Statewide Catastrophe Is Coming
maybe cutting other taxes when the state raised the gas tax wasn't such a great idea. Given the exceptionally low price of gas, no one was going to flee the state if the fuel tax increase wasn't offset by other cuts.
It's those kind of bad and short-sighted decisions that lead to the fiscal difficulties we have to deal with.
FilmCarp said:
I always thought the word was welch. Am I wrong?
This blog post sums it up pretty well:
hoops said:
in my opinion the negative responses above, the ones that say it cannot be done, are the ones that are wrong. where there is a will there is a way and if the state acts responsibly those pensioners will be protected.
the talk of flight from this state is,,,, over stated.
we'll get by, we'll make do, and we should pay our debts.
Flight from NJ to avoid taxes will be a slow process but it will be damaging. Some people will move when they have a decision point (e.g. kids are out of the house). Some companies will opt to locate elsewhere. But the state will survive. Services will be cut. Pensioners will take a haircut. I'll probably move at some point. The ties that bind me to NJ are not all that strong and once my kids are out of the house....
http://www.nj.com/opinion/index.ssf/2016/01/the_truth_about_njs_pension_crisis_and_how_to_fix.html
"Over a 14-year span, Republican governors underfunded the pension system by $2.6 billion, then Democratic governors did so by $10.2 billion. The Christie administration promised to fix the problem, but instead made it worse by underfunding the pension system by $17.5 billion in its first six years -- and a projected $23.7 billion by the time the governor's term ends in January 2018.
Every year that the pension system goes underfunded, the long-term cost of fixing the problem grows exponentially.
It would have cost only $1.1 billion a year to restore the pension system to full funding when Sweeney first flagged the problem in 2005. Five years later, at the end of the Corzine administration, it would have cost $2.5 billion. It would have cost over $4.5 billion by 2018 when the seven-year ramp-up to full funding was to have been completed under the bipartisan 2011 pension law."
spontaneous said:
To anyone here who says he doesn't deserve it, I say go f*ck yourself, and I don't care if Dave and Jamie ban me for a personal attack on this one.
Do the victims of Bernie Madoff deserve their money back?
Whether your husband deserves the amount of any promised pension is subjective but what is indisputable is that New Jersey politicians have consistently raided the pension fund (primarily by not putting in the honest contribution amount) because they were allowed to do it by their constituents, the courts and, most importantly, by people like your husband who were promised a pension and somehow took it for granted that New Jersey would be good for the money. They're not.
Why didn't the pension insurance companies take the states to court to force them to maintain their legal obligations to fund the pensions?
LOST said:
Where did the money go? As explained by Formerlyjerseyjack and Spontaneous money was taken out of every pay check of these employees to fund a pension. Do those employees get their money back?
Was it a con?
Yes.
hoops said:
in my opinion the negative responses above, the ones that say it cannot be done, are the ones that are wrong. where there is a will there is a way and if the state acts responsibly those pensioners will be protected.
the talk of flight from this state is,,,, over stated.
we'll get by, we'll make do, and we should pay our debts.
That debt is about $200 billion and the cuts have started. No more pension cost-of-living-adjustments even thought those were contractually rights. Next comes caps on pensions after the trust is depleted. It is happening with union plans in the private sector now and those plans have funding rules. Public plans don't.
https://www.lewrockwell.com/2017/03/tyler-durden/ny-teamsters-pension-fund-goes-broke/
jbken said:
spontaneous said:
To anyone here who says he doesn't deserve it, I say go f*ck yourself, and I don't care if Dave and Jamie ban me for a personal attack on this one.
Do the victims of Bernie Madoff deserve their money back?
Whether your husband deserves the amount of any promised pension is subjective but what is indisputable is that New Jersey politicians have consistently raided the pension fund (primarily by not putting in the honest contribution amount) because they were allowed to do it by their constituents, the courts and, most importantly, by people like your husband who were promised a pension and somehow took it for granted that New Jersey would be good for the money. They're not.
Bernie Madoff is in jail. Put every NJ Governor who didn't fund the pension system (i.e. scammed the workers out of their pension) in jail and I'll agree with your analogy.
This isn't complete.
