Yes we have a huge problem. As a Star Ledger editorial pointed out , “The settlement with the Security and Exchange Commission makes it official: For years, New Jersey had been cooking its books and neglecting to tell investors it was grossly underfunding pension plans. The state has been using one accounting method. Corporations use another, and academics embrace a third – and the latter two would place New Jersey in a much deeper hole, closer to $60 billion.” And this hole does not include a similar one: the State Employee Health Care Benefits System.
However, it appears that Governor Christie’s overhaul plan suffers from the same lack of transparency we have witnessed in the past.
(read about it below the fold)
Its lack of supporting detail opens the governor up to the charge of cooking the estimates. His plan, formalized in yesterday press release Pension and Benefit Reform to Bring Fiscal Sanity to New Jersey is filled with the cuts he seeks, but lacks supporting information regarding how the impact of the cuts is estimated. We are being told, in effect, “Do this or terrible things will happen, but don’t ask me how I know.”
An attached Pension Fact Sheet baldly states, “The cumulative impact of the reforms Governor Christie is proposing, projected over the thirty year period, will reduce total pension underfunding from $181 billion in 2041 without reform to $23 billion in 2041 and increase the aggregate funded ratio from the present level of 66% to more than 90% in 30 years.” The Fact Sheet provides scant financial support for this conclusion. Requesting immediate legislative action based on a 30-year estimate is the height of folly. The ups and downs of the stock and bond markets, interest rates, and investment wisdom are just a few confounding factors. 30-year estimates of pension cost increases are unreliable and subject to manipulation. The accounting methods used, as in the past, can generate a range of overly optimistic or pessimistic results. And of course in 30 years Christie will be long gone. The Treasury website provides no further financial data.
The second attached Fact Sheet addresses the State Healthcare Benefit System and is equally vague. It states, “Without Immediate Action, Costs Will Increase By More Than 40 Percent Over The Next Four Years.” Once again there is no support to indicate how this assertion was determined.
For there to be public trust and confidence in the Governor’s proposals, he must provide short term ascertainable outcome data, explanations as to how costs are calculated, and what accounting methods are being used. As he did with his privatization and gaming reports, he demands bold changes but fails to provide the data needed to make informed, intelligent choices. This lack of forthrightness is no different from what we are witnessing now in the womens’ heath care bill where our Governor and Treasurer make claims but refuse to provide supporting documents.