So why did we need a ballot question to dedicate all revenue from the massive increase in the gas tax to transportation projects?
S2842 introduced this Monday explains it.
Under the bill, the Director of the Division of Investment in the Department of the Treasury is authorized to invest and reinvest the assets of any pension or annuity fund under the jurisdiction of the division in bonds, notes, or other obligations, issued and guaranteed as to interest and principal by, or on behalf of, the New Jersey Transportation Trust Fund Authority to provide for any of the authority’s corporate purposes and the New Jersey Infrastructure Bank to capitalize the State Transportation Infrastructure Bank Fund with monies to effectuate the purposes of the fund. The bill provides that the investment of pension fund assets in those securities may be made regardless of whether the investments would meet the standard of care prescribed for the making of investments by current law, but specifies that any investments so made in bonds, notes, or other obligations issued by the New Jersey Transportation Trust Fund Authority and the New Jersey Infrastructure Bank must be made from assets that are otherwise allocated for investment in fixed-income securities and only to the extent that the bonds, notes, or other obligations are available for investment at fair market value.
A likely scenario is that $10 billion will be taken out of the retirement system to be used for transportation projects (as defined by the state which could broaden the definition of roadways to include statehouse corridors and hallways). Gas tax revenue would then go into the pension funds (maybe) and the state with the second lowest bond rating in the nation would not need to visit the the municipal bond market.
The scheme would obviously be a prohibited transaction in the private sector as money to be exclusively used for the benefit of plan participants is being diverted for the sponsor’s personal use. However, in the public sector this passes for ingenuity, per njpotlight:
“This would offer an investment strategy that is mutually beneficial for New Jersey’s underfunded pension system and for the Transportation Trust Fund,” said Senate President Steve Sweeney (D-Gloucester). “It would enable the TTF to borrow directly from the state pension fund, providing a guaranteed rate of return much better than the pension system is currently earning on portions of its investments.” “This isn’t just about money, it is also about people’s retirement,” said Sweeney, a prime sponsor of the bill.
“We guaranteed our teachers, police officers and other public workers financial safety and security at the end of their careers. We need to make sure we’re investing their retirement funds in a way that ensures we can make good on our promise, and investing in TTF is the way to do that,” he said.
“Allowing the TTF to borrow directly from the pension fund is a smart move that guarantees a rate of return while helping to support the infrastructure work that is so important to our economy,” said Sen. Dawn Marie Addiego (R-Burlington), another prime sponsor.