This week financial officials from 15 states met with FDIC chair Sheila Bair to discuss the possibility that states buy toxic assets as an investment. New Jersey is contemplating the possibility to fund its pension system.
New Jersey’s pension has been in crisis for awhile, in part because the market has fallen, and in part because of fiscal manipulation and abuse.
The state has bonded to pay for it, deferred contributions for several years and played with the valuation rules to get the books to balance — all while expanding benefits. Grantees have also exploited the system, using gimmicks to increase the size of their pensions such as tacking on multiple jobs, boosting base salaries, and getting benefits for part-time work.
Is this a good idea? The state probably shouldn’t bank on it as a full-proof solution to solve the ongoing funding problems of a structurally weakened system.