New NJ Pension Laws with Another Gimmick?

Among the scores of new laws up for a vote this Thursday in the New Jersey legislature (all of them are listed at the bottom of this blog) are these relating to pensions:

  • S5 PFRS-transfers mgmt. to Bd. of Trustees
  • S1208 Pension fds.-proh. cert. investments
  • S1966 PFRS, SPRS-incr. death benf, active mem
  • S2621 Lottery-adjust rate dedicated to pension

It is that last one (S2621) that is intriguing in that it looks like a budget gimmick. This language was added to the law that transferred money from lottery proceeds to the pension:

(d) notwithstanding subparagraph (c) above, the State Lottery Commission, in order to maximize and increase total contributions to the investment account of Common Pension Fund L under that subparagraph (c) and consistent with lottery industry best practices shall allocate up to an additional 3 percent to the payment of prizes to the holders of winning tickets or shares pursuant to subparagraph (a) above, in which case no less than 27 percent of the proceeds accruing from the sale of lottery tickets or shares shall be dedicated to the investment account under that subparagraph (c). In the event that total revenues accruing from the sale of lottery tickets or shares in the first full fiscal year after the effective date of P.L.,c.(C.) (pending before the Legislature as this bill) fall below the total reserves of the last full fiscal year prior to that effective date, this subparagraph (d) shall automatically be null and void. In the event that total revenues accruing from the sale of lottery tickets or shares in that first full fiscal year rise above the total revenues of the last full fiscal year prior to enactment, this subparagraph (d) shall remain in effect during and past the term of the lottery contribution made pursuant to section 4 of P.L.2017, 4c.98 (C.5:9-22.8).
The reasoning behind this lottery-to-pension scheme was to make the plan funded ratio look better to the numerically challenged but apparently also to make it difficult to balance the new governor’s first budget. Samantha Marcus at nj.com explains it well here:

What we call the state budget is really two pools of money. When state leaders created the income tax back in the 1970s, they promised that every nickel would be used to help pay for your public schools and everything else that constitutes local spending and giving you relief on property taxes. And they did it by changing the state Constitution to spend the income tax only on property tax relief, like aid to schools and towns, and property tax rebates. This pot of cash — called the Property Tax Relief Fund — can’t be used to pay for the other parts of state government, such as the salaries and spending of the state departments. That spending comes from the other pot of cash, which is called the General Fund. It’s funded by most other sources of state revenue, like the sales tax, Corporation Business Tax, cigarette tax and realty transfer fees. The General Fund accounts for 55 percent of the budget. For most years, this setup worked pretty well. But no more.  You see, the income tax is going strong as the treasurer expects it will bring in about $15.2 billion this fiscal year. That means the Property Tax Relief Fund is flourishing. The same can’t be said of the General Fund, which pays for state government operations. Most of the taxes that keep it going aren’t bringing in enough money. Spending here is growing faster than tax revenue.  And remember, the state is not allowed to use those income tax dollars to fill this pot of cash.

Presumably (and I am guessing here) under Chris Christie this billion dollars in lottery revenue went into the General Fund (GF) while the pension contribution came from the Property Tax Relief Fund (PTRF). For the FY18 budget that would mean $2.5 billion from the PTRF and nothing from the GF. For FY19 with the pension contribution at $3.2 billion it would be $2.2 billion from the PRTF and $1 billion (the lottery money) from the GF.

Back to S2621. Is that 3% drop in what is going into the pension really going to increase prize awards or is it simply a $100 million reduction in GF money going into the pension leaving the PTRF to pick up the difference?

