On Wednesday, the Securities and Exchange Commission (S.E.C.) charged New Jersey with improperly funding the state’s public pension fund. While the acknowledgment of the commission’s cease and desist order satisfies the official accusation, one is reminded of why, despite widespread apathy, politics still matters.
In 2001, at the behest of Republican Acting Governor Donald DiFrancesco, the Legislature voted to increase teacher retirement benefits by 9%. The bills proponents believed that the jump would attract a new generation of talent to the state. There was also an off the record assumption that the increase boded well for a Republican leadership about to exit to the wings of power. Not to be outdone, many Democrats shared that assessment. The legislation passed in a bipartisan vote and DiFrancesco obliged, a decision that dramatically altered the state’s financial fortunes. And what’s worse, it was enacted with inaccurate information.
The stock market was doing quite well in 1999. They grabbed hold of a phantom revenue source for the increase – a $5.3 billion jump not reflected in actuarial reports. Using that unreported sum as the basis for the law’s financing was improper: the gain
And it could have been avoided.