New Jersey's $13.5 Billion JACKPOT!

New Jersey's $13.5 Billion JACKPOT!

Congratulations New Jersey! Your lottery assets are worth $13.5 billion! What are you going to do with the money?

The Garden State will use these assets to support its heavily underfunded public pension systems. New Jersey has transferred the state’s lottery system, estimated in value at $13.5 billion, as well as the lottery’s $1 billion in annual revenues to the state’s three largest pension systems for the next 30 years. The move is a credit positive and demonstrates the state’s ability and willingness to make decisions to address its pension issues. The NRSROs’ downgrades of the State of Illinois, Connecticut, Kentucky and New Jersey indicate that unsustainable and accelerating pension obligations and subsequent annual required contributions are credit drivers. No matter how you look at New Jersey’s decision (creative accounting or accounting gimmick), increasing funding ratios and lowering annual required contributions are a near-term credit positive.

Utilizing the lottery asset transfer is like paying down – but not off – a credit card with a large balance. As you pay down the credit card debt, your minimum payment decreases and your total available credit improves. Citi estimates that the pension funding ratio for all pension plans based on annual net pension liability (ANPL) would increase to 65% from 55%. Another way to analyze pension debt uses unfunded actuarial accrued liability (UAAL). Analyzing UAAL assumptions and funding ratios would result in an improvement to ~49% from ~30%. Fitch estimates funding ratios would improve to 58.9% from 44.7%. As the total UAAL decreases, annual required contribution (ARC) will decline, creating room in the general fund budget to fund operations absent the lottery revenues.

Fitch recently reported that states are getting creative in addressing their pension burden and used New Jersey’s experiment as an example. Citi cites the New Jersey Attorney General arguing that the “experiment” has sound legal authority under the state constitution, because the lottery proceeds are used for education and state institutions. The three pension funds qualify as education and state institutions, as teacher pensions "constitute state aid for education," and some members of PERS and PFRS work at state institutions or public universities.

Related: Goldilocks, Don't Get Too Comfy While Sleeping in a Bear's Bed!

In all, the “lottery game” does not change the state’s long-term structural budget issues. The state economy continues to lag national trends, population growth is in the low single digits, and the per capita tax burden is high. However, the lottery game is a near-term credit win and demonstrates, yet again, the state’s ability and willingness to make decisions to address its pension issues.

Source: SNW Fixed Income Research, Citi, Fitch and Bloomberg News
SNW Asset Management
Fixed Income
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SNW Asset Management (“SNW”), which was acquired by OFI Global* in 2017, began in 2002 as a subsidiary of Seattle-Northwest Securities Corporation (founded in 1970), speci ... Click for full bio

NBA Player Carl Landry Demonstrates the Value of Persistence in Life and Work

NBA Player Carl Landry Demonstrates the Value of Persistence in Life and Work

Written by: Jon Sabes

When you meet Carl Landry, stand-out college basketball player and nine-year NBA player, you imagine that becoming a professional basketball star was a straight forward run for the 6-foot-nine-inch power forward. 

However, when you go deeper into Carl’s background, becoming a NBA professional was less than certain and little came easily to the 33-year-old from Milwaukee:

  • He was cut from his high school team as a freshman and averaged less than ten points a game when he did play as a senior.
  • He started his college career not at Purdue, but a junior college where it was not clear he would play.
  • When he finally got to Purdue, he tore his ACL in his knee his first year and reinjured it the next year.
  • While his family held a party for him the night of the NBA draft, he slept in the Philadelphia airport after missing a flight following a workout for the 76ers.
  • In the NBA playoffs, Carl had a tooth knocked out, but came back in the same game to make a game-winning blocked shot as the Rockets beat the Utah Jazz 94-92.

Landry, who I interviewed on my podcast, Innovating Life with Jon Sabes (, is a remarkable example of the value of “persistence.” In a time where technology creates the image that anything is possible at the touch of a button, persistence is an under-appreciated trait. When I spoke with Carl, I clearly saw someone for whom success has only come through a force of will that made him a NBA player, but it also made him a better player every year he played. That’s the kind of personality that has produced greatness in business as well as sports.

Carl was, in fact, drafted that night he spent in the airport. The Seattle Supersonics chose him as the 31st overall pick and then traded him to the Houston Rockets where he rode the bench for much of the first half of the season. When All-Star teammate Yao Ming was injured, he stepped in and played a key role in the Rockets astonishing 22-game winning streak (the third longest streak in NBA history). And, that season, after sitting on the bench for 33 of the first 36 games, he was named to the All-Rookie second team.

Carl was the first in his family to go to college. “I told myself that this was my ticket out, so I did everything I possibly could to be the best person in school and also on the court,” he said.

His family life in Milwaukee showed him what he didn’t want to do. “Just being honest with you, seeing some my cousins, peers, they went to work for jobs paying six, seven dollars an hour or they didn’t go to work at all and then living off welfare. I didn’t want that.”

When he was first injured, he had to contemplate the end of a career before it even got started. “When you have an ACL tear, it’s over…no more basketball,” he told me. “I said, God, give me health again and I’ll do everything I can to leave it all out on the line and be a successful individual.”

On my podcast, Carl pointed out another interesting lesson he learned in the NBA: Not doing things just to fit in.

“Fitting in was easy,” he said. “Doing everything that everybody else does was easy. If I stood out in some type of way, I’m going to have different results. I’m going to have stand-out results.”

That’s called the “Law of Contrast” and it produces that exact effect of changing the outcomes that everyone else is experiencing.  Carl is smart, he recognized that differences make a difference, and doing whatever it takes is what is required to make real, meaningful differences.

Every off-season for the last 11 years, he has run a camp for kids in Milwaukee where he tells youth his story of hard work and persistence. “I always tell the kids to apply themselves and always be persistent,” he said. “If you dream, apply yourself and be persistent. With hard work, man, the sky’s the limit.”

When Carl says the sky’s the limit he means it.  He is smart to recognize that it’s important to dream big, because if we don’t – we may be selling ourselves short. “You have to dream bigger than your mind could ever imagine,” he said. “I wanted a nice house. I wanted a nice car. I said, and I got all of that. So, what do I do, do I stop now? Maybe I didn’t dream big enough.” That’s a big statement coming from a kid who grew up to be the first in his family to graduate college and go on to be not only a top NBA basketball start, but a good businessman, father and someone who gives back to the community.

I’m convinced that in whatever he takes on as a basketball player or in his post-hoops career, Carl Landry is not going to stop getting better at whatever he does, and in the process of doing so, make the world a better place.

GWG Holdings, Inc.
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GWG Holdings, Inc. (Nasdaq:GWGH) the parent company of GWG Life, is a financial services company committed to transforming the life insurance industry through disruptive and i ... Click for full bio