New Jersey unfunded pension liability soars

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New Jersey is finding itself in even a more precarious position than previously thought regarding its unfunded pension liability.

A report released on Thursday by the state Department of Treasury showed that the unfunded liability grew by over $8 billion in the most recent fiscal year ended June 2010. The total deficit now amounts to $53.9 billion. Besides the unfunded pension liability, the state has an additional $67 billion unfunded balance in healthcare benefits for current and future retired employees.

At June 30, the pension system was about 62 percent funded, down from 66 percent one year earlier.  The statewide system covers about 728,000 working and retired state, county and municipal employees.

Gov. Chris Christie skipped a $3.1 billion payment to the fund this year, saying that he will continue to pass on making contributions until the entire system is overhauled.  The last contribution made to the system was in fiscal 2008, when then-governor Jon Corzine paid $1 billion.

A statement released by Treasury Spokesman Andy Pratt said “If all the required contributions to the pension funds had been made over the last decade, New Jersey would still not have enough money to pay all the benefits state and local governments have promised to public employees.”

Christie has proposed an overhaul of the system that union leaders and workers will find tough to accept. If adopted, his plan will cut the deficit to just $14 billion by 2026. On its present course, the system’s deficit would be about $125 billion by then.

The plan suggested by Christie includes freezing cost-of-living adjustments, rolling back a 9 percent benefit increase that was promised for 2011 and increasing the retirement age to 65. Employees would be required to pay 8.5 percent of their salaries into the system, up from 5.5 percent, and shoulder a much larger portion of their healthcare costs.

An October report from Chicago-based Loop Capital Markets said that 20 states, including New Jersey, California and Illinois, underfunded or skipped pension payments between 2007 and 2009. The report said that 91 of 145 pension systems it reviewed had less than the 80 percent of future benefits funded, that actuaries recommend.

Critics say the main issue in the unfunded systems is that lawmakers repeatedly agreed to union demands for ever-increasing retirement benefits, relying on unreasonable estimates of investment returns, and not identifying new sources of funds to pay for the pension payments and health benefits.

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