ? I simply noted that a common thread on this blog seems to be people complaining about the decline in our Village services and how there are still Christmas trees on our streets. Thank goodness we have such well trained and dedicated police, fire & sanitation,. But if you’ve been for here 18 years, you’ve seen your property taxes grow by over 4% a year. You get what you pay for, I’m not disputing that. I’m disputing that the cost of those services is seeing 4% annual cost inflation over 20+ years.
Really #23 you never complained about Village services? Wasn’t it you who posted as #19 ” We pay above NJ rates as a % of assessed value, and as you pointed out, NJ already has the highest rate of property taxes in the country.” that sure sounds like complaining to me. I acknowledged in my post as #23 Yes the taxes are high but the services and safety are worth the cost. If you don’t agree and you think you can find a better community that has lower taxes and the same services I suggest you move.
Careful #26 you’ll be branded a Union hack posting on a “Republican” blog or accused of being a communist and trying to turn this into a “Red” blog. God forbid you show a modicum of satisfaction with village life, and services.
#24 – Yes, that is my evaluation of the FAC report. That documents conclusions are based on incorrect, incomplete or inaccurate data. Call it what you will (a union ploy) but the facts are the facts. You keep going back to your talking points ($400 full coverage family plan health insurance, etc) yet you refuse to believe or acknowledge any of my statistical data (posted as #20) which clearly shows Ridgewood’s municipal tax rate is below most neighboring towns rates. You insist on making unreasonable comparisons (New York City vs Ridgewood) with out understanding the basic principal called the economy of scale. You asked me “Why are you so critical of work that has been for free by volunteers who are worried the status quo is unsustainable from a financial perspective ?” How this report came about does not change the facts and figures contained in the report. Was this report developed to support the claim you keep making over and over, that the status quo is unsustainable from a financial perspective? I am beginning to think so, that would explain the faulty data contained in the report. You have yet to provide a single shred of data to support any of your claims. You claim I am using union talking points, can you give me an example of my “union” talking points? You asked how can you be sure I present a fair and unbiased analysis? You can be sure because I have provided you with data and cited my source, which you can verify. What and where is your data for your claims? Why did you completely ignore the information I provided as #20 that proves beyond any reasonable doubt that the Village of Ridgewood provides more services for less cost than other Bergen county communities. If anyone one has an agenda it sure looks like it is you. If any of my information is wrong I challenge you to prove it is wrong.
your argument is well framed , but comparing Ridgewood to NYC at any level , economies of scale or not is ridiculous. NYC is an international city with international issues . As for great service at lowest price , its a stretch at best , old timers will tell the whole town has declined significantly in the last 15 years and is nothing what it used to be. Bergen County is not cheap by any standard and basically no longer economically viable .
My data source to support my claims the historical Village budget data and the CBAs on the Village website. Are you calling their accuracy in to question ? Union talking point #1: the Village of Ridgewood provides more services for less cost than other Bergen county communities.” Union talking point #2: The [new FAC’s] documents conclusions are based on incorrect, incomplete, or inaccurate data.” What’s wrong about your informations is that it’s only half of the story. You are leaving out the fact that from a property taxpayer’s perspective, the annual increases in our property taxes are funding mandated salary and benefit obligations, not to improve the quality of life and services for residents. You’re argument proves the status quo is working for you.
#30 – you want to base your conclusions on the faulty FAC report and ignore the fact that the Village provides more services at a lower municipal mil rate than all of the other towns I referred to in my post as #20 that is fine. None of the towns listed there provide garbage pickup, fully staffed fire services, recreation services for kids and seniors or a sewage treatment facility for their residents, that is a fact, and. How that is a union talking point is beyond me.
You claimed that I am only providing half of the story and I am leaving out the property taxpayer’s perspective,” I am a taxpayer, and have been a taxpayer in Ridgewood for many years. If anything is only providing half the story it’s your FAC report. It only tells half the story since it does not even consider the cost to the residents for the Board of Education (BOE). If your report included the BOE then I would have to agree that the largest portion of the Village Tax bill (BOE) has been increased at an alarming rate and is not sustainable.
How do I arrive at that conclusion? Here is the 2011 Bergen County property tax data showing the town – County – total tax levy – % County Taxes – % School Taxes % – Municipal taxes. This is the latest year available on the NJ.com by the numbers web site. There are 70 Municipalities in Bergen County. Below are 18 municipalities that have an equal or greater percentage of their municipal taxes dedicated to the school budget like Ridgewood. The other 51 municipalities have a lower percentage than Ridgewood dedicated to their school budget and a higher percentage number dedicated to their municipal services. Ridgewood’s municipal tax levy is lower than the other 51 Municipalities in Bergen county and is even below the state calculated average of 29%. You can draw your own conclusions from this data however this data clearly shows that the Village municipal budget is very well managed as contrasted with other Bergen County Communities and the overall state average. It also indicates that BOE budget is out of control and unsustainable.
