Video: Top New Jersey Lawmaker Weighs in on Pension Payment Ruling; Talks Taxing Millionaires to Fund Pensions

New Jersey Senate President Steve Sweeney sat down for an extended interview this week, and it didn’t take long for the conversation to swing to pensions.

In the clip above, Sweeney shares his reaction to the court ruling that will force the state to pay its full pension contribution in 2015, pending appeal.

Below, Sweeney talks about the idea of levying a tax on millionaires and using the revenue to pay down pension debt.

 

Photo credit: “New Jersey State House” by Marion Touvel – http://en.wikipedia.org/wiki/Image:New_Jersey_State_House.jpg. Licensed under Public domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:New_Jersey_State_House.jpg#mediaviewer/File:New_Jersey_State_House.jpg

Panel Recommends Atlantic City Delay Payments to Pension System For Next Three Years

Atlantic City

A task force has released its recommendations for staving off the financial collapse of Atlantic City, New Jersey.

Buried in the report is one recommendation that might sound familiar to residents of New Jersey: that the city should defer its payments into the pension system for the next three years.

From NorthJersey.com:

State officials and people outside government would take on a greater administrative role in Atlantic City under a plan for the economically troubled resort made public Thursday.

The proposal comes as the city struggles to right its budget and cover debt payments in the wake of four casino closures this year, and as a fifth casino is threatening to shut down.

To help offset financial losses brought on by the casino closings, Atlantic City would be permitted to defer payments into the public employee pension system and could qualify for more state education aid.

[…]

The details of the report were discussed Wednesday during a meeting Christie organized with local officials, casino executives and union leaders in Atlantic City. A bipartisan group of lawmakers also attended the meeting and has pledged to work cooperatively with the governor on legislation that may be required to help turn the city around.

John Bury gives his take on that part of the plan over at Bury Pensions:

New Jersey politicians and their enablers had a discussion today where they reviewed a secret report that kicked off with the suggestion:

To help ease the burden on city taxpayers, the recommendations include a three-year window for deferring the city’s employer contributions into the public employee pension system.

And that passes for a solution! How has this strategy worked out for the state which has been shortchanging the pension plans for a generation and is now in day 105 of awaiting more solutions from a study panel report that should have been released 45 days ago.

But the chilling paragraph of the northjersey.com story is:

The recommendations released Thursday were prepared by [Christie adviser Jon] Hanson, who also produced a report for Christie in 2010 that the governor used at the time to guide Atlantic City revitalization efforts.

The same adviser! Wasn’t there somebody in 2010 who looked at Hanson’s guide to AC revitalization then and saw it as a blueprint for closing half the casinos and mass layoffs?

More details of the plan can be read here.

Photo by Richard Feliciano via Flickr CC License

Video: Christie, Caller Trade Jabs Over Pensions During Radio Segment

A retired police officer called in to Chris Christie’s monthly radio segment Wednesday night and accused Christie of “hurting the working man” with his pension cuts.

Christie shot back at the caller, accusing him of “spewing union talking points.”

Christie said of the caller: “You have a union-based political agenda…you guys crack me up.”

Watch the video of the exchange above.

Would An Elected Comptroller Ease New Jersey’s Pension Pain?

Thomas P. DiNapoli

Fixing New Jersey’s pension system has been the talk of the state lately, and as far as ideas go, all the usual suspects have been proposed: cutting benefits, making full actuarial contributions, transferring new hires into a 401(k)-style plan, etc.

One idea that is rarely discussed is the creation of a model similar to New York: the appointment of a comptroller to oversee and have authority over the pension system.

Under this model, the comptroller would take significant authority out of the governor’s hands regarding pension matters.

This hypothetical comptroller, if he wished, could have overridden Chris Christie’s decision to cut the state’s pension payments. More analysis from NJ Spotlight:

While New Jersey governors and legislatures have been cutting, skipping, or underfunding pension payments for the past 20 years, New York does not have a similar pension crisis because its elected state comptroller has the power not only to set the actuarially required pension payment each year, but also to require Albany’s governor and Legislature to fully fund it, according to a senior Moody’s Investors Service analyst.

New York State Comptroller Thomas DiNapoli is required to calculate the state’s pension payment by October 15 to give the governor’s office and legislative branch sufficient time to include his calculation in the budget for the fiscal year that begins the following June 30. That amount is then required to be paid into the state’s pension systems on or before March 1 — three months before the end of the fiscal year.

“In New York, the state comptroller is responsible for the entire pension system,” Robert Kurtter, Moody’s Managing Director for U.S. Public Finance, explained at a forum on pension funding at Kean University last week. “The comptroller’s power to require full pension funding has been litigated and upheld by New York’s highest Court of Appeals.