Whitman didn't just cut taxes, she also increased spending, from $12 bil a year to $20 bil a year.
And Whitman kept taxes significantly higher than they were pre-Florio. Pre Florio the top bracket was at 3.5%. Under Florio it was 7% and under Whitman the top bracket was in the low-6's. The State should have had enough money for the pensions, but there was huge pressure to increase spending from the legislature, the public sector unions, and the NJ Supreme Court (through Abbott).
So New Jersey's pensions were underfunded in the Whitman era because of tax cuts and spending increases.
But at a certain point the blame can't all go to Whitman anymore because none of her successors were able to properly fund the pensions either. The worst years of pension underfunding were under DiFrancesco, McGreevey, and Codey, when the contribution was nearly $0. Corzine had a $0 year at the end of his term too because of the Great Recession.
Formerlyjerseyjack said:
LOST said:
Where did the money go? As explained by Formerlyjerseyjack and Spontaneous money was taken out of every pay check of these employees to fund a pension. Do those employees get their money back?
Was it a con?
A bigly chunk of it was taken out by Whitman to avoid raising taxes. The deal was that the pension fund would loan the state money. The state would pay it back with income from inflated tax dollars. Over years, a series of governors reneged on not only paying back the loan but also concurrent new contributions. Instead, they contributed no income to the retirement funds.
ml1 said:
maybe cutting other taxes when the state raised the gas tax wasn't such a great idea. Given the exceptionally low price of gas, no one was going to flee the state if the fuel tax increase wasn't offset by other cuts.
It's those kind of bad and short-sighted decisions that lead to the fiscal difficulties we have to deal with.
Yes, especially when the tax cuts that were made in parallel with the gas increase applies to a very small fraction of us.
hoops said:
in my opinion the negative responses above, the ones that say it cannot be done, are the ones that are wrong. where there is a will there is a way and if the state acts responsibly those pensioners will be protected.
the talk of flight from this state is,,,, over stated.
we'll get by, we'll make do, and we should pay our debts.
Yes we have to stay engaged and support the right candidates for public office. Both Wisnieski and Johnson had good things to say at last night's forum at Sopac. With all of this doom and gloom about the pension system I think it's important to point out that as of now, not one single pensioner has been denied the payments they are due.
the way to fix the problem is to address the problem seriously. saying F you to all these people who were promised pensions, contributed to their pensions, worked for their pensions is immoral.
the first step is to do something to stop the bleeding, then build back slowly and CERTAINLY. the bad ramifications of having to raise some taxes and make some hard choices will alleviate themselves when and if the mistake of non-funding is corrected.
I have no pension, I'm not a state employee. People who want to leave can leave, this state is not going to fold, businesses are not going to leave to go elsewhere without other businesses coming in to take their places. we have the population and population density.
All it takes is leadership that wants to turn the ship in the right direction.
a big part of the problem is the taxpayers of NJ. We go ballistic every time there's any tax increase of any kind. Even the ones that aren't that painful like the gas tax or the sales tax. We sent Jim Florio a very loud message when he raised taxes and no governor since wants the same reaction.
TCNJ Magazine: But let’s talk about that decision to raise sales and income taxes to balance the budget. Why was it necessary?
Gov. Florio: When I came into office, I was under the impression that New Jersey had a $400 million surplus. The reality was that we had a $600 million shortfall. Later on, the New Jersey Supreme Court rendered a decision on school financing [the Abbott decision] that said the poorest-performing school districts should be funded at the samerate as the highest-performing districts, which demanded a substantial increase in state school aid. We anticipated then a billion-dollar shortfall for the next budget beginning in July.
TCNJ Magazine: What did your package of new taxes include?
Gov. Florio: $1.1 billion in new sales taxes, a $1.2 billion increase in the income tax and a program of property tax rebates for people earning less than $70,000. Remember, every penny in the income tax in effect meant a reduction in property taxes, as well. We also made some substantial cuts in the budget.
TCNJ Magazine: You countered those who argued that only poor urban school districts should get more state aid, and you argued there was also a need to assist some hard-pressed suburban districts. Why?
Gov. Florio: I advocated for children, period. In other words, there were children living in suburban areas whose families were also economically hard pressed. But it was not included in our bill.
