$3 of every $4 Jersey has promised teachers is not paid for

[tmoneyearlyretiree]

I was looking at the combined NJ actuarial statements for 2015 (do I have a life? Maybe not haha) and i found some crazy stuff thought id share

2015 teachers budget, $25.6 billion, unfunded liability about $89 billion. Net unfunded liability is about $63 billion

Current benefit payments: $4.2 billion, expected 2016 contribution $3.3 billion. Investment return for fund about -2% this year.
Total fund size should be about $24 billion as of June 2016. If you use a 1% lower discount rate for the liabilities, which is much more realistic, the net liability grows to $75 billion according to the actuaries.

So 24 billion / (24 billion + 75 billion) equals a funded ratio of just under 25%. This is after the state just withdrew $200 million from the police pension which is only 55% funded.

So if you had a retirement plan that only had paid up on $1 of each $4 of promised future benefits, what would you do ? That's what teachers in New Jersey are facing. So terrible and getting worse each year

[beltim]

That's not how the math works.

If you're going to include the net present value of all future liabilities, you also need to include the net present value of all future contributions.

[tmoneyearlyretiree]

That's what a funding ratio IS though, is the assets that you need to have the future stream of liabilities covered by the income from your current investment income assumption. Those $89 billion of future liabilities they have have mostly already been earned. Future contributions will be needed to cover future liabilities, which are not already represented in that net liability number. That makes this an accurate description of their pension problem

[dandarc]

Don't pretty much all local/state government pensions work this way?  Maybe even federal.  The assumption being that each year you can redirect enough of your tax revenue to pay current retirees.

Granted, it would be better for the liabilities to be better covered by current investments, but so long as tax revenue grows reasonably, it works.  Places like Detroit are where municipal pensions fail - population decline kills the tax revenue needed to keep making the promised payments. 

Companies have a more stringent requirement for funding pension obligations, but then they don't have the ability to tax the population to pay for things.

[Guses]

Don't pretty much all local/state government pensions work this way?  Maybe even federal.  The assumption being that each year you can redirect enough of your tax revenue to pay current retirees.

No, not all of them. Most of them do use a pay/go system but some are fully funded and some use an hybrid system (e.g., CPP in Canada which is currently about 20% fully funded).

[tmoneyearlyretiree]

Jersey is a unique case though. Go through the communities and drive around and you see plenty of high wealth areas, people have good corporate jobs, people can actually afford to pay very property taxes.

The revenue won't be able to grow tax-wise. For the people that live there, would you stay in Jersey if property or income taxes doubled? You would need at least that amount to cover the full unfunded pension liability, especially if you added in OPEB retiree health care promises that are like 10% funded right now

[beltim]

That's what a funding ratio IS though, is the assets that you need to have the future stream of liabilities covered by the income from your current investment income assumption. Those $89 billion of future liabilities they have have mostly already been earned. Future contributions will be needed to cover future liabilities, which are not already represented in that net liability number. That makes this an accurate description of their pension problem

No it's not.  Or at least, not unless you subtract future contributions from that future stream of liabilities.  After all, future liabilities can not exist unless people participate in the pension plan – which, in the case of NJ, includes a contribution from the employees.

[beltim]

Don't pretty much all local/state government pensions work this way?  Maybe even federal.  The assumption being that each year you can redirect enough of your tax revenue to pay current retirees.

No, not all of them. Most of them do use a pay/go system but some are fully funded and some use an hybrid system (e.g., CPP in Canada which is currently about 20% fully funded).

I don't know about local, but state pensions are no longer funded on a pay as you go system.  NJ is just one of, if not the, least well funded: http://www.governing.com/gov-data/state-pension-funds-retirement-systems-unfunded-liabilities-obligations-data.html

Note that data is a few years old, but it illustrates the point.

[JLee]

Jersey is a unique case though. Go through the communities and drive around and you see plenty of high wealth areas, people have good corporate jobs, people can actually afford to pay very property taxes.

The revenue won't be able to grow tax-wise. For the people that live there, would you stay in Jersey if property or income taxes doubled? You would need at least that amount to cover the full unfunded pension liability, especially if you added in OPEB retiree health care promises that are like 10% funded right now

Property taxes are already the among the highest in the nation, too!

2. New Jersey
> Taxes paid by residents as pct. of income: 12.3%
> Total state taxes collected: $27.5 billion (7th highest)
> Tax burden per capita: $6,675 (2nd largest)
> Income per capita: $54,422 (2nd highest)

New Jersey had the highest effective property tax rate in the country, as well as the second-highest state sales tax. One of the factors that may have contributed to the higher taxes was the state’s considerable debt burden of $7,328 per capita, the fifth highest in the U.S. Families living in the state, however, may benefit from the high property taxes as they are often used to fund public school systems. Indeed, the American Legislative Exchange Council ranked New Jersey third in the nation for the quality of its public education in 2012. In addition to the state’s high property and income taxes, New Jersey residents paid an average of $2,000 per person in taxes to other states, such as neighboring New York and Pennsylvania.

