Category Archives: new jersey pensions

Sold Out Futures By State:  Public Employee Pensions from FY 1972 to FY 2019

Even another stock market bubble, in fact an everything bubble that has temporarily inflated the price of every asset to historically high levels relative to income, has not been enough to get the average U.S. public employee pension fund out of the hole.  But it has been enough to knock the public employee pension crisis out of the news, and give politicians an excuse to shift even more of the cost to the future.  As I showed here…

When asset prices bubble up, future investment returns are going to be lower.  If the bubble is big enough, future returns could be negative for decades, as they have been in aging countries like Japan, and countries that try to inflate away their debts like Argentina, two (hopefully but not necessarily extreme) versions of our own future.  Predicted future return returns should be reduced as asset prices rise, as ERISA requires private pension funds to do by tying future returns to current interest rates.  But in the public sector, which was exempted from ERISA, when asset prices bubble up public unions cut deals with the politicians they control to increase benefits in Blue States, and while anti-tax politicians slash pension contributions to cut taxes in Red States.  (Actually, they do both things in both types of state).  Then, when asset prices correct to normal, somehow it’s nobody’s fault.  Wall Street stole the money!, PBS Frontline claimed in an investigation of the problem.  That’s why nobody is talking about pensions now – that lie temporarily unavailable.  

Thus far the federal government, at great cost to ordinary people in disadvantaged later-born generations, has managed to keep paper asset prices – and housing prices – inflated, to benefit the rich and seniors.  Even so in FY 2019, despite sky-high asset prices and the passage of more than a decade since the problem was acknowledged (by some), my back-of-the-envelope estimate is that U.S. state and local government pension funds were $3.65 trillion in the hole, more than ever before.  A more sophisticated analysis by the Bureau of Economic Analysis, using the assumptions private pension funds are required to use, put the hole at $4.54 trillion in 2018.  But in which states is the problem the greatest?  Read on and find out.

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Sold Out Futures:  A State-By-State Comparison of State and Local Government Debts, Past Infrastructure Investment, and Unfunded Pension Liabilities Through FY 2019

In two years of the COVID-19 pandemic, with society under stress, we have seen increasingly strident political fights over whose cultural attitudes and preferences should be imposed on others, who should get to contribute less to the community, and who should get to take out more.  In the shadows, however, is a bipartisan consensus as to who should be made worse off and be sacrificed the rest of their lives to pay for it all.  Ordinary people in later born generations, those who will be living in the United States in the future.   The pandemic has given politicians of all alleged views, and the interest groups that back them, an excuse to do, to an even greater extent, what they have done for 40 years.  Cash in the common future to address the perpetual “emergency” of the present.

So it was in Washington in 2020 when The Donald and the Republicans, having already sent the federal debt soaring to cut taxes for the rich and then ran a federal deficit equal to one-quarter of the U.S. economy.

And so it is in Washington today, where Biden in the Democrats claim their plans will be “paid for” – meaning the burden shifted to the future would only be as great as it was under Trump and the Republicans.

It is in this context that for the fifth time, I have reprised an analysis of state and local government finance data from the U.S. Census Bureau, for all states and for New York City and the Rest of New York State separately, with data over 49 years, to determine the extent to which each state’s future had been sold out due to state and local government debts, inadequate past infrastructure investment, and underfunded and retroactively enriched public employee pensions.   You’d think that the extent of disadvantage for the later-born, and who benefitted from creating it, would be the number one issue in every state election, and the number one topic of debate in the media.  Instead, it remains under Omerta, especially here in New York.  Shouted down under the comforting culture war issues that Generation Greed prefers.  So, although standing up for the later born and common future may amount to nothing more than standing on the beach shouting into a hurricane as a social tsunami heads for shore, over the past month I have updated the “Sold Out Future” analysis with data through FY 2019.  This post, a national summary and explanation of where the data comes from and how it was used, and the next three, will show what I found.

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New Jersey Governor Phil Murphy Should Have Told the Truth About Generation Greed

Four years ago, I asked if newly-elected New Jersey Governor Phil Murphy would be the first to tell the truth about Generation Greed.

Telling his new constituents exactly what share of their state income taxes, local property taxes, transit fares and toll payments were going not to public services and benefits they were getting today, but rather to costs shifted forward to the present by past New Jersey politicians, and the older and former state residents and special interests they had pandered to.  Costs from past debts, inadequate past infrastructure investment, and underfunded and retroactively enriched public employee pensions.  The tell would be to reduce taxes, tolls, and transit fares to a level that only reflects the public services and benefits that the State of New Jersey and its local government are providing to New Jerseyans today.  So people would see what the public services they are now getting actually cost.  And then fund all the costs from the past with a separate, additional income tax, property tax, transit fare and toll surcharge that everyone could see. The Generation Greed surcharge.  It would be right in their face, not in some report no one reads, day after day and year after year.

Governor Murphy (like the rest of them) chose not to go that route.  And despite an economic upturn, stock market bubble, and gusher of federal money that the later-born will be sacrificed to pay back someday, that temporarily made his options and decisions much less painful than they could have been, and will ultimately be, he was nearly thrown out of office, barely winning re-election against Republican challenger Jack Cittarelli.  Meanwhile, Democratic New Jersey Senate President Steve Sweeney has apparently been ousted by a truck driver and politician novice running a low-cost campaign.

The top issue, according to pollsters, was taxes.  Even though New Jersey’s total state and local government tax burden, as a percent of state residents’ personal income, doesn’t come close to what we’ve been forced to pay in New York.  Even at their lower tax total, today’s New Jerseyans apparently don’t feel they are getting fair value for their money.  Well of course they aren’t. 

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