Senate
    Thursday, June 21, 2018 – 2:00 PM
    Senate Chambers
Voting Session:  

Bill Abstract   Current Status LDOA  

S2 Sch. dist.-concerns finan. SBA 5/31/2018
S5 PFRS-transfers mgmt. to Bd. of Trustees 2RSG 6/7/2018
S64 Investment mgmt. svc.-concerns taxation SBA 1/9/2018
S122 Garden St. Film & Digital Media Jobs Act 2RSG 6/7/2018
S276 Low-income person-reduce sewerage rates SBA 4/5/2018
S402 Bd. of chosen freeholders-rename 2RS 4/12/2018
S408 Child sexual abuse-sch dist estab policy 2RS 6/14/2018
S410 Baked goods sold at farm markets-concern 2RS 2/22/2018
S489 Work First NJ-incr. benf. amount SBA 3/13/2018
S490 Work First NJ prog.-repeals family cap SBA 3/13/2018
S641 Child sexual abuse-report to police 2RS 6/14/2018
S709 Resid. Mortgage Lending Act-revises SBA 6/18/2018
S749 Transient accommodation fee-impose tax SCM 1/9/2018
S858 Teacher-concerns instructional cert. 2RS 6/7/2018
S865 Bldg./hwy. infrastructure proj.-concerns 2RS 6/11/2018
S875 Sexual Assault Victim’s Bill of Rights 2RS 6/11/2018
S879 Haz. waste fac., major-amends definition 2RSG 6/7/2018
S976 Revised St. Med. Examiner Act 2RSG 6/7/2018
S1073 Stormwater util.-auth. mun, co. estab. SBA 5/10/2018
S1074 Public’s rights-prot, pub trust doctrine SBA 2/5/2018
S1129 Child abuse record checks-concerns 2RS 6/14/2018
S1202 Crime victims-expands rights 2RS 5/31/2018
S1317 Disab. leave, temp.-revise law SBA 6/11/2018
S1735 Lactation room availbilty-cert. pub. fac 2RS 6/11/2018
S1841 Tax amnesty, 45 day period-estab SBA 2/8/2018
S1958 Alco bev-concern full-yr consumption lic 2RS 4/5/2018
S1966 PFRS, SPRS-incr. death benf, active memb 2RS 6/11/2018
S1968 Econ Redevel, Growth-concerns tax cred 2RSG 6/7/2018
S2051 Retailers, cert.-concerns sales tax SBA 2/26/2018
S2129 Energy asst. prog-auth grants SBA 6/14/2018
S2167 Vessel regis.-donate, Greenwood Lake Fd SBA 5/21/2018
S2169 Non-driv photo id-apply through co clerk 2RS 6/11/2018
S2303 High labor-demand industry-degree prog. SBA 5/14/2018
S2307 Garden St Growth Zone-creates AC Airport SBA 5/14/2018
S2317 Civic Info. Consortium-estab. 2RS 6/18/2018
S2489 Child abuse hotline-sch. posting req. 2RS 6/14/2018
S2532 Correctional police off.-concerns SBA 5/14/2018
S2533 Victim-Witness Advocacy Office-concerns SBA 5/14/2018
S2549 HVACR lic law-revise ownership standards 2RS 6/11/2018
S2550 HVACR contractors-clarify training req. 2RS 6/11/2018
S2600 Carryout bags-estab. and dedicate fees SEN 5/21/2018
S2621 Lottery-adjust rate dedicated to pension SSG 5/31/2018
S2645 Infra. Bank enabling act-makes changes 2RS 6/11/2018
S2646 Env. infra. proj., FY2019-approp. fds. 2RS 6/11/2018
S2647 Env. infra. proj.-expend cert. sums 2RS 6/11/2018
S2657 Medicaid reimb.-concerns SHH 6/4/2018
S2662 Heating oil tanks-concerns liab. SBA 6/11/2018
S2707 Children-prev. sexual abuse task force 2RS 6/14/2018
S2709 Students-concerns sexual assault 2RS 6/14/2018
S2711 Child abuse training-teaching certif. 2RS 6/14/2018
S2712 Child abuse training arbitrator-mandates 2RS 6/14/2018
S2713 Teacher misconduct-report to Leg. 2RS 6/14/2018
S2714 Sch staff, fail to report abuse-concerns 2RS 6/14/2018
S2715 Sch surveilance-devel protocol footage 2RS 6/14/2018
S2723 STEM Loan Redemption Prog.-estab. SBA 6/14/2018
S2724 Surplus prop, Woodbridge Twp-St. sell SBA 6/18/2018
S2728 Recreation, Blue Acre-dedicate CBT rev. 2RS 6/18/2018
S2729 Capital/Park devel proj-dedicate CBT rev 2RS 6/18/2018
S2730 Complete Court Comm.-estab. SBA 6/14/2018
S2731 Nicotine, liquid-impose tax SBA 6/14/2018
S2771 Medicare-concerns elig. SBA 6/18/2018
SCR122 Infra. Bank-approves FY 2019 2RS 6/11/2018
SJR14 Hispanic Journalist Pride Day-Sept 20th 2RS 5/14/2018
SJR74 Sexual assault-create study commission 2RS 5/14/2018
SJR80 Gateway Prog.-prov. funding to complete 2RS 6/11/2018
SJR85 World Refugee Day-desig. June 20th 2RS 6/11/2018
SR19 Domestic Viol. Tech. Task Force 2RS 6/18/2018
SR20 Co. Domestic Viol. Working Groups-memb. 2RS 6/18/2018
SR21 Atty, matrimonial-domestic viol training 2RS 6/18/2018
SR77 Trump-oppose transgender from mil. svc. 2RS 5/14/2018
 Assembly
    Thursday, June 21, 2018 – 1:00 PM
    Assembly Chambers
Voting Session:  