[tmoneyearlyretiree]

The current liability for Jersey's pension includes the benefits payable in the future to each and every teacher in the state. The liability includes the 8 years of service that a 30 year old teacher has performed. However, the liability does not include the pension benefits for the next 22 years that that teacher COULD incur. There is no guarantee that the teacher will be working for the state for the 30 year period to obtain full benefits, so you couldn't and wouldn't fund the pension now as if they already earned the benefit.

If that's the case, then you couldn't include employee future contributions. Those would offset future liabilities that hadn't been earned yet.

[beltim]

The current liability for Jersey's pension includes the benefits payable in the future to each and every teacher in the state. The liability includes the 8 years of service that a 30 year old teacher has performed. However, the liability does not include the pension benefits for the next 22 years that that teacher COULD incur. There is no guarantee that the teacher will be working for the state for the 30 year period to obtain full benefits, so you couldn't and wouldn't fund the pension now as if they already earned the benefit.

If that's the case, then you couldn't include employee future contributions. Those would offset future liabilities that hadn't been earned yet.

After doing some more research, it appears that you're right.  This is how state and corporate pension funding ratios are reported.  My apologies; I'm used to thinking about these issues with regards to Social Security, which includes in its liability benefits that haven't been earned yet (and, correspondingly, includes contributions from future years as well).

[tmoneyearlyretiree]

No worries @beltim. It's like science. Doesn't matter who is right as long as we know the right answer. I actually didn't know that about Social Security. Makes sense when we hear $40 trillion or crazy numbers like that.

I actually calculated how long I think the teacher's fund in new jersey has left: I have it running out in 2023/2024. Moody's has said 2027 but I think they are being too conservative. That's only seven or eight years away. 

http://millennialmoola.com/2016/01/18/new-jersey-teachers-pension-fund/

[beltim]

No worries @beltim. It's like science. Doesn't matter who is right as long as we know the right answer. I actually didn't know that about Social Security. Makes sense when we hear $40 trillion or crazy numbers like that.

Agreed.  Not to totally derail the subject, but despite Social Security's intermediate term funding shortfall, it's interesting to note that for people who have not yet started contributing to Social Security, expected contributions almost exactly equal expected payouts.

I actually calculated how long I think the teacher's fund in new jersey has left: I have it running out in 2023/2024. Moody's has said 2027 but I think they are being too conservative. That's only seven or eight years away. 

http://millennialmoola.com/2016/01/18/new-jersey-teachers-pension-fund/

Yeah, I remember another thread you posted this on.  Have you ever done the calculation to see what the funded ratio / when the fund would run out if Christie had actually made the payments he agreed to after the 2011 compromise?  I did a rough back of the envelope calcluation and I got something like a 36% funded ratio, but I didn't look at how that would have affected investment income at all.

Also, I think it would be interesting to see the NPV of all future liabilities and contributions and see what the long-term funding situation is.  I don't know where we could get the data we need for that though.

[Cassie]

It is terrible that Christie is allowed to take $ out of the pension fund. Here it is written into our state constitution that this can't be done. One governor tried and was unsuccessful.  What a tough decision for teachers if they should stay or go.

[tmoneyearlyretiree]

@beltim if you have the time , you can go through the annual consolidated reports. Here's the latest from 2015

http://www.state.nj.us/treasury/pensions/pdf/financial/2015divisioncombined.pdf

The other big resource I've found is the monthly director's investing report. You can extrapolate a lot of things from looking at the two of them combined. I believe the police and firemen contribute 8.5% of pay and that is matched by local governments. The state of course has not been contributing much.

Teachers also contribute 7.5% (i think don't quote me would have to check). 

http://www.nj.gov/treasury/doinvest/pdf/DirectorsReport/2016/AprilInvestingReport2016.pdf

The monthly reports are usually two to three months late. That said, they provide a much better look into the current status of the pension because it shows transfers between pensions, asset allocation, and manager allocation.

Here is the demographic breakdown of teachers in NJ back when I pulled all the data for the article

2014         
Male   Female   Total           Age
282   1224           1506           20-24
2730   10815   13545   25-29
4724   15290   20014   30-34
5501   15240   20741   35-39
4955   14116   19071   40-44
4059   11961   16020   45-49
3268   12074   15342   50-54
3183   12751   15934   55-59
2650   9882           12532   60-64
1209   3435            4644   65+
           
                       139349   


Here are the demographics of all NJ teacher retirees currently drawing a pension. Notice that there are over 100 teachers over 100 years old currently drawing New Jersey pension. Guess that air near NYC makes you live a long time.

2014         
Male   Female   Total           Age Retirees
0   16            16           <50
55   193            248           50-54
628   2079            2707   55-59
3387   10516   13903   60-64
7949   17415   25364   65-69
6121   11719   17840   70-74
3644   6710           10354   75-79
2874   4887            7761   80-84
1599   3399            4998   85-89
513   1612            2125   90-94
99   491            590           95-99
10   101            111           100+

I think I got all that from the annual reports from fiscal 2014. @beltim if you can do any of the calculations napkin or otherwise with that data that would be cool. It'd take a little work though

[tmoneyearlyretiree]

Apologize for the formatting , it looked better in the message box.

