It would cost each of New Jersey’s households about $12,000 to close the $37 billion pension gap, according to a 10-member panel named by Governor Chris Christie.
In an interim report, the panel said the state’s combined liabilities in pensions and retiree health-care costs are about $90 billion.
Elected officials widened the gap by skipping payments as they increased benefits, and employees who enrolled in “platinum” health plans exacerbated the situation, according to the report. New Jersey’s pension system is the fourth-worst-funded in the U.S., the report found.
“The unfunded liability of the state plans reflects a long-term disconnect between the willingness to provide employees with benefits and the willingness to pay for them,” the report said.
The 25 largest U.S. public pensions face about $2 trillion in unfunded liabilities, showing that investment returns can’t keep up with ballooning obligations, Moody’s Investors Service said today. The 18-month recession that ended in June 2009 wiped out asset values and forced cuts to contributions. Now, liabilities are crowding out spending for services, roads and schools, Moody’s said.
In New Jersey, pensions and health costs represent 10 percent of the fiscal 2014 budget. It would have taken $6.5 billion, or 20 percent of the budget, to fully fund them, according to a summary of the report.
Healthcare costs have also risen as the system discourages employees from selecting cheaper options, the report said. Eighty percent are in plans that would be considered the most generous under the federal Affordable Care Act.
During his first term, Christie signed legislation requiring workers to pay more for pensions and health benefits. He also froze cost-of-living raises and phased in full annual payments into the system.
The governor abandoned the latter component when confronted with a deficit that may top $2.75 billion over the current fiscal year and the last one. A state judge in June approved his plan to reduce last year’s payment and has yet to rule on whether the governor can do so this year.
Christie created the panel last month and it is scheduled to released its recommendations for overhauling the system in 30 days.
The group includes Thomas J. Healey, a former assistant secretary of the U.S. Treasury; Raymond Chambers, a philanthropist and United Nations special envoy and chairman of the New Jersey Performing Arts Center in Newark; Tom Byrne, founder of Byrne Asset Management in Princeton and vice chairman of the state’s pension board; and Ethan Kra, who runs an actuarial service specializing in financing strategies.
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