Another Tip of the Public-Retirement System Iceberg Is Revealed

From an AP report last week based on a New York Times article (Times link requires free registration and may not be available in a couple of weeks):

New Jersey has diverted billions of dollars from its public worker pension fund into other purposes over the last 15 years using unorthodox transactions authorized by lawmakers and governors from both political parties, The New York Times reported in Wednesday newspapers.

For years the state has been contributing less money into its pension fund than it should. However, The New York Times said its analysis shows New Jersey overstated what it has claimed to have contributed, raising concern about how much money is in the pension fund — the nation’s ninth largest, with reported assets of $79 billion.

The New York Times analysis said the state recorded investment gains immediately when the markets went up, then delayed recording losses when the markets went down. It reported money to pay for health care costs as contributions to the pension fund and claimed it had excess assets that allowed it to divert pension contributions to other uses, such as aid to poor schools.

….. If New Jersey violated federal securities, tax or other rules, it could be forced to make up some of the contributions, the newspaper explained.

The Internal Revenue Service has specific rules against mixing pension money with money for other uses, while federal securities law requires bond issuers to provide complete and accurate financial information.

There would be one word to describe the ultimate address of private company executives and accounting types if they engaged in these kinds of shenanigans: Prison.

Given the fact that it is written into the Garden State’s constitution(!) that the state “cannot reduce earned pension benefits,” this has all the makings of fiscal train wreck.

I would not be at all surprised to learn that New Jersey’s situation is only one of many similar ones throughout the country.