[dandarc]

Male	Female	Total	Age Retirees
0	16	16	<50
55	193	248	50-54
628	2079	2707	55-59
3387	10516	13903	60-64
7949	17415	25364	65-69
6121	11719	17840	70-74
3644	6710	10354	75-79
2874	4887	7761	80-84
1599	3399	4998	85-89
513	1612	2125	90-94
99	491	590	95-99
10	101	111	100+

Your last grid - formatted.  Use Excel (or google sheets) Concatenate in the markup.  Add spaces to the header text to get decent spacing.

[dandarc]

https://docs.google.com/spreadsheets/d/1Et9v68soIVXfzm1qPzKqkipj1fMRZ3PBZSLp_47F3Nk/edit#gid=0

Has example formulas.

[tooqk4u22]

It is terrible that Christie is allowed to take $ out of the pension fund. Here it is written into our state constitution that this can't be done. One governor tried and was unsuccessful.  What a tough decision for teachers if they should stay or go.

It's not just Christie's fault - it has been caused by many years of screwiness on both sides of the aisle and many governors before him.  NJ is f'd up all the way around when it comes to taxes, state and local workers comp and pensions.  Sure the state has contributed its share as it was supposed to but starting about 15-20 years ago the state basically floated a bunch of debt, commenced a long period (still going on) of negotiated ridiculous contracts that allow for high pay, effectively early retirement and lucrative retirement benefits that are not based on reality that never had a real way to pay for them, so property taxes rose significantly since then and continue to do so (averaged about 7% a year but at a slower pace over the last couple years), so did other taxes, and yet the state and pensions are still a fiscal mess.

The best conversation I have had with a teacher and her husband.......

Teacher:     It's ridiculous how high property taxes are here!
Me:            I know. Did you ever think about moving out of state?
Teacher:     Absolutely. Once I retire and get my pension and medical we are out of here! Not paying these taxes any longer than that!
Me:            You know you are part of the reason taxes are so high, right?
Teacher:     Maybe, but it really benefits all the children.
Me:            Huh

I still can't figure out why NJ is the most densely populated state with one of the highest average incomes in the country, highest property taxes, high corporate taxes, and high income taxes.....and yet NJ is one of the worst off.  Can you say spending problem.

NJ does have one of the lowest gas taxes, but they working to change that as we speak. 

[beltim]

It is terrible that Christie is allowed to take $ out of the pension fund. Here it is written into our state constitution that this can't be done. One governor tried and was unsuccessful.  What a tough decision for teachers if they should stay or go.

It's not just Christie's fault - it has been caused by many years of screwiness on both sides of the aisle and many governors before him.  NJ is f'd up all the way around when it comes to taxes, state and local workers comp and pensions.  Sure the state has contributed its share as it was supposed to

It's not just Christie's fault, but the underfunding of the pensions is entirely the fault of the state government NOT contributing its share.  They haven't met the minimum payment in a long time.  The fact that they haven't made the pension contributions that Christie agreed to in 2011 (when the teachers increased their contributions) is absolutely Christie's fault.

[tmoneyearlyretiree]

What would Christie have done? He had revenues that didn't meet expectations and essentially needed to expand the budget by at least 10% to make the promised payments. He's already losing lots of residents to other states, including the wealthiest to FL. Heard that move could be a huge forecasting error for the budget in 2016.

I think the guy is generally a dishonest and unethical person, but still if I was in his shoes it was pretty much gut the pension, not contribute and hope you arent known in history as the guy who destroyed the nj retirement system, or you could hike taxes and make the situation spiral downward faster from people leaving the state.

I think most people do not understand how generous public retirement benefits are in general. Dwarfs the private sector. The pensions are like like $2-$3 million in lifetime cost I think. Healthcare even more. For every $1 in pay they get a $1 in benefits or something close but people do not understand that. They think just because they contribute 8.5% of pay and the employer matches it with the police that they have paid for their full benefit. They have paid for something for sure, just not the retire at 50 with $70,000 a year for life benefit.

Hopefully some folks in Jersey will have better anecdotes and thoughts on this than I

[Cassie]

He should not have touched the pension fund. I guess that is why in our state it is written into the constitution. When we are short of $ we cut other ways such as furloughs for state employees, raise the cost of their health insurance, etc.  The average public employee in our state gets 20K/year in pension and has to pay for their own health insurance. For the 2 of us it costs 10K/year.  Only police, firemen and correction officers can retire young without penalty unless they have 30 years. The reason for this is because firemen develop respiratory probs, etc and police & CO's have jobs where they go from bored to major adrenaline quickly.  This is very hard on your body. Many do not live to be very old.

[tooqk4u22]

It is terrible that Christie is allowed to take $ out of the pension fund. Here it is written into our state constitution that this can't be done. One governor tried and was unsuccessful.  What a tough decision for teachers if they should stay or go.