TCNJ Magazine: Did having a Democratic Legislature help?
Gov. Florio: Yes.
TCNJ Magazine: The so-called Tea Party isn’t very strong in New Jersey, but it’s certainly had an impact nationally. When you were governor, you encountered an early New Jersey version of it. Tell us about it.
Gov. Florio: [The group] was called Hands Across New Jersey. It consisted of guys walking around in oak barrels saying I had taken the shirts off their backs. A postman headed the group. In some respects they were promoted by 101.5, a central Jersey talk station. They had bumper stickers and held a protest in front of the State House. We found out later that the NRA sponsored them. What was interesting was I met with Hands Across New Jersey and asked if anyone in the room made more than $70,000. No one did. That meant they were not affected by the tax increases. With the homestead rebate I proposed, they actually were making money. So they were campaigning against these changes, yet they benefited most from them!
TCNJ Magazine: Nothing like that is happening in New Jersey today. In fact, not much is happening. Why?
Gov. Florio: We’re paralyzed by policy gridlock.
http://www.tcnjmagazine.com/?p=9120
My basic disagreement with you is that the public sector unions weren't "just promised pensions." They actively, strenuously, and vociferously demanded those pensions and then increases in those pensions.
When Florio tried to change anything with teacher pensions (by making them locally funded, not state-funded) the NJEA went ballistic. It endorsed the Republican Party in 1991 and was neutral in the 1993 governor's race, with a slight lean towards Whitman.
After pensions were increased in 2001 NJEA officials openly bragged about how their lobbying and contributions had made the increase possible.
And the pension increase wasn't to current workers. It was retroactive to workers already retired.
So a public sector promise isn't a normal promise as far as I'm concerned. It was a promise made under immense pressure. And thelegislature didn't understand what it was voting on anyway. As Gordon MacInness tells the story, the pension increase bill was introduced on a Monday and voted on on a Thursday. (it passed with one dissenting vote I believe.)
It's like if your father offhandedly promised a gangster money for "protection" and then the gangster came back to you demanding you pay the bill.
(I've read similar things about other pension increases elsewhere. The cities and states that approved them didn't understand them. When reporters look back at how certain California municipalities made insane promises to public workers they find that the issue was never debated at all and then passed unanimously by the city council.)
hoops said:
the way to fix the problem is to address the problem seriously. saying F you to all these people who were promised pensions, contributed to their pensions, worked for their pensions is immoral.
the first step is to do something to stop the bleeding, then build back slowly and CERTAINLY. the bad ramifications of having to raise some taxes and make some hard choices will alleviate themselves when and if the mistake of non-funding is corrected.
I have no pension, I'm not a state employee. People who want to leave can leave, this state is not going to fold, businesses are not going to leave to go elsewhere without other businesses coming in to take their places. we have the population and population density.
All it takes is leadership that wants to turn the ship in the right direction.
Runner_Guy said:
(I've read similar things about other pension increases elsewhere. The cities and states that approved them didn't understand them. When reporters look back at how certain California municipalities made insane promises to public workers they find that the issue was never debated at all and then passed unanimously by the city council.)
It is more the case that if you let a politician kick the can down the road, they will. It doesn't take a lot of intelligence to understand the cost of pension increases, so I don't buy the argument that nobody understood.
Found it.
This story is about a city in California and its pension crisis.
Please read it because it describes how in 2000 the city council made some insane public pension promise without understanding what it was doing.
The same thing happened in New Jersey at the same time.
And this is the debt that you want your children and grandchildren to pay?
And the notion that public workers "paid in, every paycheck" so their pensions are sacrosanct and everything is 100% the state's fault is bogus.
The employee contributions were set politically, not actuarially. The idea was always that the state would pay the majority of pension costs.
(never mind what a ripoff pensions are for anyone who leaves before their pension vests.)
And the judges, whose pension zeroes-out first, paid nothing into the pension system.
Runner_Guy said:
Found it.
This story is about a city in California and its pension crisis.
Please read it because it describes how in 2000 the city council made some insane public pension promise without understanding what it was doing.
The same thing happened in New Jersey at the same time.