Bill Abstract   Current Status LDOA  

A2 Sch. dist.-concerns finan. ABU 6/14/2018
A591 Cash-paying consumers-proh. discrim. 2RA 6/11/2018
A781 Animal cruelty viol.-recover costs 2RA 5/17/2018
A997 Pension fds.-proh. cert. investments ABU 6/14/2018
A1186 Mail-in ballots-reg voters, receive auto ABU 6/14/2018
A1299 Bldg./hwy. infrastructure proj.-concerns 2RA 5/24/2018
A1429 Dry drowning-mun. req. to prov. info. 2RA 6/14/2018
A1526 Freelance workers-concerns pymt. 2RA 5/17/2018
A1753 Hotel occupancy fee-impose sales tax ABU 6/18/2018
A1980 TDI-estab. partial return to work prog. 2RA 5/17/2018
A2001 Transfer co coll emp-SEHBP to SHBP ABU 6/18/2018
A2169 Controlled dangerous substance-crim cert 2RA 6/7/2018
A2401 Delta Sigma Theta lic. plate-Auth ABU 6/14/2018
A2426 Reliability Prepared Storm Response Act 2RA 6/14/2018
A2601 U text U driv U pay sticker-driv texting 2RA 6/14/2018
A2697 Lead svc line inventories-req. certain ABU 6/14/2018
A2726 Real estate lic., cert.-concerns 2RA 6/11/2018
A2732 Wildlife control-non-lethal methods 2RA 2/12/2018
A2747 Continuing care communities-concerns 2RA 6/7/2018
A2762 Disab. leave, temp.-revise law ABU 6/14/2018
A2763 Temp. disab. insur. report-req addl data 2RA 6/14/2018
A2764 TDI, family leave-design a webinar ABU 6/14/2018
A2779 Connection fees-auth. loc. gov. util. 2RA 6/14/2018
A3063 Postage for goods, Armed Forces-tax cred 2RA 6/14/2018
A3084 Income tax agreement reciprocal-concerns ABU 2/8/2018
A3112 Loc. Unit Electronic Procurement Act 2RA 5/10/2018
A3121 Brewing training prog.-concerns 2RA 6/7/2018
A3373 Soil, drinking water-reduce exposure ABU 6/14/2018
A3438 Tax amnesty, 45 day period-estab ABU 3/5/2018
A3576 Antwan’s Law-concern reduced speed limit 2RA 6/14/2018
A3627 Homestead prop. tax reimb.-concerns ABU 6/18/2018
A3676 Garden St Growth Zone-creates AC Airport ABU 6/14/2018
A3861 Unemp. comp. and labor disputes-concerns ABU 6/14/2018
A3902 Securing Our Children’s Future Bond Act AED 5/7/2018
A3904 Tommy’s Law-incidents w/pub. transp. ABU 6/14/2018
A3975 Family leave, temp. disab.-revise law ABU 6/14/2018
A4061 Transp. svcs., cert.-impose fee ABU 6/18/2018
A4065 Surplus prop, Woodbridge Twp-St. sell ABU 6/14/2018
A4073 Jerry Green Memor. Hwy-desig. Rt.27 2RA 6/14/2018
A4101 SNAP-outreach plan to inform students 2RA 6/14/2018
A4118 TDI and family temp. disab.-concerns ABU 6/14/2018
A4119 Lottery-adjust rate dedicated to pension ABU 6/18/2018
A4121 Lead test results-estab online reporting ABU 6/14/2018
A4132 Liquid nicotine-impose tax ABU 6/11/2018
A4133 Bus. filing statutes-modernizes ABU 6/11/2018
A4163 Emp payroll tax-concerns ABU 6/18/2018
A4169 Env. infra. proj.-expend cert. sums ABU 6/14/2018
A4170 Env. infra. proj., FY2019-approp. fds. ABU 6/14/2018
A4173 Infra. Bank enabling act-makes changes ABU 6/14/2018
A4176 Pub. officials, elected-concerns benf. ABU 6/18/2018
A4191 Swimming pool-comply w/regulations AHE 6/18/2018
A4194 US 250th anniv.-estab. commem. prog. ABU 6/18/2018
A4210 Recreation, Blue Acre-dedicate CBT rev. ABU 6/14/2018
A4211 Capital/Park devel proj-dedicate CBT rev ABU 6/14/2018
ACR178 Infra. Bank-approves FY 2019 ABU 6/14/2018
AJR113 Dairy Week-desig. last full week of June 2RA 6/14/2018
AJR114 Buy Local Week-desig. last full wk, July 2RA 4/5/2018
AJR137 Smart Irrigation Mo.-desig. July 2RA 6/14/2018
AR29 Drone Test Site Prog-urge Congress to fd 2RA 1/9/2018
AR52 Stafford Act-Cong. amend. 2RA 6/14/2018
AR76 Gas supply-ensure stability in emerg. 2RA 6/14/2018
AR156 Dairy product-incr export. other nations 2RA 6/14/2018
AR160 Jewish people-historical connection 2RA 6/14/2018
S430 Real estate lic., cert.-concerns 2RA 6/11/2018
S647 Mail-in ballots-reg voters, receive auto ABU 6/14/2018
S844 TDI-estab. partial return to work prog. 2RA 5/17/2018
S878 Income tax agreement reciprocal-concerns ABU 3/5/2018
S1208 Pension fds.-proh. cert. investments ABU 6/14/2018
S1247 Connection fees-auth. loc. gov. util. 2RA 6/14/2018
S1484 Antwan’s Law-concern reduced speed limit 2RA 6/14/2018
S2455 Transfer co coll emp-SEHBP to SHBP ABU 6/18/2018