It's not just Christie's fault - it has been caused by many years of screwiness on both sides of the aisle and many governors before him.  NJ is f'd up all the way around when it comes to taxes, state and local workers comp and pensions.  Sure the state has contributed its share as it was supposed to

It's not just Christie's fault, but the underfunding of the pensions is entirely the fault of the state government NOT contributing its share. They haven't met the minimum payment in a long time.  The fact that they haven't made the pension contributions that Christie agreed to in 2011 (when the teachers increased their contributions) is absolutely Christie's fault.

No it is not....that is just one contributor.  Other contributors assumptions about returns have been and continue to be ridiculously high (this applies to most pension plans), actuarial assumptions about longevity are way to optimistic, actual contributions to the plans from all parties is horrifically low and then pension is based on highest 3-5 years of service (why do you thing salaries spike after 15-20 years). The politicians do this because it garners votes and they don't actually have to pay for it - and if it blows up who cares, they are either gone or will plan to raise taxes and fearmonger so they get reelected. Its such BS.

The math is wrong on all levels and has been for a long time.  I am fine with pensions but they should be union controlled/managed and the state contributes a set amount each year.  I bet if they didn't have the state as a backstop there would more reasonable assumptions and contracts along the way.   

He should not have touched the pension fund. I guess that is why in our state it is written into the constitution. When we are short of $ we cut other ways such as furloughs for state employees, raise the cost of their health insurance, etc.  The average public employee in our state gets 20K/year in pension and has to pay for their own health insurance. For the 2 of us it costs 10K/year.  Only police, firemen and correction officers can retire young without penalty unless they have 30 years. The reason for this is because firemen develop respiratory probs, etc and police & CO's have jobs where they go from bored to major adrenaline quickly.  This is very hard on your body. Many do not live to be very old.

That is not acceptable - a pension fund should not hold the state hostage, as I said before the solution is to take it off the books and let the union manage it - afterall they are the ones with the vested interest. 


Each year the actuaries calculate how much the state payment should be, its always some large number and as pointed out above has been underfunded by the state for 15 years.  Part of the problem is that the payment is calculated and not based on original contracts - i.e. market tanks and results in a big deficit and a increased required payment and there is always a required payment due to the large deficit. 

It would be like me doing a job for you and you agree to pay me $100K per year for very specific work and stated terms  - but I have the right to bill you whenever I want because my rate changed or I didn't work as much but I bought a new house so you have to pay me more and so on - that is not a fair trade.

Not to mention we all kind of knew that the $100k job was a $200k job but didn't have the money to pay it along the way so we kick the can down the road and bury it in the math.

[tooqk4u22]

What would Christie have done? He had revenues that didn't meet expectations and essentially needed to expand the budget by at least 10% to make the promised payments. He's already losing lots of residents to other states, including the wealthiest to FL. Heard that move could be a huge forecasting error for the budget in 2016.

I think the guy is generally a dishonest and unethical person, but still if I was in his shoes it was pretty much gut the pension, not contribute and hope you arent known in history as the guy who destroyed the nj retirement system, or you could hike taxes and make the situation spiral downward faster from people leaving the state.

I think most people do not understand how generous public retirement benefits are in general. Dwarfs the private sector. The pensions are like like $2-$3 million in lifetime cost I think. Healthcare even more. For every $1 in pay they get a $1 in benefits or something close but people do not understand that. They think just because they contribute 8.5% of pay and the employer matches it with the police that they have paid for their full benefit. They have paid for something for sure, just not the retire at 50 with $70,000 a year for life benefit.

Hopefully some folks in Jersey will have better anecdotes and thoughts on this than I

Yup - typical teacher/state worker in NJ puts in $134k over their career and gets $60k w/COLA once they retire. 

[Cassie]

Our state does not have a union that is worth anything. since it is a right to work state you can join or not. I would not want those morons in charge of my pension.  I love that it is written into our Constitution because then they must cut other things. Also our state Constitution says we must have a balanced budget so no borrowing from our future. Other states should take note of the way to do it.

[paddedhat]

Yup - typical teacher/state worker in NJ puts in $134k over their career and gets $60k w/COLA once they retire.

It can be pretty stunning to think about, particularly when you view the huge differences, even in nearby states. We have a friend who "taught" at a NJ. state school for mentally disabled adults. She quite literally babysat for big kids. Her days spent playing, taking them on field trips, doing art projects, etc..... She retired at 55 with $63K +cola, and a Cadillac FAMILY heath care plan. My wife taught special ed. in PA. Standard retirement for her at 55 was $46K, no cola EVER, and heath care for herself, until medicare age. The wife has a college room mate who started and ended her teaching career at exactly the same time, but she taught in rural Virginia. She ended up with a bit over $30k/year, no cola, and no health care.

[Cassie]

Most likely the teacher was teaching the teens life skills etc that they will need and not babysitting.

[tooqk4u22]

Our state does not have a union that is worth anything. since it is a right to work state you can join or not. I would not want those morons in charge of my pension.  I love that it is written into our Constitution because then they must cut other things. Also our state Constitution says we must have a balanced budget so no borrowing from our future. Other states should take note of the way to do it.

