And pretty much every other state in just a few years. Add in that public employee unions and Democrats with their union allies will destroy a number of states.
We’ve written frequently about how teachers and other public employees, including cops and firefighters, are funding the Democratic Party and simultaneously laying the groundwork for destroying cities and states all across the nation. Wisconsin is one of the few places that are in pretty good shape, only because Governor Scott Walker and Wisconsin Republicans at the state level passed Act 10 and cut the unions off at the knees.
Today we’re going to look at the other side of the coin, New Jersey.
New Jersey’s Governor, Chris Christie, has been fighting with their public employee unions for six long years. The worst part of the fight, as far as New Jersey’s taxpayers are concerned, is that the rest of the state is Democratic. The legislature, the cities, all run by Democrats which makes a “Scott Walker Miracle” an impossibility in the Garden State.
The powerful teachers’ union and other public employee unions fought NJ Governor Chris Christie tooth-and-nail on pension reform, and now the budget busting unions appear to be paying a price. A new report from Moody’s Investors Service has a dire warning for two of New Jersey’s largest public employee pensions — they will run out of money and exhaust their underlying assets within ten years.
Union pension plans problems have been well hidden for decades by forecasts of up to double digit returns on their assets when a more realistic return forecast is in the very low single digits. Private pension fund managers typically forecast returns in the 1% – 3% range, public employee funds have been forecasting 7% to 10%+. The result is going to be a rolling nightmare across the country because New Jersey is not the exception it’s the rule.
Politicians, primarily Democrats, have been happy to give teachers, cops, firefighters, and every other kind of public employee outrageous pension and retiree health care promises for two reasons. One, those unionized employees done huge amounts of money to Democrats campaign funds. Two, the promises aren’t due and payable for decades, so it’s not “real money” they’re dealing with. Except now the calendar has begun to run out.
The state of New Jersey reported last week that its unfunded pension liabilities doubled to a whopping $83 billion at the end of June. However, If not for more rigorous guidelines attempting to end the practice of over-inflating returns, the pension-promising politicians in Trenton, New Jersey, may have been able to continue to go along to get along, for at least the short-term.
Recently implemented accounting guidelines required by the Governmental Accounting Standards Board require states to use smaller, more realistic discount rates when forecasting and assessing investment returns for pensions. The Moody’s report — New Jersey Reports Surge in Unfunded Liabilities Under New Pension Accounting Rule — found the state of New Jersey has almost no time to fix its insufficiently funded public pensions, or the state’s taxpayers will be forced to pay a much higher tax burden and enjoy far fewer services.
This is a Ponzi scheme that’s being practiced all over the country. For example, Chicago Teachers Retirement Fund is estimated to grow at 8% and the California Teachers Association at 7.5%.
pension debt across the unionized country is becoming a real economic problem in the nation. While New Jersey is making headlines today, a previous Moody’s report released in 2013 found the state didn’t even make the worst ten states with unsustainable pension debt.
This is going to be a nightmare of unprecedented proportions because 30 of the 50 largest funds have debt ratios of over 100%. When these pension funds start to go under bond holders who have been investing in these municipal funds because they are “safe” will be wiped out – see the impact of the Obama mandated auto bankruptcy where bondholders were put last in line to recover. Taxpayers will get hammered because state and local governments will be expected, and likely ordered, to make dramatic increases to their “contributions” to these pension funds. Finally, state and municipal employees will lose their pensions, or at least a large percentage of their expected payouts.
If voters don’t stand up and elect people willing to fight the unions – and the Democrats – bankruptcy is right around the corner.
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