We have an inside joke in our family that got started with the movie The Thin Red Line (most overrated movie of all time, by the way, feel free to hate me in the comments section below). In the movie, Woody Harrelson fumbles a grenade which then explodes on him, and he shouts “I blew my butt off!” Now whenever someone does something exceptionally stupid that backfires on them, we laugh and say “I blew my butt off!” It’s a terrible joke and we’re totally going to Hell for making it, but it so aptly describes so many situations.
Well, state and local governments – having implemented insane let’s-quarantine-the-healthy policies after reading a hysterical white paper based on an epidemiologist’s one-man hack job in an old programming language with zero documentation based on a flu epidemic he tried to model over a decade ago, but who goes around calling it his “model” with no criticism allowed because he’s a media hero – have blown their butts off.
I already wrote about how Calpers, which manages pension and health benefits for almost 2 million California government employees, has lost $69 billion.
New Jersey froze $920.6 million in spending, including aid to homeowners and cities, and warned of deep hits to the nation’s least-funded public pension system.
In a voluntary disclosure note to bondholders, State Treasurer Elizabeth Muoio gave the broadest description yet of how New Jersey, among the most indebted U.S. states, expects to suffer revenue shortfalls and other fallout as a result of the new coronavirus.
On March 20, Governor Phil Murphy and his counterparts in New York, Connecticut and Pennsylvania asked President Donald Trump and congressional representatives for at least $100 billion in direct cash to help cover the cost of their coronavirus response. The states represent 16% of the U.S. economy.
New Jersey expects “precipitous declines” in fiscal 2020 and 2021 gross income, sales, corporate business, casino and motor-fuel taxes, according to the note. Lottery sales, which support pension payments, already have declined barely three weeks after the state reported its first coronavirus case, on March 4. “The state may encounter future increases in the state’s actuarially recommended contributions to the state’s pension plans to the extent that the valuation of pension plans is affected by the deterioration in value in the investment markets,” according to the note.
Among the immediate effects of the spending freeze is the suspension of $140 million of homestead benefit payments, designed to give property-tax relief to eligible property owners in a state where last year the average annual bill hit $8,953. The plan also froze $84 million for the motor vehicle commission, $70.6 million for college operating aid and $44.7 million for municipalities that rely on state cash to help close budget gaps.
Murphy had planned a $4.6 billion pension payment for the fiscal year that starts July 1. That’s an historic contribution but still about $1.5 billion short of the actuarial requirement. New Jersey’s pension, with 38.4% of what’s promised to 800,0000 current and future retirees, has the worst-funded pension system among U.S. state governments, according to a September report by S&P Global Ratings.
And this is just getting started. You are going to have state and local governments across the country coming to the realization that they blew their butts off and destroyed their entire financial existence.