And this is the debt that you want your children and grandchildren to pay?
http://www.latimes.com/projects/la-me-el-monte-pensions/
Then it was a case of willful ignorance because all you have to do is find even an incompetent actuary and they can explain the costs.
Gov. Florio: [The group] was called Hands Across New Jersey. It consisted of guys walking around in oak barrels saying I had taken the shirts off their backs. A postman headed the group. In some respects they were promoted by 101.5, a central Jersey talk station. They had bumper stickers and held a protest in front of the State House. We found out later that the NRA sponsored them. What was interesting was I met with Hands Across New Jersey and asked if anyone in the room made more than $70,000. No one did. That meant they were not affected by the tax increases. With the homestead rebate I proposed, they actually were making money. So they were campaigning against these changes, yet they benefited most from them!
TCNJ Magazine: Nothing like that is happening in New Jersey today. In fact, not much is happening. Why?
Gov. Florio: We’re paralyzed by policy gridlock.
http://www.tcnjmagazine.com/?p=9120
I've seen a lot of that.
oh my god
Runner_Guy said:
Found it.
This story is about a city in California and its pension crisis.
Please read it because it describes how in 2000 the city council made some insane public pension promise without understanding what it was doing.
The same thing happened in New Jersey at the same time.
And this is the debt that you want your children and grandchildren to pay?
http://www.latimes.com/projects/la-me-el-monte-pensions/
FYI, article about the NJEA's immense lobbying operation.
Do you think that the NJEA just wasted $800 million over 20 years or did they get something for that money?
What they got was for the legislature to do exactly what they wanted.
The NJEA knew that the pensions were being underfunded and didn't like that, but they had the legal guarantee that the pension payments would still be made eventually, so they didn't care and they focused on increasing state aid.
http://nypost.com/2016/11/24/how-teachers-unions-drive-jerseys-pension-crisis/
Right. The council should have known (just like the NJ legislature should have known), but I think they had too much trust in the people telling them that this deal was affordable. They had too much faith that the 1990s economic boom would continue forever.
And if they did understand what they were doing then so what? That means they were corrupt in the first place. If you read the LATimes article the people pushing the pension plan had a conflict of interest and it was to match a deal that the police had gotten.
Do you think the police got that deal through honest negotiations or did just *maybe* political pressure have something to do with it?
If you are a public official under union pressure you are damned if you do, damned if you don't. If you disobey the union, there's a good chance you'll lose your seat, especially if you are a Democrat who can be primaried. If you keep your principles and get voted out of office, then so what? The unions have replaced you with someone more pliable. You've only delayed the mistake, not avoided it.
tjohn said:
Runner_Guy said:
Found it.
This story is about a city in California and its pension crisis.
Please read it because it describes how in 2000 the city council made some insane public pension promise without understanding what it was doing.
The same thing happened in New Jersey at the same time.
And this is the debt that you want your children and grandchildren to pay?
http://www.latimes.com/projects/la-me-el-monte-pensions/
Then it was a case of willful ignorance because all you have to do is find even an incompetent actuary and they can explain the costs.
Runner_Guy said:
FYI, article about the NJEA's immense lobbying operation.
Do you think that the NJEA just wasted $800 million over 20 years or did they get something for that money?
What they got was for the legislature to do exactly what they wanted.
The NJEA knew that the pensions were being underfunded and didn't like that, but they had the legal guarantee that the pension payments would still be made eventually, so they didn't care and they focused on increasing state aid.
http://nypost.com/2016/11/24/how-teachers-unions-drive-jerseys-pension-crisis/
Well, the NJEA will eventually learn how this works when their members have to take a haircut.
@FJJ, how have you quantified your risk (and felt about) the credit risk inherent in any pension (or annuity scheme)?
How have you responded to your credit risk increasing with respect to a NJ pension(s)?
* * * * *
I believe that NJ you could future pensioners with a combination of cash and promissory notes (AKA IOUs) payable in the future. This is the solution that CA used in 2009 with payments to vendors. Although CA paid these IOUs off pretty quickly (say a year or two if I remember correctly). See https://www.wsj.com/articles/SB124648274812182537 and http://seekingalpha.com/article/147792-california-ious-are-valid-and-binding-but-dont-try-to-spend-them
Formerlyjerseyjack said:
Runner_Guy said:
Do you feel any guilt whatsoever about putting this generation and the next generation in a debtors' prison?