That is generally the consensus of all union workers....they are good for increasing the benefits and working with politicians but nobody trusts them with their money or lives - to me they should be on the same side of the coin.

Yup - typical teacher/state worker in NJ puts in $134k over their career and gets $60k w/COLA once they retire.

It can be pretty stunning to think about, particularly when you view the huge differences, even in nearby states. We have a friend who "taught" at a NJ. state school for mentally disabled adults. She quite literally babysat for big kids. He days spent playing, taking them on field trips, doing art projects, etc..... She retired at 55 with $63K +cola, and a Cadillac FAMILY heath care plan. My wife taught special ed. in PA. Standard retirement for her at 55 was $46K, no cola EVER, and heath care for herself, until medicare age. The wife has a college room mate who started and ended her teaching career at exactly the same time, but she taught in rural Virginia. She ended up with a bit over $30k/year, no cola, and no health care.

Yes, salaries/benefits/retirement in NJ is not representative of other states - NJ is very very generous on all counts and is one of the problems. 

Most likely the teacher was teaching the teens life skills etc that they will need and not babysitting.

Agreed, while there are some bad apples that take advantage I think they are the few.  Teaching is hard in general (contrary to popular belief) especially for those teachers that care and want to excel in their field.  Teaching those with disabilities is even harder and those people tend to have a special way about them.

My comments are not to be taken as the teachers are screwing NJ - yes they are getting a good deal that the unions and politicians negotiated in my mind negligently or even fraudulently, but I actually feel for the teachers because its possible they end up taking it on the chin at some point unfairly. 

Egregious benefits that are unfair to the taxpayers does not equal teachers being unfair.

[Cassie]

OUr union is only worthless because this is a right to work state. If you had to join the union it would be powerful. It is also in the state Constitution that you can't strike so any power is taken away.  I also feel sorry for the teachers in NJ if they do not get what was promised to them. Most people that work for government work for less then in private and the pension makes up the difference. If governments stop offering pensions they will have to raise wages or find themselves without good workers.

[beltim]

It is terrible that Christie is allowed to take $ out of the pension fund. Here it is written into our state constitution that this can't be done. One governor tried and was unsuccessful.  What a tough decision for teachers if they should stay or go.

It's not just Christie's fault - it has been caused by many years of screwiness on both sides of the aisle and many governors before him.  NJ is f'd up all the way around when it comes to taxes, state and local workers comp and pensions.  Sure the state has contributed its share as it was supposed to

It's not just Christie's fault, but the underfunding of the pensions is entirely the fault of the state government NOT contributing its share. They haven't met the minimum payment in a long time.  The fact that they haven't made the pension contributions that Christie agreed to in 2011 (when the teachers increased their contributions) is absolutely Christie's fault.

No it is not....that is just one contributor. 

It really is.  Sometimes a picture is worth a thousand words:

[beltim]

It would be like me doing a job for you and you agree to pay me $100K per year for very specific work and stated terms  - but I have the right to bill you whenever I want because my rate changed or I didn't work as much but I bought a new house so you have to pay me more and so on - that is not a fair trade.

No, it's not like that at all.  It's like you doing a job for me, and I agree to pay you $50k now and $1k/year starting at age 65 for the rest of your life (and doing this each year you work for me).  If I don't have the money to pay you when you turn 70, that's my fault, not yours.  It's compensation we agreed on when the contract started.

[tmoneyearlyretiree]

Yup - typical teacher/state worker in NJ puts in $134k over their career and gets $60k w/COLA once they retire.

So the average teacher contributes $134,000 and gets an asset worth at least $1.5 million based on the 4% rule. If you factor in the fact that it's a guaranteed income stream, the proper discount rate would be the risk free rate no? That'd make it worth about $3 million. Seems like they actually haven't contributed much of anything for the asset they get. My dad taught 38 years in state of FL. Got a pension worth about $35,000 a year. Benefits are way better up there in Jersey

[tmoneyearlyretiree]

It would be like me doing a job for you and you agree to pay me $100K per year for very specific work and stated terms  - but I have the right to bill you whenever I want because my rate changed or I didn't work as much but I bought a new house so you have to pay me more and so on - that is not a fair trade.

No, it's not like that at all.  It's like you doing a job for me, and I agree to pay you $50k now and $1k/year starting at age 65 for the rest of your life (and doing this each year you work for me).  If I don't have the money to pay you when you turn 70, that's my fault, not yours.  It's compensation we agreed on when the contract started.

So if the recourse is to sue for payment if you don't have the money as with a corporation , they can just declare bankruptcy and have a judge slash benefits. Detroit was a good precedent for GO bondholders, but not the appropriation crap that New Jersey uses to issue most of its state debt.

The legislature can simply fail to appropriate, walk away from all their debt, without bondholders having a legal recourse. That'd be terrifying to me if I owned a New JErsey muni bond fund

[beltim]

Yup - typical teacher/state worker in NJ puts in $134k over their career and gets $60k w/COLA once they retire.