“The New York Legislature tried to underfund the actuarially required contribution, but couldn’t,” Kurtter said. “It’s a two-edged sword for New York. Their unfunded liability is low, but they don’t have a choice, even when revenues are down.”

The soundness of New York’s pension system is one of the principal reasons that the state enjoys a AA1 bond rating from Moody’s — one of 30 states in the top two rating categories — while Illinois and New Jersey are the nation’s fiscal basket cases, the only two states with lower-tier single-A bond ratings. While New York was upgraded this year, New Jersey’s bond rating has been downgraded a record eight times under Gov. Chris Christie.

But creating a comptroller position and giving it authority is a politically tricky process – because it involves not only amending the constitution, but also taking away significant power from the state’s governor. From NJ Spotlight:

New Jersey’s governor has more power over state spending than any other governor. New Jersey’s governor has unilateral authority to determine the revenue projections that determine the size of the budget — which Christie has consistently overestimated, as previous governors have when it met their political needs.

New Jersey’s governor also has the ability to make midyear budget cuts without seeking legislative approval — as Christie did when he retroactively changed the pension formula in March and cut $900 million in Fiscal Year 2014 pension payments in May.

Adding an elected state comptroller or state treasurer or establishing an ironclad requirement that the state make its actuarially required contributions to the pension system annually would require a constitutional amendment. The Democratic-controlled Legislature would need the governor’s signature to pass a new law, but not to put a constitutional amendment on the ballot — a strategy it used to bypass Christie on the minimum wage last year and on guaranteed funding for open space this fall.

Last spring, Christie cut $2.4 billion in payments to the pension system and diverted it to help balance the state’s general budget.

Documents Shed New Light on Alleged Conflicts of Interest In New Jersey Pension System

two silhouetted men shaking hands in front of an American flag

Gov. Chris Christie has shielded his state’s pension system in recent weeks from allegations of conflicts of interest by asserting one thing: the State Investment Board doesn’t have input in pension investment decisions, it only loosely oversees them.

But new documents obtained by the International Business Times suggest that the Council does have an active hand in guiding pension money.

David Sirota writes:

The minutes of the State Investment Council (which Christie appoints, and whose official mission is to “formulate policies governing the investment of [state] funds”), show his appointees not only oversee the state’s due diligence reviews of specific managers but also offer guidance to New Jersey Treasury Department officials about managers. Christie appointees at times cast votes on specific investments and have spearheaded the recruitment and subsequent appointment of the official who runs the state’s Division of Investment.

According to minutes of the State Investment Council, most of New Jersey’s investments in private equity, hedge funds, venture capital and other so-called alternative investments are reviewed by Christie appointees on the Investment Policy Committee (a subcommittee of the State Investment Council). Typically, the minutes show State Investment Council Chairman Robert Grady reports the committee “discussed the investment and was satisfied that the due diligence that was performed was adequate and appropriate.”

Grady was appointed to the council by Christie. He also serves as the Chairman of the Governor’s Council of Economic Advisers, and state documents show he was in regular contact with Christie administration and campaign officials. The governor has described him as a longtime friend.

The State Investment Council debates the merits of specific investments in open session, offering advice to Department of Treasury staffers about the specific money manager being given a New Jersey pension contract. Because the council has influence over the selection of specific managers, Grady and another Christie appointee, real estate investor Jeffrey Oram, have recused themselves from deliberations that involve managers to whom they might have a financial connection.

The documents also reveal a few examples of members explicitly voting to approve (or disapprove) big investments with money managers. From the report:

– On Dec. 8, 2011, Grady spearheaded a proposal to invest as much as $1.8 billion of New Jersey money in the Blackstone Group. State records show “a motion was made by Chair Grady to approve the Blackstone investments,” the motion “was seconded by Council Member Oram,” and the investment in Blackstone was subsequently approved on a 7-2 vote. As IBTimes previously reported, Grady’s private firm was investing in one of the same Blackstone funds though Grady did not disclose that at the time of the vote.

– On July 21, 2011, the council voted on a quarter-billion-dollar investment in Blackstone Resources Select Fund. After a debate, the council voted against a motion to halt the investment.

– On June 11, 2011, the council voted to approve a financial maneuver to facilitate a specific transaction with a firm called RLJ Lodging Trust.

In addition to overseeing and voting on specific investments, Christie appointees oversee the appointment of the state official who runs the state’s Division of Investment.

Christie yesterday offered his first extensive defense against conflict of interest allegations.

