Is New Jersey Exacerbating Pension ‘Crisis’ by Shorting the System?
The governor put New Jersey’s pension obligations front and center in his budget address, sounding the alarm about a “crisis” that the pension (and health benefit and debt) payments are creating for the state’s fiscal health. But close budget observers may have noticed an odd tidbit: the proposed budget includes only $2.25 billion in pension payments, not the $2.4 billion announced earlier.
An obscure new report may explain why.
The report on the Teachers Pension and Annuity Fund of New Jersey (TPAF) says the fund plans to change how the increased employee contributions enacted in 2011 are recognized so that the state’s contribution is ultimately reduced along with overall payments into the pension funds (see page 34).
Since this change is being proposed for the TPAF, we assume it will also be used for the other state and local pension systems. Still, important questions remain:
• Will this change also reduce the administration’s pension payment to be made at the end of June for this budget year?
• Is the governor interested in making other changes to free up funds for him to spend on other programs over the next four years?
• Why is the administration calling for additional changes to pensions at the same time it’s actually reducing the amount of money going into the system?