So the average teacher contributes $134,000 and gets an asset worth at least $1.5 million based on the 4% rule. If you factor in the fact that it's a guaranteed income stream, the proper discount rate would be the risk free rate no? That'd make it worth about $3 million. Seems like they actually haven't contributed much of anything for the asset they get. My dad taught 38 years in state of FL. Got a pension worth about $35,000 a year. Benefits are way better up there in Jersey

No, that's not a fair way to look at it.  This is part of their compensation.  And the pension fund invests the contributions from the employee and the employer, and over the long term state pension funds make >8% annually.  So the discount rate is much higher than the risk-free rate - I'd use 7% or so.

If a state actually makes required contributions to the pension fund, the total cost works out to something like 10% of salary for each 1%/year of a pension.  So if a pension gives 2% of final salary per year, then the total cost is about 20% of salary.  If an employee contributes 7.5%, that leaves 12.5% to the state.

[paddedhat]

Most likely the teacher was teaching the teens life skills etc that they will need and not babysitting.

  No, all adults, some elderly, all very low functioning, and typically living out their lives there. It is as I described it,  $80k/yr, plus an insane benny package, to babysit. Please note that I commented on the fact that my wife spent a career as a public school teacher, and I am not bashing the profession. This comment was made to illustrate that in many other state systems the "teacher" I refer to would be replaced by a $12/hr aide with little to no benefits, and no pension.

[MoneyCat]

I am a NJ teacher. I recognize the fact that I will never be allowed to draw a pension. I was legally promised compensation that I will never receive. I did the math once to figure out my hourly pay after taxes and my most recent annual increase in contributions to benefits and it worked out to $7.45/hr. At this point, I don't understand why I'm doing this job anymore. I am not treated with respect by anybody -- parents, administrators, students, or the public. I work my ass off and get no recognition for it from anybody. My job has evolved into being a glorified test prep examiner instead of actually teaching real knowledge and skills. I have to spend a lot of my time preparing for potential mass shooting attacks where I am expected to lay down my life for the kids.

Every day, I regret the fact that I went into this profession. If I had known better, I would have gotten a degree in STEM and then worked with computers for six figures a year. Teaching sucks.


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[tooqk4u22]

It is terrible that Christie is allowed to take $ out of the pension fund. Here it is written into our state constitution that this can't be done. One governor tried and was unsuccessful.  What a tough decision for teachers if they should stay or go.

It's not just Christie's fault - it has been caused by many years of screwiness on both sides of the aisle and many governors before him.  NJ is f'd up all the way around when it comes to taxes, state and local workers comp and pensions.  Sure the state has contributed its share as it was supposed to

It's not just Christie's fault, but the underfunding of the pensions is entirely the fault of the state government NOT contributing its share. They haven't met the minimum payment in a long time.  The fact that they haven't made the pension contributions that Christie agreed to in 2011 (when the teachers increased their contributions) is absolutely Christie's fault.

No it is not....that is just one contributor. 

It really is.  Sometimes a picture is worth a thousand words:

The part you are missing is that the required payments are not predetermined or fixed solely based on the pension participants. Which would be considered normal contributions.  The other component is the unfunded liability portion of that is determined by amortizing the unfunded liability over 30 years.  So market tanks or the 8% returns aren't realized the unfunded liability grows and so does the required payment (which if not made adds further to it). 

The state should only be required to make the normal payments IMO and should be changed to that....the rest is market risk that should be borne by the pensioners.  They should float a bond, make the system whole, get it off the books by turning it over to the unions, and fixing the contribution amount to fixed amount per person that are legally enforceable requires.  State would be happy because amount is quantified and not fluid, pensioners should be happy because they are funded and control their own destiny....of course we know this won't be the case because they won't trust their unions or want the risk that comes with managing money without a full backstop from mom and dad.

[tmoneyearlyretiree]

The part you are missing is that the required payments are not predetermined or fixed solely based on the pension participants. Which would be considered normal contributions.  The other component is the unfunded liability portion of that is determined by amortizing the unfunded liability over 30 years.  So market tanks or the 8% returns aren't realized the unfunded liability grows and so does the required payment (which if not made adds further to it). 

The state should only be required to make the normal payments IMO and should be changed to that....the rest is market risk that should be borne by the pensioners.  They should float a bond, make the system whole, get it off the books by turning it over to the unions, and fixing the contribution amount to fixed amount per person that are legally enforceable requires.  State would be happy because amount is quantified and not fluid, pensioners should be happy because they are funded and control their own destiny....of course we know this won't be the case because they won't trust their unions or want the risk that comes with managing money without a full backstop from mom and dad.

Not only that, but there is a zero% chance that Jersey could issue a $135 billion bond to get the pensions to proper funded status. They would have trouble with a $2 billion bond deal right now.

I think very few individual investors understand the flimsiness of Jersey's bond promise. Almost every other state gives you a GO which is backed by the full faith and credit of the issuer. Even in Detroit, they were collecting about $0.70 on the dollar of every tax due, and bondholders got $0.72 on the dollar. With Jersey, they have these lousy appropriation bonds that they have the legal right to just walk away from if they ever needed to. And when they cant pay their pensions in 7-10 years, what would you do as a politician stop paying 200,000 people's retirement and stop paying bondholders? I don't get why people are buying New Jersey bonds and mutual funds at all. The extra yield you get could be paid for dearly

[Cassie]

I also think that some people who have chosen to work in private industry and make more $ are jealous when the public workers get pensions.  That is where some of the judgement is coming from.

