State pension system near collapse

Inaction can be tolerated for only so long. Remember when the Fed tried to convince everyone that quantitative easing programs could be scaled back? How long before Stimulus III (possibly IV) become absolute necessity? Austerity and deficit reduction after high profile and public bailouts won't last long when unemployment lingers and climbs higher.

"New Jersey's defined pension systems are underfunded by more than $170 billion, an amount equivalent to 44 percent of gross state product and 328 percent of the state's explicit government debt," said authors Eileen Norcross and Andrew Biggs.
The report says the state has five defined benefit pension plans that cover 770,000 public workers, and more than a quarter million retirees depend on $6 billion per year in benefits.

Officials maintain pension plans are underfunded by $44.7 billion when the return on investment is 8.25 percent. The study used calculations consistent with private-sector accounting methods and, when they are applied, the state's underfunded benefit obligations go from $44.7 billion to $173.9 billion.

"It is estimated if state pension assets average a return of 8 percent, New Jersey will run out of funds to meet its pension obligations in 2019. If asset returns are lower than 8 percent, they will run out of funds sooner," the report says.
How much sooner?

Under certain assumptions the well could go dry as early as 2013.

Source: app.com