New Jersey's public pension system is in dire straights--or so says Mary Williams Walsh in The New York Times today in an article that argues that politicians have made some questionable moves in pension funding.:
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 phantom contribution is just one indication that New Jersey has been diverting billions of dollars from its pension fund for state and local workers into other government purposes over the last 15 years, using a variety of unorthodox transactions authorized by the Legislature and by governors from both political parties.
Walsh has generally been one of the best reporters on the pension issue. And if she is right, the ninth-largest public pension fund in the country could be in real trouble. When you boil down her long story, a couple of things stick out. First, like too many people, in government and just in the street, we have too much faith in the illusory gains of the stock market. At one point, in 2001, New Jersey officials used a perceived surplus in the teachers' pension fund to post a "gain" in the fund's value. Problem is, the market collapsed shortly after and, poof, there went the "gain." So, there is a great example why we should not be basing retirement plans on 401(k) plans, which can be worth a whole lot less than you think if you end up retiring at a time when the market is down.
The second issue is pretty obvious, too. Part of the shortfall--a big part--comes because of the huge obligations to cover retiree health care. That is true with many public and private pension funds. Which makes the need for single-payer health care even more urgent--much of the pressure on public and private pension funds, though not all of it, will be relieved if health care burdens are moved to a more efficient, non-profit driven health care system.
One quibble with the article: in describing the state's financial situation, Walsh does very little in the way of analyzing how revenues have changed as a result of the undermining of a progressive taxation system. I'm not as familiar with the New Jersey's tax structure--it is, after all, New Jersey...across the river--so this may not play a huge role. But, I'd guess that it does.