[Lagom]

I also think that some people who have chosen to work in private industry and make more $ are jealous when the public workers get pensions.  That is where some of the judgement is coming from.

Totally agree with this. It's mind boggling how often teachers are criticized or vilified  simply for agreeing to accept a compensation package that is still far lower than many private industry jobs requiring a similar education.

[beltim]

It is terrible that Christie is allowed to take $ out of the pension fund. Here it is written into our state constitution that this can't be done. One governor tried and was unsuccessful.  What a tough decision for teachers if they should stay or go.

It's not just Christie's fault - it has been caused by many years of screwiness on both sides of the aisle and many governors before him.  NJ is f'd up all the way around when it comes to taxes, state and local workers comp and pensions.  Sure the state has contributed its share as it was supposed to

It's not just Christie's fault, but the underfunding of the pensions is entirely the fault of the state government NOT contributing its share. They haven't met the minimum payment in a long time.  The fact that they haven't made the pension contributions that Christie agreed to in 2011 (when the teachers increased their contributions) is absolutely Christie's fault.

No it is not....that is just one contributor. 

It really is.  Sometimes a picture is worth a thousand words:

The part you are missing is that the required payments are not predetermined or fixed solely based on the pension participants. Which would be considered normal contributions.  The other component is the unfunded liability portion of that is determined by amortizing the unfunded liability over 30 years.  So market tanks or the 8% returns aren't realized the unfunded liability grows and so does the required payment (which if not made adds further to it). 

I understand this completely.  This is the contract the state agreed to, and the state took the market risk.  They didn't complain when this allowed them to make no contributions for 3 years when the market was good, and the have no right to complain when their not contributing earlier results in higher contributions now.

[Cassie]

I do feel sorry for the teachers because they have to teach to the test their students have to pass. Also when I was raising my kids we were supportive of the schools and if the boys got in trouble at school they were also in trouble at home.  That is no longer the case in general so teachers are getting crap from all sides. Ugh!  Then after all that shit they may not get their full promised pension.

[tooqk4u22]

I am a NJ teacher. I recognize the fact that I will never be allowed to draw a pension. I was legally promised compensation that I will never receive. I did the math once to figure out my hourly pay after taxes and my most recent annual increase in contributions to benefits and it worked out to $7.45/hr. At this point, I don't understand why I'm doing this job anymore. I am not treated with respect by anybody -- parents, administrators, students, or the public. I work my ass off and get no recognition for it from anybody. My job has evolved into being a glorified test prep examiner instead of actually teaching real knowledge and skills. I have to spend a lot of my time preparing for potential mass shooting attacks where I am expected to lay down my life for the kids.

Every day, I regret the fact that I went into this profession. If I had known better, I would have gotten a degree in STEM and then worked with computers for six figures a year. Teaching sucks.


Sent from my iPad using Tapatalk

I also think that some people who have chosen to work in private industry and make more $ are jealous when the public workers get pensions.  That is where some of the judgement is coming from.

Totally agree with this. It's mind boggling how often teachers are criticized or vilified  simply for agreeing to accept a compensation package that is still far lower than many private industry jobs requiring a similar education.

I indicated in a prior post that teaching is hard...on many fronts.  While I can't speak for other states, in NJ teachers are compensated fairly and more than fairly when benefits and days workes are factored.

I originally was going to be a teacher but after doing student teaching and interviewing teachers and administrators I realized there was way more BS than I could tolerate.  I liked teaching but decided to pursue a different path and could return to teaching later if desired.  Fast forward, I am FI but still can't see teaching due to the administration BS...and I could give a fuck about a pension because I am FINE.

I know what teachers have to deal with and it is hard, but that doesn't mean that total comp isn't set right here in NJ.

[MoneyCat]

I am a NJ teacher. I recognize the fact that I will never be allowed to draw a pension. I was legally promised compensation that I will never receive. I did the math once to figure out my hourly pay after taxes and my most recent annual increase in contributions to benefits and it worked out to $7.45/hr. At this point, I don't understand why I'm doing this job anymore. I am not treated with respect by anybody -- parents, administrators, students, or the public. I work my ass off and get no recognition for it from anybody. My job has evolved into being a glorified test prep examiner instead of actually teaching real knowledge and skills. I have to spend a lot of my time preparing for potential mass shooting attacks where I am expected to lay down my life for the kids.

Every day, I regret the fact that I went into this profession. If I had known better, I would have gotten a degree in STEM and then worked with computers for six figures a year. Teaching sucks.


Sent from my iPad using Tapatalk

I also think that some people who have chosen to work in private industry and make more $ are jealous when the public workers get pensions.  That is where some of the judgement is coming from.