 

Photo by Truthout.org via Flickr CC License

Christie Dismisses Conflict of Interest, Pay-to-Play Allegations as “Garbage”

Chris Christie

Journalist David Sirota has written a series of reports since over the last five months detailing the possible conflicts of interest and pay-to-play violations under the surface of the New Jersey pension system.

On Monday, Christie gave his first extended response to the allegations and denied them categorically. From Politicker NJ:

“There’s no appointed people in my administration that make those decisions,” Christie responded when asked about the allegations, reiterating an earlier defense of his administration and brushing off the accusations as innaccurate. “Those decisions are all made by folks in the Department of Treasury who are career employees. And the appointed folks on the pension board, both Republicans and Democrats, don’t make decisions about individual investments.”
[…]

“So all of those are just factually incorrect,” Christie said. “Nobody in my office had any input or discussion in any way with anybody from Treasury or the pension board for that matter about how we invest our pension funds.”

He also said “nobody should be complaining” when it comes to the state’s pension fund, lately burdened with millions in underfunded liabilities, given a high rate of anticipated returns– 7.9 percent — on the fund’s investments.

“And over my fours years as governor we’ve made 12 million over the 7.9 percent,” he added. “So the investments have gone very well.”

A major New Jersey union filed an ethics complaint against the pension system earlier this summer. The union said in the complain that the chairman of the State Investment Council “violated the Division’s own rules barring politics in the selection and retention of such funds and investments, and has further created an appearance of impropriety.”

Video: Funding Shortfalls and the Politics of Pensions

 

Here’s a short segment that dives into public pensions with Adrian Moore, vice president of policy at the Reason Foundation.

The video touches on assumed rates of return, New Jersey’s funding shortfall and the politics of pension payments.

The Reason Foundation is a libertarian-leaning think tank based in California.

John Bury: 4 Things The New Jersey Pension Panel Failed To Say

stack of papers

Over at Bury Pensions, actuary John Bury covers New Jersey pension developments as close as anyone. And there’s been a lot to talk about lately, as the New Jersey Pension and Health Benefit Study Commission just released their first report last week.

But what wasn’t in the report is just as important as what was. While the report served as a great primer on how New Jersey’s pension mess came to be, it fell short on some counts.

Here’s John Bury’s take on what was left out.

__________________

By John Bury

The report did a good job of piecing together available public information but anyone could have done that. What this panel of experts was supposed, and failed, to do is bring their knowledge of the truth of the situation to the general public.  Perhaps some did not possess that knowledge and others who did wimped out but here is what should have been in the report:

Actuaries lie

A 54% funded ratio and $37 billion shortfall for the state portion of the New Jersey pension sounds bad enough but people should be aware that these figures are generated by actuaries whose sole responsibility to their politician clients is to keep contribution amounts low.  Ask yourself how a plan returning 16.9% in trust earnings when it is assuming 7.9% worsens their shortfall.  It’s primarily because of a flaw in basic actuarial math which is not being adjusted for since getting it right is not what public plan actuaries are paid for when right means higher contributions. Then there is the smoothing canard that the panel completely ignores, quoting the $44 billion actuarial value of assets as real rather than the $39.5 billion market value.

Politicians cheat

$14,9 billion in skipped ARC payments under Christie in cahoots with the legislature who not only get to decide how much they put in but they also get to brag that their selected mini-contributions are the full statutorily required amounts though they get to define what is statutorily required.

Benefits are protected

Hinted at on page 18:

One of the reasons the reforms described above have had little impact on the unfunded liability is that many of them do not apply to all current employees.

And the reason many recent reforms are not applied successfully (witness the COLA fiasco) is that Christie Whitman in 1997 exchanged constitutional protection of those benefits for the ability to reduce contributions to a desired level (i.e. nothing).  That needs to be admitted and reforms must include either paying for all those promised benefits in full or coming up with some strategy to get public employees to agree to reduce their benefits voluntarily.

Hybrid plans won’t work here

Though a Defined Contribution plan is the only type of plan that governments, run by political considerations and without independent funding discipline, should be allowed to sponsor moving new employees into these plans would only worsen the underfunding since a valuable input into the ponzi scheme New Jersey currently runs (employee contributions) would be shut off and new hires who are typically younger could wind up getting even higher benefits than under an age-weighted defined benefit system.  In the private sector the shift to cash balance plans worked because older employees could be forced (or tricked into) accepting them.  It would take a massive amount of ‘creativity’ and will to work the same magic in the public sector where employees have more leverage and  politicians are not bargaining with their own money.