2 responses to this post.

  1. Posted by boscoe on June 19, 2018 at 9:13 pm

    Wow. My initial read (OK, my second or third read) is that this bill is not a complex budget adjustment of the nature described above, but is part of a wished-for lottery prize booster. The statement on the bill indicates that the Lottery Commission wants to increase prizes and odds of winning, while generating greater net income at the same time through increased play. To “hold harmless” the current requirement that 30% of the net lottery income be turned over to the state budget deposit into Common Pension Fund L, someone has apparently made a calculation that 27% of some larger net amount number is at least the equivalent of 30% of the current anticipated lottery receipts. The bill seems to include a fail-safe mechanism that if their calculations prove wrong and the 27% ends up transferring less in the first year than the current 30%, the provision won’t go into effect. Interesting twist though: if the opposite happens; that is, if 27% of the expanded lottery revenue base is greater than the current 30% of the existing lottery base in the first year, then the future transfer will be 27% each year, notwithstanding a future leveling or even a drop in net lottery proceeds. Which of course could be problematical for the pension systems.

    I reserve the right to change my mind about this. 🙂

    Reply

    • Not sure if the state honestly keeps the books on this lottery money but if it were about sweetening prizes then my question would be why isn’t the boost being advertised (assuming it’s not). And would a slight increase in prizes really make a difference to these recreational players who obviously are not calculating odds (or else they wouldn’t be playing)?

      They can make up whatever reason will fly but as for the result all I see is the pension getting about $100 million less coming out of the GF.

      Reply

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