I am not Retiring Rumor; Pension Funding Manipulation

This column was supposed to be about the recently announced positive funding news of the pension systems, but a funny thing happened  when I was preparing to send it to NJASA for publication. My computer ate it.  Really!  It disappeared and I was left with a blank page.  So, faced with a deadline, I decided to put together a short column, one that was a combination of a personal message and some comment about the funding of the pension system.

First, the personal note. I AM NOT RETIRING.  Despite the erroneous rumors circulating for the last month, I AM NOT RETIRING.  What I am doing is reducing my workload, the way many of you do as you reach the point in life where you want to enjoy a bit more time and are not ready to retire completely.  In my case, that means instead of two major clients, I will only have one major client for whom I am available on a regular basis.  That will be NJASA, for whom I am beginning my 38^th year of consulting.  I will continue to be available for individual “gigs,” as the young people say, but it will be on an ad hoc basis (I can say “no”) and I will still be available for individual consultations, using Zoom as the format. For me, full retirement is a long way off.

The second item about which I had originally written in my now computer eaten manuscript was a detailed history of the two decades from 2000 to 2021 of the manipulation of contributions to the pension system, particularly the Teachers’ Pension and Annuity Fund (TPAF).  This manipulation has resulted in the system being called “one of the worst funded public-worker retirement systems” in the nation in every article written about it during the past few years.  This description, used incessantly in New Jersey media, describes a system that was 108% funded in 2000 (fully funded) in 2000 and today is somewhere in the range of 60% funded.

 How did this happen?  The answers to this question, to the diminution of the benefits for new educators entering public service since 2011, and to the suspension of cost-of-living adjustments for all retirees for the last ten years shows how the retirement system has provided political figures with the revenue to meet the constitutional requirement that New Jersey have a balanced State budget annually.  Without these manipulations, taxes in New Jersey would be even higher than they currently are.

 I plan to explore these manipulations and their consequences in the next Financial Corner.