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This new report out says that new Jersey's pension system faces a 173.
Billion dollar gap.
But according to the states only 46 billion so we want -- -- who's right more importantly how -- we close it.
Longer term the co author of of that report -- Norcross joins us now she's a senior fellow with the market is setter at George Mason University.
Thanks for coming on with -- money.
So basically what I just said there is that your numbers prove that the budget deficit New Jersey is three times worse the pension deficit.
Three times more underfunded than we thought we already thought it was pretty bad how could this possibly be the case.
That's right that has to do with an accounting practice that the states have been using to value their pension liabilities.
According to the government accounting standards board states are allowed to value their pension liabilities according to what they think the assets will return.
And when invested in the market in New Jersey they have an expected rate of return of eight point 25% on their pension assets.
But according to financial theory that's the wrong way to value those liabilities.
It should be valued according to how risky they are and this is the state guaranteed payment for the worker there for a low rate risk to be chosen okay.
So that if if we use your numbers things again or even worse than we thought now people living in New Jersey say.
But such good for us others watching say well tough luck New Jersey but not so fast on that either because I was looking at some of your other numbers that show around the nation.
-- number of what pensions are underfunded by something like -- sixty billion where's your figures show them.
The reported number your figures show -- -- three trillions this is a nationwide problem.
That's right and again that -- found that discount rate issue when you apply.
The return of the discount rate.
For treasury bonds you get a much larger paper says what are we got -- -- across the nation how we fix this well they're simple there's probably knows maybe there's a simple answer what does it.
I it's simple but it's relatively straightforward the state needs to close down these defined benefit plans to new hires.
And start reducing the rate of accumulation everyday they're adding workers and adding to the -- So the idea that somebody's watching now and thinks that they're gonna start a job and get a pension or have a guaranteed pension they should get they should take that idea and get it out of there.
-- -- -- I think it is unrealistic but the state needs to do other things -- -- to get a handle on this obligation that it.
Postal workers and New Jersey -- -- passed a series of pension reforms in the spring -- those need to be applied to current workers not just been hired are they going about it right by the way in New Jersey with the new governor and what have you.
They're moving in the right direction with the pension reforms but again they don't go deep enough they only apply to new hires are reducing the rate of accumulation of benefits.
Raising the retirement age these -- reforms have to be undertaken and applied to Workers Party in the system and we we say that the station also consider freezing the cost of living adjustment to reduce the rate of accumulation of benefits.
Thanks Eileen president is driven by competition got it -- thanks for bringing us the information as tough as it is for a lot of these states especially New Jersey.
I mean our Chris George Mason University there in -- DC the.
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