NJPSA Director of Retirement Services, Robert Murphy, provided analysis on the recent report released by the New Jersey Pension and Health Benefit Study Commission, A Roadmap to Resolution: Report of the New Jersey Pension and Health Benefit Study. The report was released February 24 in conjunction with the Governor's Address.
The report clearly indicates that the primary problem with the Pension system is simple. More money needs to be put into the system if it is going to be able to meet the needs of the members of the pension system when they are ready to retire. In 2011 the reforms that had been agreed to by the legislature and the Governor reduced member benefits, increased member contributions and this increase was to be matched by a seven year phase in of the states statutorily required pension payment. After the first two years of the phase in, the Governor failed to make the full, statutorily required payment in years 3 and 4. Even this year the announced payment of $1.3 Billion (the 5th year of the seven year phase in) is approximately $2 Billion short of the Statutorily Required Contribution and another $2 Billion short of the Actuarial Required Contribution (ARC – Approx $ 5Billion). The $4.187 Billion Governor Christie has/will contribute during his tenure to the State Pension Fund is approximately $15 Billion short of the Actuarial Required Contribution.
NJ Pension & Health Benefit Study Commission Recommendations (Summary)
- Freeze the existing pension plans; benefits earned to date would not be affected, but taxpayers cannot afford additional benefits to be earned under the existing plans
- Align future public employee retirement benefits with private-sector levels; this is the sensible thing to do on its own merits and the savings will make funding more secure for employees and less painful to taxpayers
- Also align public employee health benefits with private-sector levels; get ahead of the curve in controlling these staggering costs before they crowd out retirement benefits from State and local budgets
- Fairly realign State and local responsibility for new and sustainable pension and health benefits; this will produce the best result from the perspective of employees and the State’s taxpayers as a whole
- Lock in fixed and certain pension funding with a constitutional amendment; this will protect employees and retirees from the vagaries of politics and the annual budget process, improve the State’s financial condition, and make clear to all that the people of New Jersey have taken ownership of the problem and the solution
- Transfer the assets, liabilities and risks of the existing pension and new retirement plans to employee entities willing and able to assume this obligation; allow those who receive the benefits to have the power and assume the risk of managing the plans to ensure that the available funds are sufficient to pay for the provided benefits.
The Report calls for the next step to be the Formulation of an Implementation Task Force to develop an action plan to implement changes. Change will require statutory and constitutional (possibly) provisions which will take time.
For now, we are still in a holding pattern, but rest assured the NJPSA will work to make the voices of our members heard as we move forward.
Pension Contribution State History
(From Governor’s Budget Publication)
Defined Benefit (In Thousands)
Pension
Governor Fiscal Year Contribution (a)
Whitman 1995 $ 193,342
Whitman 1996 227,916
Whitman 1997 (b) 104,616
Whitman 1998 90,194
Whitman 1999 286,203
Whitman 2000 61,663
Whitman 2001 –
Cumulative Totals $ 963,934
DiFrancesco 2002 $ 563
Cumulative Totals $ 563
McGreevey 2003 $ 11,181
McGreevey 2004 (c) 27,520
McGreevey 2005 62,723
Cumulative Totals $ 101,424
Codey 2006 $ 165,026
Cumulative Totals $ 165,026
Corzine 2007 $ 1,023,192
Corzine 2008 1,046,136
Corzine 2009 106,268
Corzine 2010 –
Cumulative Totals $ 2,175,596
Christie 2011 $ –
Christie 2012 484,484
Christie 2013 1,029,296
Christie 2014 (d) 695,705
Christie 2015 (d) 680,634
Christie 2016 (e) 1,297,737
Cumulative Totals $ 4,187,856
(a) Pension contribution amounts from FY 1995 to FY 2005 include funding for non-contributory life insurance; life insurance costs are not included thereafter.
(b) As of June 30, 1997, $2.75 billion in proceeds from the issuance of Pension Obligation Bonds was contributed to the State funded pension systems. Additionally, corresponding legislation enacted authorized the use of excess assets in the systems to fund any contribution requirements going forward.
(c) Beginning in FY 2004, excess assets were exhausted in most pension funds and the State was required to resume making full pension contributions; however, due to budgetary constraints, the State began "phasing-in" required contributions. In addition, in PERS and TPAF, funds accumulated in the Benefit Enhancement Fund were used to cover the phased-in contributions for these two pension funds in FY 2004, FY 2005 and FY 2006.
(d) FY 2014 and FY 2015 fully fund the actuarial employer normal cost, which is the present value of benefits earned by active employees during the current year.
(e) FY 2016 funds 3/10ths of the Actuarially Recommended Contribution. 37