CivicStory Panel: New Jersey Pension Fund Crisis Discussed
(Excerpted from April 9 edition of TAPinto Springfield)
SUMMIT, NJ – New Jersey’s Public Employee Pension Fund is severely underfunded based on projected demands of future pension payments and retiree health care costs, which appear to be growing at an unsustainable pace. That is the conclusion of a report issued February 11, 2016 by a bi-partisan group called the New Jersey Pension and Health Benefit Study Commission. Some felt the fund could run out of money in twelve years if actions are not taken to address the problem.
The report’s conclusions and some of its contents were discussed by a panel hosted by the nonprofit organization CivicStory last Monday night at Central Presbyterian Church in Summit. The evening’s event was entitled “NJ Pension & Health Benefits - Sowing Solutions.” The purpose of the event was to increase awareness of the issue, highlight some of the suggested solutions, and stimulate further dialogue because silence and lack of attention will only make the situation worse. Here are some of the major points:
1) If no actions are taken, the rising level of benefit costs could cause the fund to run out of money in a period as short as twelve years as “…the painful reality is that the benefits currently provided to employees are beyond the State’s means”.
2) This problem exists because “…elected officials overpromised and underfunded for two decades.”
3) Underfunding is often the path of least resistance and according to estimates; the pension fund is underfunded by at least $50 billion and possibly as much as $135 billion.
4) There will not be a bailout from the federal government.
5) Rising benefit costs will force cuts in other essential services such as education, infrastructure, and public policy.
The panel participants included Tom Byrne, Chair of the NJ State Investment Council; Andrew Sidamon-Eristoff, former State Treasurer; and Assemblywoman Nancy Munoz. The panel moderator was Lisa Allen, a resident of Summit.
The consensus of the panel was that the public employee pension fund financial condition is in crisis and that corrective steps need to be taken as soon as possible to avoid more punitive and costly steps. They echoed the first of ‘five hard truths’ from the 2016 study, “The State’s current public employee pension system is broken and needs to be fixed now to protect current retirees.” Underlying this view are concerns about the already large and increasing burden of public employee benefits, which the Commission felt must be kept below 15% of the State budget.
Above the 15% level, the Study concludes, “…the State will be in financial jeopardy and New Jersey’s credit ratings will continue to decline.” In fact, the State received another downgrade in March - this time from Moody’s taking the rating on general obligation bonds from A2 to A3.
The New Jersey Pension Fund has $72 billion of assets. Those assets are meant to help fund the annual retirement and post retirement health care benefits for 800,000 New Jersey public employees that are still working or retired. According to an analysis of future needs, the pension fund is underfunded by at least $50 billion and possibly, $135 billion. At its current level, “The State cannot afford to continue to provide employees with pension and health benefits far greater than those enjoyed in the private sector,” which is the second of five points in the Study.
Read Chip Dickson's complete article on TAPinto Springfield.