Treasurer Says NJ to Make Partial Pension Payment in 2012
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School Aid May See Further Cuts Under Forthcoming Budget Proposal
July 29, 2010
New Jersey Treasurer Andrew Sidamon-Eristoff said July 28 that New Jersey will make a $512 million payment to its pension funds for teachers and government workers in fiscal 2012, its first payment in four years. Sidamon-Eristoff also spoke about the state's budget situation and shortfall projections for fiscal 2012 – claiming that the projections that the State faces a gap of more than $10 billion for the year that begins July 1, 2011, are "wildly inflated." (Source: Bloomberg). The gap “will not be anything near” $10 billion, the treasurer said.
The Treasurer made the statements during a segment on Bloomberg Television's "InBusiness."
But, according to Sidamon-Eristoff, the contribution would be made in tandem with proposals to trim employee retirement costs that Governor Chris Christie plans to present to lawmakers later this year. These would include reducing the rate at which current employees earn retirement credits or scaling back annual cost-of-living increases for retirees, he said.
Christie, a Republican who took office in January, skipped the state’s $3 billion pension contribution in his first budget to help close a record $10.7 billion deficit for the fiscal year that began July 1.
Pension Payment
The$10 billion projection was made in a July 12 memo to Democratic lawmakers by David Rosen, chief budget officer for the non-partisan Office of Legislative Services (OLS) (OLS Says Initial Estimates Show N.J. Facing $10.5B Budget Deficit Going Into Next Year, July 21, 2010). OLS calculated the $10.5 billion shortfall by counting all mandatory increases in state funding and assuming all programs now in the budget would be included next year. Rosen’s estimate also included the assumption that New Jersey will make a pension payment of $3.5 billion in fiscal 2012 to address a deficit that was calculated at $46 billion as of June 30, 2009.
Sidamon-Eristoff claimed July 28 that the OLS study “assumes that New Jersey will return to spending habits of 2008 and 2009, those spending commitments were unsustainable and out of control.”
Moreover, reducing the payment to $512 million, which Sidamon- Eristoff said is the minimum required under a new state law, would cut Rosen’s deficit projection by $3 billion, to $7.5 billion.
The payment into the pension system would be the first since fiscal 2008, when former Governor Jon Corzine made a $1 billion payment, state bond documents show.
School Aid
Rosen’s estimate also assumed the state would fully fund local aid programs for schools and cities, adding $2.6 billion in new spending to the 2012 budget. Those payments will not necessarily be forthcoming, the treasurer said.
Christie plans to “start with fiscal 2011 and determine what our long-term capacity is,” he said. “We have to bring our expenses into line with our capacity to meet them.”
Christie and the Democratic-led Legislature filled this year’s budget deficit largely with spending cuts. The plan cut aid for school districts by $1.3 billion and municipalities and scaled back property-tax rebates.
The current budget “represents a new baseline for New Jersey,” said Sidamon-Eristoff.