Totally agree with this. It's mind boggling how often teachers are criticized or vilified  simply for agreeing to accept a compensation package that is still far lower than many private industry jobs requiring a similar education.

I indicated in a prior post that teaching is hard...on many fronts.  While I can't speak for other states, in NJ teachers are compensated fairly and more than fairly when benefits and days workes are factored.

I originally was going to be a teacher but after doing student teaching and interviewing teachers and administrators I realized there was way more BS than I could tolerate.  I liked teaching but decided to pursue a different path and could return to teaching later if desired.  Fast forward, I am FI but still can't see teaching due to the administration BS...and I could give a fuck about a pension because I am FINE.

I know what teachers have to deal with and it is hard, but that doesn't mean that total comp isn't set right here in NJ.

You are incorrect that we are compensated fairly. If I worked a forty hour week, then maybe. When I work my typical 65-70 hour week and put on forty lbs because I have no time to exercise then no. If you think making less than $8/hr is fair compensation, I have to assume that you are just trolling everyone here.

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[tooqk4u22]

I understand this completely.  This is the contract the state agreed to, and the state took the market risk.  They didn't complain when this allowed them to make no contributions for 3 years when the market was good, and the have no right to complain when their not contributing earlier results in higher contributions now.

Ok we  agree.  Where we disagree is that where the state maybe mad e the contract the taxpayers did not or did not know the true story.  Also the state has made normal contributions but not generally the full required contributions from the fuzzy unfunded liability math l.

It's just a basically fraudulent setup formed from collusion between state politicians and the unions because the general population is either kept in the dark or to dumb to know otherwise.  It will end badly at some point and I feel for those that don't see it.

[tooqk4u22]

You are incorrect that we are compensated fairly. If I worked a forty hour week, then maybe. When I work my typical 65-70 hour week and put on forty lbs because I have no time to exercise then no. If you think making less than $8/hr is fair compensation, I have to assume that you are just trolling everyone here.

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Good for you but that is not the life of most teaches in NJ. And when teachers do complain about hours it typically includes lunch, prep, and study periods that arrus often under utilized by teachers.....your typical day is probably 8 hours including lunch and prep....high school you get in by 7 and leave by 3.  Sure there may be some grading after hours but more often that is because of not utilizing prep time efficiently. Also you don't work all year like normal employees....you typically work maybe 190 days vs 230 for a professional with a "great" vacation day package....do not tears here.  I already said the job is hard and to be good takes a special person, but teachers in NJ most have a good fucking deal.  If you are in the few that don't than go get a job at some company where you will work 50/60/70 hours a week year round, no overtime, and probably only two weeks vacation.

[MoneyCat]

You are incorrect that we are compensated fairly. If I worked a forty hour week, then maybe. When I work my typical 65-70 hour week and put on forty lbs because I have no time to exercise then no. If you think making less than $8/hr is fair compensation, I have to assume that you are just trolling everyone here.

Sent from my SM-G920V using Tapatalk

Good for you but that is not the life of most teaches in NJ. And when teachers do complain about hours it typically includes lunch, prep, and study periods that arrus often under utilized by teachers.....your typical day is probably 8 hours including lunch and prep....high school you get in by 7 and leave by 3.  Sure there may be some grading after hours but more often that is because of not utilizing prep time efficiently. Also you don't work all year like normal employees....you typically work maybe 190 days vs 230 for a professional with a "great" vacation day package....do not tears here.  I already said the job is hard and to be good takes a special person, but teachers in NJ most have a good fucking deal.  If you are in the few that don't than go get a job at some company where you will work 50/60/70 hours a week year round, no overtime, and probably only two weeks vacation.

Yeah, you don't know what you are talking about but you vote on school budgets so I have to live with your opinion. Well, not for much longer. I am going to look out for number one from now on and you can have some Teach for America volunteer with no experience teach your kids. I am out.

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[tmoneyearlyretiree]

Yeah, you don't know what you are talking about but you vote on school budgets so I have to live with your opinion. Well, not for much longer. I am going to look out for number one from now on and you can have some Teach for America volunteer with no experience teach your kids. I am out.

My dad got really frustrated as a teacher too. The big difference is Jersey teachers used to get average pensions over $60,000 a year. Florida teachers and others in the Southeast might get $30,000 to $40,000 on average, so there is a huge difference in pension dollar amount. Given that the pensions of NJ teachers are higher than others around the country, I imagine that creates some political pressure to cut benefits, right or wrong.

Also, I don't know if people saw this, but I just found in the monthly investment reports for the NJ pensions that Christie just took $200 million out of the police and fire pension and $100 million out of the state public employee pension and transferred it to the teachers pension.

http://millennialmoola.com/2016/06/28/new-jersey-stole-from-the-police-pension/

Police pension ~54% funded, public employee pension ~38% funded, teachers pension ~25% funded using their 7.9% return assumption. Taking the money from the other two funds might drop the total picture to 48%, 33%, and 27% funded or something like that. In other words, it might buy the teachers pension another year or two at the expense of a shorter life by a year or two for the other pension funds.

Trying to kick the can down the road is definitely going to blow up the whole house of cards one day soon.