A Little Good News - Finally!

At least there is a little good news interspersed amongst all the bad (the recent Supreme Court decisions).

Shafting The "Select Few"

Admittedly, the past can’t always accurately predict the future but unfortunately it’s all we have got to work with.

An average teacher at the top of the salary guide in 1990 was making about $55,000 per year. Let us assume that he/she retired in 1990 at the age of sixty. If he/she started immediately after being graduated from college his/her years of teaching would be about 35. Doing some rough calculations his pension would be $35,000 (assuming the full benefits were taken without survivor benefits).

In 2014 this person would be 84. During his/her retirement inflation (as seen by the accompanying charts) has risen by an accumulated 81.64%. This means if the COLA was not in effect during this period,  the real value of the pension would have  been reduced to $18,900 (more than cut in half).

Now, it appears that “The Governor” wants to renege on his pension reform agreement which eliminated the COLA and raised contribution rates and retirement age requirements. I am sure that more tinkering will result in further loss of pension benefits even beyond what inflation will cost.

His statement “we will miss the opportunity to improve the lives of every New Jersey citizen, not just a select few” is infuriating.

Does he mean the “select few” that have faithfully made pension payments during their entire working lives while the State reneged on its part?

Does he mean the “select few” who have educated New Jersey children (including him) year after year and decade after decade?

Does he mean the “select few” that relied on the integrity of the State to fulfill its contract with them?

Does he mean the “select few” that he has chosen to demonize, bully and degrade because they failed to support his political campaigns?

PS - Speaking of a “select few” read my preceding article “George Orwell Again? - Sunday, February 23, 2014 ” and you decide who the “select few” really are!!

Pension Pigsty

I saw this cartoon in the Ledger the other day and I just had to add some annotations!

Am I A Conspiracy Theorist ? Maybe !

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I had lunch with a friend last week. 
He said he had been cleaning out his filing cabinet and found this!
I found it both shocking and depressing. I have underlined some of the purported returns of the 1998 TPAF. 
I am a frequent viewer of the TV show"American Greed" on CNBC. Many of the shows are about Ponzi Schemes that are foisted on the public.
When I first looked at the returns on this pension report they immediately reminded me of the returns promised by the fraudsters shown on the aforementioned shows.
Then I began to think about this a bit more. I wonder if this these reported returns were really valid at the time or if they were artificially concocted to those seemingly impossible levels?
You might say " You must be a conspiracy theorist! "
(Well, I don't think I am a  conspiracy theorist but maybe!)
"Why would anyone want to inflated those numbers? "
Someone who wanted to "borrow" (steal) money from the fund so as to give tax breaks and thereby enhance his/her reelection chances and just might like to use these return numbers to justify the "theft", that's who !

Unshared “Shared Sacrifice”?

In the budget message of March 2010 Governor Christie called for “shared sacrifice”. Pension “reform” was part of the “shared sacrifice” by teachers and public workers. The “reform” measures eliminated the COLA (Cost of Living Adjustment) for currently retired workers and scuttled many of the provisions of the existing system. In instituting the COLA elimination, the State of New Jersey unilaterally reneged on the contract agreement between retirees and the State which was put in place on the day the retiree began collecting pension payments. It appears that contract law applies to everyone in New Jersey except the State!

The cry from the Governor was the State doesn’t have the money (of course they don’t, since much of it was stolen by the State) and that retirees are obliged to participate in “shared sacrifice”.

Well, let’s look at another group who has entered into contracts with the State and not been required to participate in the Governor’s “shared sacrifice” program. Those are the New Jersey State bondholders.

Here’s what I mean.

Listed below are several of the outstanding NJ bonds, their maturity dates and coupon rates (interest rates).

NEW JERSEY ECONOMIC DEV AUTH ECONOMIC DEV REV ELITE PHARMACEUTICALS PJ-SER A

64577HPQ8            6.500 % 09/01/2030

TOBACCO SETTLEMENT FING CORP N J RFDG-SR-SER 1A ASSET-BACKED BONDS

888808DF6 5.000 %  06/01/2041

NEW JERSEY ECONOMIC DEV AUTH REV -SR MTG-ARBOR-A

645916D20 6.000%  05/15/2028

NEW JERSEY HEALTH CARE FACS FING AUTH REV SOMERSET MED CTR

64579E8G4 5.500% 07/01/2033

NEW JERSEY HEALTH CARE FACS FING AUTH REV SOMERSET MED CTR

64579E8G4 5.500%  07/01/2033

These are just five randomly selected issues all paying  5% or better (in a rate environment that pays less than 1% on saving accounts) and all carry maturity dates twenty and thirty years into the future.

As for the total State debt, I quote from the  Star Ledger – August 20, 2008

“The additional borrowing pushes the state's debt load to $32.9 billion. Including $3.6 billion in bonds being repaid with payments from a national settlement against cigarette manufacturers -- which the state Treasury does not count in its debt calculations -- the state's total debt load is $36.5 billion, nearly triple the level of a decade ago.”

Each purchase of a NJ muni bond represents a contract with the State (there are literally millions) and to date none have been violated (defaulted) as has been the pension contract.
If it is okay to unilaterally violate a contract agreement with pension retirees in the name of “shared sacrifice” then why has no sacrifice by the holders of NJ tax free bonds (many of whom are wealthy people) been proposed?

Why haven’t these bondholders been required to accept lower interest returns in the future in the name of “shared sacrifice” as have been public employees and retirees?

How about this:             36.5 X .05 = 1.825B bond interest payments at a  5% average rate

36.5 x  .02 = .73 B    bond interest payments at a  2% average rate

          1.095 B   net savings if bondholders were to “share the sacrifice”

At a reduced 2% rate (still twice that of a saving account) rather than an average rate of 5%, NJ could save over a billion dollars a year!

What do you think  the chances are of this happening or even being suggested ?

I say chances are slim and none.

Why hasn’t this been even mentioned? Well, from a practical standpoint, the ability of  NJ to borrow future funds would instantly disappear if it was even hinted at.

However, from a moral standpoint it still should be made clear by the Governor that public employees and retirees really represent the total share (100%) of the “shared sacrifice” of which he speaks so glowingly!