Formerlyjerseyjack said:
The state supreme court ruled that the pensioners are entitled to the money. They gave no ruling as to where the money should come from. That means, either a tax increase or a reduction in some services.
Feckless politicians were more concerned with being a state legislator and collecting the money and prestige of the job, than doing the job of being a legislator.
No guilt, whatsoever. I put a bigly amount of time into the school system. The contract was, pay and pension in exchange for the work. Carry on.
Oh, and by the way, I had no choice as a public employee but to be a part of the retirement system.
+1000
Runner_Guy said:
FYI, article about the NJEA's immense lobbying operation.
Do you think that the NJEA just wasted $800 million over 20 years or did they get something for that money?
What they got was for the legislature to do exactly what they wanted.
The NJEA knew that the pensions were being underfunded and didn't like that, but they had the legal guarantee that the pension payments would still be made eventually, so they didn't care and they focused on increasing state aid.
http://nypost.com/2016/11/24/how-teachers-unions-drive-jerseys-pension-crisis/
Here's roughly how this situation unfolded, along with some selected quotes from this conversation thread:
Gov Florio: Essentially said that taxes needed to be raised substantially to keep up with obligations.
Gov Whitman: Essentially said that taxes did not need to be raised, and that everything would be ok.
"A bigly chunk of it was taken out by Whitman to avoid raising taxes. The deal was that the pension fund would loan the state money."
"Whitman didn't just cut taxes, she also increased spending, from 2 bil a year to $20 bil a year."
Over the years, as money was taken out of the pension fund, the assumed rate of return on the money remaining in the pension fund was artificially increased, making it look like all would be well in the future even though not enough money was there. And no governor was willing to risk calling for raising taxes adequately to make up the shortfall, lest they face a Florio-like fate.
"We sent Jim Florio a very loud message when he raised taxes and no governor since wants the same reaction."
The 2008 market crash exacerbated everything. Now the shortfall was even bigger.
"Not only did public employees pay into the pension plan, but they were asked to increase their share to help fix the problem. Workers had more money taken out of their checks, yet the state still didn't honor their part of the bargain."
Here is a link to a succinct summary of how the present situation arose:
http://www.nj.com/politics/index.ssf/2017/02/njs_pension_deficit_reached_491_last_year.html
Note this excerpt from the article below, and ask yourself - what can I safely, conservatively expect the rate of return to be on my investments? And what should the state expect?:
"Treasurer Ford Scudder reduced the expected rate of return from 7.9 percent to 7.65 percent, the first revision since it was dropped from 8.25 to 7.9 percent five years ago.
"Moving it downward is consistent with what other states have done and is based upon our analysis of the marketplace and past returns," a spokesman for the Treasury Department said in a statement.
The higher assumed rate of return made the pension fund look healthier than it really is and didn't reflect the reality of the state's investment outcomes."
This is the world we live in. All new spending will go to supporting pensions while everything else goes to hell.
"About 85 percent of the state's 578 school districts won't see any increase in direct aid if Christie's final budget proposal doesn't change.
The flat funding for most districts comes even as Christie touted yet another record investment in education funding, 3.8 billion. The bulk of new education spending will go toward the teacher's pension and annuity fund or debt service payments, leaving districts to generate their own new revenue."
The pension catastrophe could be national. But from the range of more fully funded pensions states, appears this could have been prevented with better oversight.
https://graphics.wsj.com/table/Connecticut_102015
Click the rank sorter to see the states with the least funded the pensions
Illinois 47%
Kentucky
Connecticut
Alaska
Kansas
Colorado
New Hampshire
Mississippi
Louisiana
New Jersey 61%
... and the states with the most funded pensions
South Dakota 100.0%
Wisconsin 99.9%
Washington
North Carolina
Oregon
Tennessee
Delaware
New York 88.3%
Florida 86.6%
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in my opinion the negative responses above, the ones that say it cannot be done, are the ones that are wrong. where there is a will there is a way and if the state acts responsibly those pensioners will be protected.
the talk of flight from this state is,,,, over stated.
we'll get by, we'll make do, and we should pay our debts.