New Jersey has the worst funded state retirement system in a country full of badly funded public retirement systems and yesterday’s Investment Council meeting provided a glaring example of why that dubious distinction is not going away.
As reported by njspotlight:
New Jersey has the nation’s worst-funded public-employee pension system, and in a bid to help put it on a firmer footing, state lawmakers last week overwhelmingly approved a bipartisan bill that calls on the state to begin making pension contributions on a quarterly basis. But the leaders of the board that oversees investment policy for the pension system are divided on whether lawmakers should be going even further to address the state’s pension-funding problem.
[Adam] Liebtag, a leader of the Communications Workers of America labor union, said he would also like to see the payments themselves calculated using the actuarial assessments and not just the amounts set aside each year in the annual state budget. For example, the current state budget calls for a $1.9 billion state pension contribution, which is well below the close to $5 billion payment that actuaries have called for.
The governor has vetoed similar measures in the past, but legislative leaders say they expect him to sign this version due to several changes that they made. The new wrinkles include allowing the payments to be made at the end of each quarter of the fiscal year. That is intended to give the state more time to generate revenue to cover the payments, especially in the first two quarters when tax collections typically come in more slowly than they do at the end of the fiscal year. Another change would allow the pension system itself to cover any short-term borrowing costs that would be required if the state doesn’t have enough cash on hand to make any of the quarterly payments.
What this comes down to is a debate over whether the state should REDUCE its contributions on account of the actuarial adjustment for earlier deposits and the cost of borrowing. The state would still get to pick their contribution by applying some arbitrary fraction to the already understated amounts that the actuaries develop and if even that turns out to be onerous they have the option to either ignore it entirely or borrow to pay for it.
Anyone who sees this as a real solution is not looking for a real solution.