New Jersey Investment Council Member Defends Robert Grady, Pension Investments

board room

The New Jersey State Investment Council, the entity that oversees investments for the state’s pension fund, has lately been embroiled in controversy revolving around Council Chairman Robert Grady and allegations of conflicts of interest driving investment decisions.

On Thursday, one member of the Council, Guy Haselmann, defended Grady in a letter to the editor published in the Times of Trenton. The letter reads:

The chairman of the State Investment Council (SIC), Robert Grady, has done an outstanding job conducting the business of the council wisely, ethically, apolitically and with the utmost propriety. Recent criticisms levied against the chairman personally, and against the performance of the SIC and the Division of Investments (DOI) politically, are without merit.

The mission of the SIC, of which I am a member, is to provide policy and governance oversight of the DOI. In other words, the SIC does not make investment decisions or select outside managers; rather, it verifies that procedures and investment parameters are met, with the goal of maximizing return per unit of risk.

Disagreements or complaints regarding the governor’s stance on pension reform are matters completely separate from the management and oversight of the pension’s assets. Public input is always welcome; however, baseless attacks and misinformation disseminated via blogs and other means interfere with the timely and efficient work of the DOI and the SIC, and thus does a disservice to all involved, and especially to the 767,000 beneficiaries of the New Jersey Pension System.

The pension fund returned 16.9 percent in FY 2014, which ends June 30, well above benchmarks and the actuary return assumption. This is testament to the successful oversight and fiduciary duties of the SIC and the DOI.

Pension360 has covered the ethics complaint filed by a union over the alleged conflicts of interest.

Reporting by David Sirota sparked the controversy. His pieces on the topic can be read here.

Lagerkvist: Here Are the Seven Deadly Sins of the New Jersey Pension System

Seal of New Jersey

New Jersey’s pension system is shouldering $51 billion of unfunded liabilities. How did it get that way?

In an editorial in the Philadelphia Inquirer, investigative reporter Mark Lagerkvist goes through what he calls the “seven deadly sins” of the state’s pension system. Excerpted from the article:

#1 – Retirement shams

A New Jersey Watchdog investigation revealed state attorneys general rehired 23 of their own retirees as investigators and supervisors. More than half of those law enforcement officials “retired” for only one day before they went back to work for the state.

The rehired retirees collected $3.77 million a year — $1.56 million a year in pension pay plus $2.21 million in salaries. Such costly personnel maneuvers have happened so often that state officials even have a name for it — “resignation pickup.”

#2 – Full pensions for part timers

The loophole, exclusive to the Public Employees Retirement System, is open to a wide range of part-time elected and appointed officials from New Jersey’s 565 municipalities, 590 public school districts, 21 counties and other governmental entities.

The list includes state legislators, county freeholders, mayors, councilmen, school board members, prosecutors, judges, town attorneys, tax assessors and many others who work for public entities covered under PERS, the largest New Jersey retirement fund.
#3 – Double-dippers and triple-dippers

 Eighty percent of New Jersey sheriffs — elected in 17 of the state’s 21 counties — collect pensions as law enforcement retirees in addition to their six-figure salaries. Their payrolls include 29 undersheriffs who also double-dip. Overall, those 46 top county cops rake in $8.3 million a year – $3.4 million in retirement pay plus $4.9 million in salaries.

#4 – Disability pension abuses

5,500 retired police officers in New Jersey receive more than $200 million a year in disability pensions. They have been judged “totally and permanently disabled” by the state Police and Firemen’s Retirement System or State Police Retirement System.

“I’d say 95 percent of the disability applications are questionable,” said John Sierchio, former chair of the PFRS Board of Trustees. “It’s people who don’t want to work anymore.”

#5 – Ill-advised health benefit costs

If you think a $51 billion pension deficit is bad, here’s something worse.

The New Jersey state retirement system also faces a staggering $53-billion shortfall in funding retiree medical benefits, according to a report released by state actuaries last month.

 #6 – The deadbeat state

From fiscal 2006 through 2011, New Jersey shortchanged its pension funds by more than $10 billion. Instead of contributing the expected $13.1 billion to the retirement accounts during that period, the state only pitched in $2.3 billion, according to a report by Common Sense Institute of New Jersey.

#7 – The $100,000 Club

New Jersey’s $100,000 Club of retired public officials has ballooned by 75 percent in the past three years. It is growing at a faster rate than the state’s pension deficit.

A total of 1,731 retirees collected $100,000 a year or more from state pensions last year,  an increase of 739 pensioners since 2010, according to a New Jersey Watchdog analysis of Treasury data.

Mark Lagerkvist is an investigative reporter at the watchdog group New Jersey Watchdog.

There’s much more in the way of explanation over at the article, here.