MuniLand

Is muniland doping the data?

By Cate Long
March 26, 2014

Puerto Rico and New Jersey may have played with the numbers recently to put a better gloss on their weak finances. They seem to be “doping” the data.

For example, Puerto Rico (with assistance from the Bureau of Labor Statistics) has revised six years of employment data to cast a positive upward revision to its economy. This had spillover effects on the broad economic measures of the island. From Puerto Rico’s Government Development Bank:

The payroll employment benchmark revision not only impacted the average level of payroll employment, it also changed its average growth rate for previous years.

Notice that from a 0.7 percent decline during FY2013, the revised figures now reflect a 0.7 percent increase; and from a year-to-date (July-December) contraction of 4.3 percent in FY2014, the revised numbers show a year-to-date drop of 2.4 percent.

In addition to the revision of the 21 months prior to January 2014, the revision included changes for December 2006 (+2,500 jobs), December 2007 (+2,200 jobs), December 2009 (+13,200 jobs), and December 2010 (+6,600 jobs).

Although Puerto Rico continues to lose population at a rapid rate and its gasoline and electricity production and cement sales continue to decline (Though it showed a surprising 14 percent increase in March) the revised numbers say that employment was actually better than reported.

Ten pages of the monthly GDB report was devoted to “clarification” about the new economic reporting framework. These changes will make developing a historical basis of comparison very difficult.

The Puerto Rico economy is still contracting as the GDB reports “In January 2014, the GDB-EAI registered a 3.5 percent year-over-year reduction.” But this means that muniland will have a more difficult time knowing how the economy is performing over a multi-year basis. Maybe Puerto Rico is doping the numbers.

Meanwhile NJSpotlight reported:

Facing another year of fiscal problems, Gov. Chris Christie unilaterally changed the funding formula for the state’s pension contribution so that he could cancel $93.7 million in previously budgeted pension payments due in June, cut next year’s pension bill by $150 million, and put $900 million less into the underfunded pension system by the end of his term.

Christie’s decision to change the pension calculation formula will further add to New Jersey’s $47 billion unfunded pension liability — which was one of the main reasons Fitch’s Ratings cited last Friday when it followed Moody’s and Standard & Poor’s in downgrading the state’s credit outlook from ‘stable’ to ‘negative.’ Over a 30-year period, Christie’s formula change would swell the state’s unfunded pension liability by 10 percent, actuaries for the state’s pension funds reported.

Read the whole piece in NJSpotlight. It’s worth the time to understand how fancy fiscal shenanigans like this operate.

Btw. Thanks to Adam Shapiro and Fox Business for inviting me to appear as part of a special public pension series. We discussed many topics, but Illinois, Puerto Rico and New Jersey were highlights for their weak pension systems.

Comments
3 comments so far | RSS Comments RSS

> They seem to be “doping” the data.
> Maybe Puerto Rico is doping the numbers.

If anyone is “doping,” that would certainly be you, Cate, as well as other journalists who also seem to have a personal agenda against PR. It is the BLS that changed the employment numbers, so go attack them, not PR. What is the basis for your insinuation that PR cooked the books and BLS was complicit in the process? Is there an editor or a publisher at Reuters who is reading this biased stuff you are continuously producing about PR???

Here are the facts:
“Every March the BLS publishes the benchmark revision of the payroll employment. Each revision changes the employment figures for the previous 21 months.

The revision released in March 2013 increased the 2012 average level of payroll employment by 18,433 employees with respect to the previous employment estimates published until December 2012. Moreover, the revision released in March 2014 increased the 2013 level of payroll employment by 21,275 jobs with respect to the estimates released until December 2013.”

Posted by CraigL | Report as abusive
 

Moodys:

New Jersey’s Reduced Pension Contribution Reflects Persistent Budget Pressure

On March 21, New Jersey Treasurer Andrew Sidamon-Eristoff released a list of $694 million of spending
cuts to close a mid-year fiscal 2014 budget gap. The measures include a recalculation and reduction of the
fiscal 2014 pension contribution by $94 million. The state’s fiscal 2014 budget-balancing actions reflect the
credit negative strain of New Jersey’s (Aa3 negative) persistent budget gaps and indicate that the state has
already exhausted some of the easiest spending reductions.
The pension contribution reduction is based on revised actuarial assumptions that will use current employee
contribution requirements, enacted in a 2011 pension reform, instead of lower, pre-reform contribution
levels. The lower state contributions are consistent with minimum legislative requirements. However, the
need to retroactively recalculate the amounts indicates that the state’s financial position is weaker than
expected and that more typical budget balancing solutions have already been exhausted. Additionally, while
the changes provide budgetary relief through fiscal 2018, pension costs will be higher in later years than they
would have been without the adjustment.
While the budget gap is only 2.3% of the revised fiscal 2014 budget, this is the third consecutive year that
revenue shortfalls have required mid-year budget balancing. Through December 2013, the state’s revenues
had grown 5.7% year-over-year but were $331.7 million below the budget forecast. The state’s recurring
mid-year revenue shortfalls reflect both the one-year lag in the economic recovery and optimistic revenue
projections.
As a result of recurring budget gaps and increasingly limited options, the state continues to use one-time fixes
that indicate above-average financial weakness. Non-recurring budget solutions include debt restructurings
for debt service savings, and in fiscal 2013, a one-time shift in Homestead Benefit payments that crossed
fiscal years. Earlier this month, the state provided an enhancement to tobacco securitization bonds,
committing additional Master Settlement Agreement receipts to a 2041 maturity in return for an upfront
payment of approximately $92 million. The payment provided both budgetary relief and helped shore up the
state’s narrow liquidity position.

Posted by Cate_Long | Report as abusive
 

This article is completely unfair to Puerto Rico. The GDB uses the US Bureau of Labor Statistics jobs data as part of its economic index. This is responsible and it makes sense as the BLS data is the authoritative data on jobs statistics. Each March the BLS goes back and revises years of previous data for states and metropolitan areas, and this year (as with 2013) PR saw a large revision. This isn’t unique to PR, for example California’s data was also significantly revised. Given the revised BLS data, the GDB had to revise its own data going back for years. Cate, what else should they have done–continued to use the old, inaccurate data?

This is irresponsible journalism. Next time I suggest a bit more research before accusing a government of “doping” data. Maybe a call to the BLS and GDB before posting would have cleared this up?

Posted by JXC | Report as abusive
 

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