The National Association of State Retirement Administrators (NASRA) is a lobbying group for defined benefit plans in the public sector and their latest report compares the percentage of the Annual Required Contribution (ARC) that public plans around the country deposited between 2001 and 2013. New Jersey came out worst with a shortfall of over $23 billion (out of a total national shortfall of $123 billion) and a funding percentage of 38% (with the national average at 84%).
One obvious intent of the report is to pin blame for the impending collapse of the New Jersey retirement system on New Jersey itself rather than a flawed funding system that allows politicians to low-ball contributions and deputizes actuaries to find the means.
Of course New Jersey is a fiscal basket case. If it were an individual it would be declared without capacity to enter into contracts. But the system for funding public plans is also at fault and will bankrupt all defined benefit plans (though not as quickly as New Jersey) and the NASRA report tacitly admit as much in the first paragraph.
The annual required contribution, or ARC, refers to the amount needed to be contributed by employers to adequately fund a public pension plan. The ARC is the sum of two factors: a) the cost of pension benefits being accrued in the current year (known as the normal cost), plus b) the cost to amortize, or pay off, the plan’s unfunded liability. The ARC is the required employer contribution after accounting for other revenue, chiefly expected investment earnings and contributions from employee participants.