The New Jersey budget for the 7/1/16 – 6/30/17 year is out and, as it relates to pensions, it is interesting reading for lovers of fictional interpretations.
Governor Christie has made substantial progress addressing the sins of the past. The fiscal 2017 budget continues that process. The proposed pension payment is the largest in history, reversing decades of underfunding. (page 2)
By law this payment is only 40% of the actuarially required contribution (understated as that is) so it means another year of increasing the total unfunded liabilities. It reverses nothing.
Defined Benefit Pension Payment
While the need for real and sustainable long-term reform to contain the ever-increasing cost of pension and health benefits cannot be understated, minimizing the continued compounding of the problem requires a substantial increase in State contributions in the near term. Accordingly, the Governor’s fiscal 2017 budget includes a defined benefit pension payment of $1.862 billion, $555 million more than the fiscal 2016 amount, and 4/10ths of the Actuarially Recommended Contribution (ARC). This will be the largest defined benefit contribution in New Jersey history. Approximately two-thirds of the total contribution, or $1.17 billion, funds pension benefits on behalf of local school districts, municipalities, and county colleges. Through fiscal 2017, the Christie Administration will have contributed $6.275 billion to the State’s underfunded pension system, a commitment to funding that exceeds that of any previous administration. This contribution level is nearly double the total funding from fiscal 1995 through fiscal 2010. (pages 10-11)
Yet that $6.275 billion that Christie brags about contributing over seven years totals less than 2/3rds of what the plans are paying out annually right now. Of course there are other sources of funds (local governments and employee contributions) but as…
- real reform are off the table,
- salaries increase,
- retirees keep living longer than expected, and
- if COLAs return…
one can make the argument that the Christie years will have seen the largest dollar increase in unfunded pension liabilities foisted on a populace by any other government in the history of the planet.
Some interesting exhibits from this budget: