The List: Top Ten Payments into NJ’s Public-Worker Pension System

John Reitmeyer | October 7, 2019 | The List
The $3.2 billion pumped into the pension system under Gov. Phil Murphy in fiscal year 2019 tops the list, but the problems remain

Dire warnings about the health of New Jersey’s public-worker pension system have inspired a series of bipartisan fiscal policy changes in recent years, setting the stage for a string of record-setting state pension contributions.

In fact, the shift to a quarterly payment schedule and the adoption of a multiyear payment ramp-up plan have laid the groundwork for a more than doubling of the annual pension contribution, from $1.3 billion in fiscal year 2016 to $3.2 billion in fiscal year 2019.

Yet even with the state pumping nearly $9 billion total into its pension funds in just the last four fiscal years, there continues to be much more work to do.

Continuing a state pension trend

That’s because Gov. Phil Murphy and his predecessor, Chris Christie, also continued a trend previous governors from both political parties had started that made it normal practice to short the state’s full contribution. This was done even as they’ve stuck to the ramp-up schedule that Christie established in 2015. (The ramp-up plan calls for the annual pension contribution to be increased by 10% annually until the state is making a full actuarially required contribution, or ARC.)

For example, when Christie, a Republican, made a then-record state pension contribution of $2.5 billion during fiscal year 2018, that represented just 50% of the $5 billion that actuaries said the state should be paying to restore the pension funds to good health. And by the time Murphy, a Democrat, pays 100% of the ARC — which would occur in fiscal year 2023 under the current ramp-up schedule — the annual bill will have soared to more than $6.5 billion, according to state Department of Treasury records.

The depth of the state’s continuing pension woes was just illustrated in S&P Global Ratings’ latest 50-state review of public pension plans. Released late last month, the analysis by the major Wall Street credit-rating firm listed New Jersey’s pension system in last place, with a funded ratio of just 38.4%.

Still, that review analyzed data from FY2018, which came to a close more than a year ago. Since then, Murphy has pumped $3.2 billion into state pension funds during FY2019. And under Treasury’s latest calculations, which were included in documents prepared in advance of a recent state bond issue, the pension system’s funded ratio has moved up by two full percentage points, to 40.4%, as of the end of FY2019.

Some lawmakers call for hybrid retirement system

Despite the recent improvement, some lawmakers, including Senate President Steve Sweeney (D-Gloucester), have suggested it’s time to enact another round of cost-saving benefits changes. Among them is a proposal to shift many new public workers and those with less than five years of service into a new, hybrid retirement system that would offer some features similar to a 401(k).

So far, Murphy has resisted those calls for benefits reform and has instead suggested the state needs to stay the course on pension funding. But it remains to be seen whether he will be able to stick with Christie’s ramp-up schedule until FY2023. (The fiscal year 2020 budget calls for a $3.8 billion pension payment representing 70% of the ARC.) Murphy’s two immediate predecessors, Christie and Democrat Jon Corzine, also sought to aggressively beef up pension funding, only to be knocked off course by economic downturns.

The following is an updated list of the 10 largest state pension contributions, the governor who was in office at the time they were made, and the fiscal year in which the funding was deposited into the pension system. (All information is from state Department of Treasury budget records.)