Wednesday, April 04, 2007

NJ Pension fund

Behold the tip of the pension fund scandal looming on the horizon in the U.S. We saw a tip of the corporate scandals appear last year, now come the states with more corporate to follow. From the NY Times:
In 2005, New Jersey put either $551 million, $56 million or nothing into its pension fund for teachers. All three figures appeared in various state documents — though the state now says that the actual amount was zero.

...The state has long acknowledged that it has been putting less money into the pension fund than it should. But an analysis of its records by The New York Times shows that in many cases, New Jersey has overstated even what it has claimed to be contributing, sometimes by hundreds of millions of dollars.

...State officials say the fund is in dire shape, with a serious deficit. It has enough to pay retirees for several years, but without big contributions, paid for by cuts elsewhere in the state’s programs, higher taxes or another source, the fund could soon be caught in a downward spiral that could devastate the state’s fiscal health. Under its Constitution, New Jersey cannot reduce earned pension benefits.

The Times’s examination of New Jersey’s pension fund showed that officials have taken questionable steps again and again. The state recorded investment gains immediately when the markets were up, for instance, then delayed recording losses when the markets were down. It reported money to pay for health care costs as contributions to the pension fund, though that money would soon flow out of the fund. It claimed it had “excess” assets that allowed it to divert required pension contributions to other uses, like providing financial assistance to poor school districts.

...State law requires New Jersey’s seven pension plans, large and small, for various types of public employees, to be funded according to actuarial standards. Over the last decade, though, the Legislature has passed, and various governors have signed, a series of amendments to statutes that allow smaller contributions or none. These were justified by various maneuvers and approved with little scrutiny. In interviews, officials of the Treasury said the changes were made at the behest of the Legislature, while legislators faulted the Treasury.

In other words, incompetence at all levels of government. The so-called business men and women who are often elected based, in part, on their alleged acumen for dealing with finances are failing the system and have been doing so for decades.

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