N.J. public worker pension fund gap widens to $40B

N.J. public worker pension fund gap widens to $40B

By Samantha Marcus | NJ Advance Media for NJ.com
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on April 23, 2015 at 5:40 PM, updated April 24, 2015 at 1:04 AM
TRENTON — New Jersey's funding gap for public worker pensions continued to widen last year to $40 billion, adding $4.5 billion in pension debt from 2013.

The unfunded liability, or the difference between the money the state has on hand versus what it would cost to fully fund benefits for future and current retirees, surged as the state slashed planned payments into the system, which ranks among the largest and least healthy in the country.

The pension system was worth about $42.5 billion at the end of the 2014 fiscal year last June, while the price tag to meet those retirement promises was $82.6 billion, according to actuary reports for the state's seven pension funds released this week.

As a result, the ratio of assets to liabilities slid from 55.6 percent to 51.5 percent. Experts generally say a pension fund with an 80 percent funding ratio is considered healthy.

"We were expecting it because the governor has failed to put in for two and now coming up on three payments," said Tom Bruno, chairman of the Public Employees' Retirement System Board of Trustees. "It didn't surprise us."

The pension system has three funding streams, including worker contributions, public employer contributions and investment returns.

Gov. Chris Christie scrubbed $2.4 billion from payments into the fund in 2014 and 2015. And the $1.3 billion proposed payment for the upcoming 2016 fiscal year that Christie hailed as the largest in state history is $1.8 billion less than he was scheduled to pay in and less still than what actuaries recommend.

After Christie slashed the state's payment in 2014, labor unions fought him in court and lost. They won a trial court battle in February to force Christie to restore this year's payment, and the state Supreme Court will hear that case next month.

The unfunded liability has been climbing since the turn of the 21st century largely because of investment losses, increased benefits and chronic underfunding. In a National Association of State Retirement Administrators's study of states' contribution from 2001 to 2013, New Jersey had the worst record.

Within the pension system there are seven individual pension funds for police and firefighters, teachers, judges and other public employees. Two of the largest funds — the Teachers' Pension and Annuity Fund and the Public Employees' Retirement System — are on pace to run out of money within 12 years.

Scott Porter, a Milliman actuary, told the trustees of the teachers' fund on Wednesday that he's concerned about "the ongoing solvency of the fund," which could be depleted by 2027.

In the world of pension funding, he said, "that is very, very close. It's tomorrow."

The state portion of the Public Employees' Retirement System, which trails the teachers as the second largest pension fund, is just 43.8 percent funded, down from 48.1 percent in 2013. Meanwhile, the portion of those liabilities covered by municipalities, is 73.5 percent funded.

The Police and Firemen's Retirement System is also largely funded by local governments, and that chunk is 76.3 percent funded, while the state's smaller end is 47.2 percent funded.

The fund is stable "in spite of" the state underfunding the system, said Patrick Colligan, president of the New Jersey State Policemen's Benevolent Association.

"Our members are out there everyday working for our communities and continuing to make the payments required to make sure members and their families have a stable pension fund for their retirement, he said. "Today's actuarial report shows quite clearly that it is well past time for Gov. Christie to begin meeting his responsibilities."

A spokesman for the Department of Treasury declined to comment Thursday.

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Samantha Marcus may be reached at smarcus@njadvancemedia.com . Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.

Christie accuses Dems of 'suing themselves' over pension shortfall they created, approved

By Claude Brodesser-Akner | NJ Advance Media for NJ.com
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on April 23, 2015 at 12:35 PM, updated April 23, 2015 at 4:09 PM
CEDAR GROVE — Gov. Chris Christie on Thursday accused the Democratic leaders of the state Legislature of "suing themselves" after they joined in court papers of public employee unions suing the state to make a full pension payment.

Speaking at a town hall meeting in Cedar Grove, Christie went on the offensive against the NJEA and state Democrats, placing the blame squarely on a Legislature that had accepted and approved a budget with a lower pension payment in the first place.

Christie acknowledged "the payment we made this year was supposed to be $1.6 billion more than it was" but noted that, facing a revenue shortfall, the Democratically-controlled Legislature had approved a final budget that called for a pension payment of a slightly more than $650 million dollars.

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"They (the NJEA and its supporters in the Legislature) are now suing to force the court to force them to do what they didn't do," Christie said, "They are essentially suing themselves. It's extraordinary."

The reality is a bit more complicated: The New Jersey Legislature earmarked $2.25 billion into the Appropriations Act. However, the governor then used a line item veto to cut a little over $1.5 billion, leaving a pension payment of $677 million in fiscal year 2015.

Instead, Christie argued, the state should institute a three-step reform package that will reduce health benefits from platinum plus to "gold" and reinvest the savings to help shore up the pension system, which would result in $3 billion in savings.

He also argued the creaking pension system's benefits should be frozen and the administration of the payments be removed from the hands of politicians and turned over to the unions.

"We do those steps, we fix this problem," Christie said.

However, the NJ Education Association doesn't see it that way. On Tuesday, it announced it was cutting off talks with the Christie administration over pension reform, and focusing its efforts on getting a payment via the courts.

Christie insisted he would love to make the payment, but warned the assembled crowd of 200 in the gym of Essex County College's Public Safety Academy that there was no "money tree" that would magically make up the short fall.

"Here's the problem," said Christie, "You're the money tree. They're Robin Hood, alright: They're gonna take it from you, and give it to them."

Christie added the alternatives were too harsh to bear: Revenue increases in either the sales or income tax would need to occur, stifling growth and jobs. To make up the shortfall, the sales tax would need to be hiked to 10 percent, or the income tax would need to be raised by 29 percent.

Raising the millionaire's tax further would only provide $500 million of the missing $3.3 billion, Christie said, but he also warned it would come with a side-effect.

"Be careful," he warned, "You know what happened last year? 10,000 millionaires left New Jersey. People of wealth can move, and they can move easily."

Christie noted that many of the well-heeled had decamped to Florida, perhaps permanently.

"Why? Not just the wonderful climate. Zero income tax," he said, "Don't fall for it."