Sunday, August 22, 2010

Pension Fraud by New Jersey Is Cited by S.E.C. / By Mary Williams Walsh- NY Times

The following summary of an article looks at the very serious issues facing teachers, police, firefighters, and other state workers in the State of New Jersey as well as other states with large pension systems. It is important to understand that the current emergency with the NJ State Pension system is not due to "excessive" benefits-- but rather, simply that the State of New Jersey has systematically, consciously, and inappropriately, failed to MATCH the funds put into the system that the public workers of New Jersey put in every pay check due to payroll withholdings. And, consequently falsely reported "all is well" to the SEC. It is the bi-partisan failure of the politicians to properly fund the pension system that has led to the current situation. To say this is inexcusable is obvious, to say it is fraud, as does the United States Security and Exchange Commission, is much more accurate. -Dr. Petrosino

Federal regulators accused the State of New Jersey of securities fraud on Wednesday for claiming it had been properly funding public workers’ pensions when it was not.
The Securities and Exchange Commission said the action was its first ever against a state, and only its second against any government over the handling of a public pension fund. The first was the city of San Diego. The S.E.C. said its action was meant to dissuade other governments and their advisers from hiding bad fiscal news in a fog of pension numbers. Actuaries, for instance, have been raising questions about the framework Illinois has laid out for bolstering its pension funds. In New York, California and other places, financial advisers have told lawmakers that benefits could be sweetened at virtually no cost, only to be proved wrong once those benefits were adopted.

The commission said that from 2001 to 2007, New Jersey claimed to have money set aside in a “benefit enhancement fund” as part of a “five-year plan” to pay for new benefits for teachers and general state employees. In fact, the fund was an accounting illusion and no such money was available. The misstatements began during the Republican administration of Gov. Donald T. DiFrancesco and continued under Democratic administrations, including those of James McGreevey and Jon Corzine.

By the time Gov. Chris Christie took office this year, the pension funds had been deprived of contributions for so long that it had become near impossible to catch up. The state needs to come up with billions of dollars every year, something it cannot do without raising taxes, cutting public services or going even deeper into debt. Governor Christie has been forcing cuts in education spending and other areas in hopes of improving the state’s finances.

Read the full story by clicking HERE