Town – County – tax levy – % County – % BOE – % Municipal
Ridgewood Village Bergen $130,248,198.77 10% 65% 25%
Closter Borough Bergen $42,254,879.89 11% 65% 25%
Demarest Borough Bergen $27,942,242.71 10% 68% 21%
Franklin Lakes Borough Bergen $62,617,871.06 14% 69% 17%
Glen Rock Borough Bergen $59,596,958.87 9% 70% 21%
Harrington Park Borough Bergen $21,819,633.46 10% 69% 22%
Hillsdale Borough Bergen $41,482,921.52 10% 70% 20%
Midland Park Borough Bergen $27,063,090.79 10% 65% 25%
Oakland Borough Bergen $54,044,047.52 9% 65% 26%
Old Tappan Borough Bergen $29,120,723.48 13% 71% 16%
Park Ridge Borough Bergen $35,601,710.17 10% 66% 24%
Ramsey Borough Bergen $72,773,675.42 11% 67% 22%
River Edge Borough Bergen $43,666,177.86 9% 65% 26%
River Vale Township Bergen $43,739,302.11 10% 68% 22%
Tenafly Borough Bergen $86,534,847.47 10% 65% 25%
Upper Saddle River Borough Bergen $46,413,818.76 13% 69% 18%
Waldwick Borough Bergen $37,118,536.98 9% 68% 23%
Westwood Borough Bergen $40,321,173.87 11% 60% 30%
Woodcliff Lake Borough Bergen $38,129,520.22 12% 66% 22%
Statewide total $25,643,843,500.01 18% 52% 29% of 567 municipalities
https://www.nj.com/news/bythenumbers/
This information confirms that the Ridgewood municipal is budget is well managed and the BOE budget is where the runaway spending is since the Ridgewood BOE takes a higher percentage of the total tax bill than 51 other Bergen county municipalities. The FAC report ignores this fact, and therefor is even more faulty than I originally thought.
My data source is the CBAs and Village budgets posted on the Village website, not the FAC report. As for the BOE, as you well know, the Village budget has nothing to do with the BOE budget. They are run by separate governing bodies; that’s why we vote separately for the Village Council and BOE members. Talk to the BoE if you have an issue with their budget. This post is about the Village, not the BOE, and the FAC report mandate is to look at the Village of Ridgewood budget & finances, not the BOE budget. Maybe you should ask the BOE to produce a similar report like the FAC just produced for the Village ?
No. We’ve checked your math #16, and hopefully you’re not in pension fund management. Saving $120 a month from ages 25-65 at a 7% interest rate will result in a pension of $314,977.61. How much did you contribute towards your pension every month from the age of 25-65 ?
#12, we just checked your facts. The AVERAGE total annual return (incl dividends), which is the correct way to look at returns for long run liabilities like pension costs, for the S&P500 since the start of 1970 was 10.28% through January 2014. However, no pension fund manager would hold only stocks given they are higher risk than government bonds. Pension funds generally also hold risk free assets, including a mix of 10 year, and 30 year treasuries given they match up well with long term liabilities like pension costs. The AVERAGE return for 10 year US treasuries since the start of 1970 is 6.85%. A portfolio of 60% 10 year treasuries and 40% stocks that earned the S&P500 return would have returned 8.22% on AVERAGE since 1970, which is close to the 7.95% used by NJ’s municipal pension funds. That’s an agressive risk mix for a pension fund, they would normally also hold cash and other assets. Since the start of 2000, the S&P500 has only seen a total AVERAGE annual return of 3.31%, the average yield on the 10 year US treasury was 3.87%, and the average yield on a 30 year treasury was 4.53%. That same mix of 60% bonds and 40% equities would have only earned AVERAGE returns of 3.75% for the past 15 years. If you want the NJ state pension funds to invest in to MPV US, give them a call.
#12, you claim that having a pension worth $1.2 million is not such a big deal. That’s how much you need in principal to pay out annual pension benefits of $100,000 using the NJ municipal pension funds assumed rate of return of 7.95%. You say that an individual saving $120.00 a month from age 25 to age 65 at a 9% to 12% growth rate will get you there quite easily. We just checked your math: $120/month X 480 months (40 years) would generate $1.2mn in savings at an annualized rate of 11.48%, so it doesn’t get you there easily compared with an average S&P500 return over the past 40 years (since 1974) of 10.84% and the average 30 year treasury rate since then of 7.13%. That 11.48% annual return you would need is impressive. Did you contribute $120/month towards your pension for 40 years at an 11.48% return ? Can I get the phone number for your financial advisor who got you that return on your contributions ? At 9% annual returns, it would have been $561,758. At 10% it would have been $758,889. At 11% it would have been $1,032,015.
#33 said, No. We’ve checked your math #16, and hopefully you’re not in pension fund management.
You are correct #33 , and that was a trick question to see if you were paying attention. Use the same $120.00 per month and 40 years at 11% and see what you end up with.
