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. More may be in store; the agency announced in January that it had a special unit looking into public pension disclosures. The S.E.C. has been trying to assume more authority over municipal securities.
The commission settled its suit with New Jersey by issuing a cease-and-desist order, which the state accepted without admitting or denying the findings. No penalties were imposed.It's worth reiterating that the SEC is making an accusation of securities fraud - it's not citing the state for underfunding pensions themselves.
Obviously, this can't continue - we've got to do something. I've said before that I believed that in a economic crisis, not making a pension payment - which I contend is essentially the same as going into debt - is a sound strategy. Unfortunately, we didn't make pension payments in flush times either, so we've pretty much used up that option. What's left?
It pretty much comes down to this:
- Find more revenue and use it to pay off unfunded liabilities.
- Decrease current and/or future benefits.
Now, there are those out there who seem to believe we have other options that will solve our dilemma; options like changing the governance of pensions, or moving to defined contributions as opposed to defined benefits.
But I just don't see it. I'll be posting about that this week - barring my son breaking his other wrist...