Gas Tax for NJ Pension

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.

 

11 responses to this post.

  1. Posted by dentss dunnigan on December 9, 2016 at 10:05 am

    Well if the TTF is selling all it’s bonds to the pension they won’t have to make public a full disclosure of what they need and what they spend ,it’s a real circle jerk to the taxpayers and the pension ……I’m surprised they don’t need the union to OK this plus if they will be pulling in their stock investments it tells me the market will have a great return in the coming years ….

    Reply

  2. Posted by jackdean on December 9, 2016 at 10:09 am

    What could possibly go wrong?

    On Fri, Dec 9, 2016 at 6:27 AM, Burypensions Blog wrote:

    > burypensions posted: “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 Departmen” >

    Reply

    • Posted by dentss dunnigan on December 9, 2016 at 12:22 pm

      This might not be as stupid as it first appears ….the state got a yes vote on the gas tax and it’s ability to raise the tax to as high as it takes to service the debt ….so now the state can raise the gas tax to whatever it needs to put into the pension fund ,so of course the constitutional amendment was no longer necessary …..

      Reply

      • Posted by Standard on December 11, 2016 at 1:04 am

        This sort of maneuver isn’t new.

        Remember when New York City went bankrupt in the 1970s? The New York City Teacher’s Retirement System was forced to buy bonds from the Municipal Assistance Corporation.

        Reply

  3. Posted by Anonymous on December 9, 2016 at 10:29 am

    Yeah but it’ll be a win win situation for the taxpayers when the Feds allow States to file bankruptcy?

    Reply

  4. Posted by steve on December 9, 2016 at 11:00 am

    The politicians have finally reversed the digestive process–in the bottom and out the mouth——doctors take note—-this reminds me of a really bad movie where people were sewed together mouth to tail–seems there is no end in sight

    Reply

  5. Posted by George on December 9, 2016 at 11:41 am

    Aren’t the bonds triple tax fee? How can the plan administrators justify tax free bonds put in a pension scheme? Some bureaucrat will have to take personal risk to permit tax free bonds in the pension scheme, and it might come back to haunt them. I guess they are not even going to fake trying to achieve the long term return estimates they publish.

    And what for? Why can’t they just put less into transportation, make up the difference with the gas tax and used the money saved for the pension scheme?

    Reply

  6. Posted by Anonymous on December 12, 2016 at 3:44 pm

    John, why is Trenton permitted to take money out of the pension plan at all to use for anything? How will there be a guarantee of returning the money plus interest?

    Reply

  7. Posted by George on December 13, 2016 at 3:59 pm

    Maybe the gas tax is going to pay for failed Christie’s failed mega casino and mall projects:

    How Did the American Dream Mall Turn Into a Nightmare?

    The New Jersey behemoth, billions of dollars over budget, is the only large suburban mall being developed anywhere in the country.

    “Then Christie plunged in, with taxpayer dollars, to salvage the project, once budgeted at $1.3 billion. If the mall opens in 2018, as the Ghermezians now say, it will have taken 15 years and $5 billion.”

    https://www.bloomberg.com/news/articles/2016-12-13/how-did-the-american-dream-mall-turn-into-a-nightmare

    Reply

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