NJ's Real Pension Plan Problem

Not a pretty picture (0.00 / 0)

For the fiscal year ending in June 30, 2009, there was a NJ Pension Fund investment loss of $12.3 Billion. No 8.25% return there. And the market got only worse after June 30, 2009.

Three bad investments (amongst others):
In mid 2008 New Jersey government retirees picked up a $180 million stake in the troubled Lehman Brothers investment firm.  Also earlier in the year the Pension Division invested $400 million in Citigroup and $300 million in Merrill Lynch.  

Now with very low bond rates and widely fluctuating stock prices there are few options for safely recapturing high rates that might undo the problem. We are between a rock and a hard place. Advice in today's NY Times article: "The larger the pension plan, the lower-risk strategy you would like to employ," said Andrew T. Ward, the chief investment officer of Boeing."

"The work goes on, the cause endures, the hope still lives, and the dream shall never die." - Sen. Ted Kennedy

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by: Bill Orr @ Tue Mar 09, 2010 at 19:23:28 PM UTC

Huge Screw-ups to follow (0.00 / 0)

Privatization may not always be a bad idea but earlier experiments with DMV and medical care in prisons did not go well. One problem in the past has been to give these contracts to big donors, and often with little or no bidding competition and with insufficient oversight of the contract's implementation.

More recently we relied on financial consultants for Pension Fund investment decisions with the result that our fund lost $12.3 billion in value in FYE June 30 2009. Had we used State employees who followed conservative, risk-averse policies, instead of going for the "big bucks and high rates," we would have done better.

In theory, privatization can be beneficial but in practice it has often been disastrous. For privatization to work, the government needs to establish clear goals and timelines for bidders, a fair bidding process, and ongoing oversight afterward. If our governor acts in haste and does not follow wise principles, look for huge screw-ups to follow.

"The work goes on, the cause endures, the hope still lives, and the dream shall never die." - Sen. Ted Kennedy

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by: Bill Orr @ Thu Mar 11, 2010 at 15:34:24 PM UTC