New Jersey’s public employee pension and benefit cost liabilities grew in FY 2018, leaving the state’s retirement system with the worst finances of all 50 states.
It’s hardly a new development; New Jersey’s pension and benefits liabilities have been the highest in the nation for the last few years. But fixing the problem is expensive and, without reforms, will require ever increasing appropriations from the general fund, which would likely impose new burdens on taxpayers and take resources away from important public priorities like infrastructure and public education.
Writing at NJ.com, Samantha Marcus reported that New Jersey had enough money to cover just 38.4% of what it needs to provide retirement benefits to some 800,000 current and future retired workers. Using S&P Global Ratings comparison of public pension liabilities, Marcus said the state public pension system had $81.5 billion in assets and $212.2 billion in liabilities, leaving a $130.7 billion funding gap.
“And while New Jersey’s pension fund has been gaining ground, according to S&P it is lagging behind most other states in improving its standing,” Marcus wrote.
Similarly, Truth in Accounting (TIA), a conservative think tank based in Chicago, estimated that closing New Jersey’s pension & benefit liability would cost each taxpayer more than $65,000, the highest taxpayer burden in the country.
TIA put New Jersey’s liabilities at a total of $235 billion, including bonds and other liabilities besides pensions and benefits, but only $26 billion in assets to pay them. That’s an unfunded liability of $209 billion. It puts the state’s pension and retiree healthcare liabilities at $99 billion and $92 billion respectively.
New Jersey’s finances are probably a little better today. Both reports use data from 2017, the year before Gov. Phil Murphy took office. The current governor increased state contributions to the pension fund in both his FY 2019 and FY 2020 state budgets and has negotiated cost-savings on health benefits.
How the state got into this predicament is no secret: Past governors from both parties underfunded the retirement system for decades.
NJBIA believes that the cost of public employee pension and retiree health benefits have simply grown beyond the ability of the state to pay for them as currently structured. The association supports many of the Path to Progress reforms under consideration in the Legislature that would change the retirement system for new public employees to lower the long-term costs to taxpayers.