Is muniland doping the data?
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.