I have contributed the maximum permitted by law to my 401k for 20 years. you do the math and you will know how much I have in my retirement fund.
#35 – Because you referred to the median number in a previous post that is the number I used for the S&P 500 growth in my post. Now you want to go with the AVERAGE total annual return instead, that is fine, however your average total return for the S&P 500, including dividends, since 1970 (10.8%) is wrong. The actual return is 10.40% with Compounded Annual Growth Rate (CAGR) applied. Below is the total annual return percentages for each year including dividends and the high/low and median percentages. With risk comes reward. While it is true that bonds are a safer investment, over the last 6 years they haven’t returned enough interest to overcome the basic CPI rate and as such they are a losing investment. If you’ve been buying US Bonds over the last 6 years you have been losing money to inflation. As a pension manager I would have expected you to know better. A good investment manager knows when to and when not to take risks. I have no reason to call the NJ Pension system to recommend anything to them. I used the security MP as an example of an investment that is a moderate risk with a high rate of return as a dividend to show you that not all stocks are risky.
Total
Change Annual
in Return
Year Index W/Dividends
1970 0.01% 4.01%
1971 10.79% 14.31%
1972 15.63% 18.98%
1973 −17.37% −14.66%
1974 −28.72% −26.47%
1975 31.55% 37.20%
1976 19.15% 23.84%
1977 −11.50% −7.18%
1978 1.06% 6.56%
1979 12.31% 18.44%
1980 25.77% 32.50%
1981 −9.73% −4.92%
1982 14.76% 21.55%
1983 17.26% 22.56%
1984 1.40% 6.27%
1985 26.36% 31.73%
1986 14.62% 18.67%
1987 2.03% 5.25%
1988 12.40% 16.61%
1989 27.25% 31.69%
1990 −6.56% −3.10%
1991 26.31% 30.47%
1992 4.46% 7.62%
1993 7.06% 10.08%
1994 −1.54% 1.32%
1995 34.11% 37.58%
1996 20.26% 22.96%
1997 31.01% 33.36%
1998 26.67% 28.58%
1999 19.53% 21.04%
2000 −10.14% −9.10%
2001 −13.04% −11.89%
2002 −23.37% −22.10%
2003 26.38% 28.68%
2004 8.99% 10.88%
2005 3.00% 4.91%
2006 13.62% 15.79%
2007 3.55% 5.49%
2008 −38.47% −37.00%
2009 23.49% 26.46%
2010 12.64% 15.06%
2011 0.00% 2.11%
2012 13.29% 16.00%
2013 29.60% 32.39%
High 34.11% 37.58%
Low −38.47% −37.00%
CAGR 10.40%
Median 12.64% 15.79%
Now were arguing basis points ! My post said, “The AVERAGE total annual return (incl dividends), which is the correct way to look at returns for long run liabilities like pension costs, for the S&P500 since the start of 1970 was 10.28% through January 2014.” I didn’t say 10.8%. As for bonds being a “losing investment”, can you please give me an example of a pension fund anywhere in the developed world that doesn’t own US treasuries ? They earn what is called a “risk free rate”. How do you get US treasuries on a total return basis losing to CPI over the past 6 years ? You should use inflation excluding food & energy as a measure of core inflation.
You are correct, you said “the S&P500 since the start of 1970 was 10.28%.” When I entered your results I accidently missed entering the .2%. I apologize for my error. In any case the point is, different individuals can calculate the same group of numbers and end up with a totally different result.
I stand by my statement that US Treasuries for the past 6 years have been a horrible investment. Excluding food and energy costs in the inflation rate is just smoke and mirrors to make an investment appear better than it truly is.
I do not spend my time examining pension funds of other companies or government agencies so I can not answer your question. I can only tell you how my company manages investments for our clients. What you call investing to obtain a “risk free rate” would only be done with bonds and on a case by case basis by my investment firm for an individual investor who has retired or is near retirement with a more than adequate portfolio to provide them with a comfortable income with no risk. Even after retirement we encourage investors to accept moderate risks if they have a 10 or more year investment time frame. Bonds, particularly today since interest rates are at historic lows, are a safe but low return investment. And once interest rates rise, and they will, bond values will drop dramatically. For example, a bond fund with an effective duration of 5 years will drop 5% in value for every 1% increase in interest rates.
Many argue you need to exclude food & energy as part of core CPI because they can be volatile, i.e. Henry Hub gas futures are at $6.42/Mmbtu today versus $4.02/MMbtu this time last year. Have you seen a 60% YoY increase in your gas bill this month ? Should we assume that much price inflation will continue through the spring and summer ?
As for bonds over the past six years, according to the ML 10-Yr U.S. Treasury Total Return index (source: https://www.mlindex.ml.com ), they’ve returned 5.2% anualized since Feb 2008 on a total return basis. That compares with core annualized CPI growth of 1.7%, or 2.0% if you want to include food & energy. So 10 year U.S. treasuries have outperformed inflation over the past six years.