Taxpayers Benefit from SEC Action Against Lying about State Pension Underfunding
David C. John /
The fact is that New Jersey lied and got caught, but taxpayers everywhere may benefit.
Yesterday, the State of New Jersey settled with the SEC on charges that the state committed securities fraud by failing to disclose the true state of its state employees pension funds. This admission is an important step toward ending accounting policies that allow states to claim that the state teachers and employees’ pension funds are fully funded, when they really have billions of dollars of deficits.
By using accounting tricks, New Jersey claimed to have made millions of dollars of contributions into its pension funds, when it really made no cash contributions at all. The false statements in the documents backing 79 issues of municipal bonds totaling $26 billion between 2001 and 2007 gave the impression that the state was in much better financial shape that it actually was (and is), thus misleading purchasers of the bonds into thinking that the risk of default was lower. (more…)