New Jersey Public Pension Slugfest Omits 15 Years of Governors Stealing From Workers
The shell game started in 1995 with Christine Todd Whitman.
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If you live in the world according to the mainstream media, the row between state executives and unions is all about (by implication) greedy unions trying to preserve their perquisites when budget “realities” demand that they suffer. Consider this excerpt from a recent article New York Times article about the fight in New Jersey:
Across the nation, a rising irritation with public employee unions is palpable, as a wounded economy has blown gaping holes in state, city and town budgets, and revealed that some public pension funds dangle perilously close to bankruptcy.
Um, the “wounded economy” trashed the state budget? Funny how the article fails to point fingers at the real perp, which is the global financial crisis, brought to you by your friendly TBTF banks. Andrew Haldane, Executive Director of Financial Stability for the Bank of England estimated that the costs of the financial crisis was 1 to 5 times global GDP. If you were, as economists recommend, to try to tax them to recoup the cost of the damage they did over a period of 20 years, the charge would be over $1.5 trillion a year. That’s more than the market cap of the biggest global banks. Funny, their staff and executives got record bonuses in 2009. So maybe the unions have the wrong strategy. They need to screw up in a particularly destructive manner.
And how exactly did the crisis “reveal” that some pension funds were close seriously under water? A more accurate rendition would be that, at least in New Jersey, the state has been raiding the pension kitty for over 15 years. This is not news to anyone who has been paying attention, any more than underfunding of corporate pensions. In the Garden State’s case, Governor Chris Christie skipped the required $3.1 billion pension fund contribution last year. He claimed this move was to force reform, but what impact does another $3.1 billion failure to pay have on an unfunded liability that was already over $50 billion?
The shell game started in 1995 with Christine Todd Whitman.
And what should the unions do now that they are in this mess? I’d fight for shared sacrifice. The dire state of the budgets is hitting everyone. The union members will have to take less, as many Americans have had to. But they need to recognize that these fights over pensions are an effort to eliminate public unions as a political force; the budget battles are simply a useful excuse for the right to break a long-standing foe. Thus the unions need to find a way to regain the moral high ground. New Jersey, one of the richest states in the US, has mismanaged its way into this mess. That fact needs to be hammered hard, and the unions also need to put forward a realistic plan in which they make concessions provided upper income earners do their part to address the budget shortfalls.
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Jan 7, 2011 at 2:26 AM
Reader Comments (10)
http://www.nytimes.com/2011/01/02/business/02showdown.html?_r=3&hp
http://www.nakedcapitalism.com/2011/01/summer-rerun-brace-for-the-tsunami-fitch-sp-downgrade-aig-updated-again.html
Once Wendigo psychosis begins, it will not stop with one group or the other, it will rage on till all is destroyed.
http://mises.org/daily/3379
Read more: http://www.businessinsider.com/profiting-from-the-muni-meltdown-2011-1#ixzz1ALJHyM00
Read more: http://www.businessinsider.com/elena-ambrosiadou-2010#ixzz1ALFSOqc4
http://www.reuters.com/article/idUSTRE7061MQ20110107
[snip]
SEC and Calpers did not immediately respond to emails seeking comment by Reuters outside regular U.S. business hours.
(Reporting by Abhinav Sharma in Bangalore)
http://www.calpers.ca.gov/index.jsp?bc=/about/press/pr-2010/april/opposes-citigroup.xml
@steve, the tip off here was the bangalore dateline.
Here is something else.
http://www.globalpensions.com/global-pensions/news/1649119/calpers-votes-proposal-split-jpmorgan-chairman-ceo-post
http://www.nakedcapitalism.com/2013/09/taibbi-on-how-wall-street-is-looting-public-pension-funds.html
You must go, pronto, and read Matt Taibbi’s latest expose, on how hedge funds are plundering public pension funds, meaning pension funds managed on behalf of government employees like policemen, sanitation workers, and teachers. Taibbi describes how a concerted PR campaign has made workers the scapegoats for large pension shortfalls when in fact public officials and unscrupulous financiers (both through their machinations with these funds and via damage done by the global financial crisis) are the real perps.
Taibbi describes how the fact that they are exempted from ERISA meant their overseers, state and local politicians, could play fast and loose. As he explains:
Politicians quickly learned to take liberties. One common tactic involved illegally borrowing cash from public retirement funds to finance other budget needs. For many state pension funds, a significant percentage of the kitty is built up by the workers themselves, who pitch in as little as one and as much as 10 percent of their income every year. The rest of the fund is made up by contributions from the taxpayer. In many states, the amount that the state has to kick in every year, the Annual Required Contribution (ARC), is mandated by state law.
Chris Tobe, a former trustee of the Kentucky Retirement Systems who blew the whistle to the SEC on public-fund improprieties in his state and wrote a book called Kentucky Fried Pensions, did a careful study of states and their ARCs. While some states pay 100 percent (or even more) of their required bills, Tobe concluded that in just the past decade, at least 14 states have regularly failed to make their Annual Required Contributions. In 2011, an industry website called 24/7 Wall St. compiled a list of the 10 brokest, most busted public pensions in America. “Eight of those 10 were on my list,” says Tobe.
Among the worst of these offenders are Massachusetts (made just 27 percent of its payments), New Jersey (33 percent, with the teachers’ pension getting just 10 percent of required payments) and Illinois (68 percent). In Kentucky, the state pension fund, the Kentucky Employee Retirement System (KERS), has paid less than 50 percent of its ARCs over the past 10 years, and is now basically butt-broke – the fund is 27 percent funded, which makes bankrupt Detroit, whose city pension is 77 percent full, look like the sultanate of Brunei by comparison.
Here’s how it played out in New Jersey, as we wrote in 2011: