Seeking to put New Jersey's pension contributions back on track, State Senate President Steve Sweeney is proposing a constitutional amendment that would require payments on a quarterly basis.
Sweeney, D-Gloucester, introduced legislation on Dec. 7 that would place a constitutional amendment on the ballot in 2016 that would implement pension payments each quarter rather than the last day of a fiscal year. The Garden State's top Democratic lawmaker said the move would put New Jersey on pace to make full actuarially required pension payments by 2022 and save taxpayers an estimated $8.5 billion. It would also cut the unfunded liability by a projected $4.9 billion over 30 years.
"Each year that we fail to make the required pension payments, the crisis gets worse and the future cost to taxpayers grows," said Senator Sweeney. "This constitutional amendment protects taxpayers by requiring that pension payments be made on a quarterly basis to maximize investment earnings and to protect public employees by guaranteeing the pension benefits they earned."
Sweeney's proposal comes in the wake of Gov. Chris Christie slashing pension payments during the last three budgets; he vetoed $1.57 billion for the 2015 fiscal year. The New Jersey Supreme Court ruled 5-2 in June that a section of Christie's 2011 pension reform law that called for ramp-up of the state's pension system over a seven-year period was not legally enforceable and allowed the veto to remain in place.
"We cannot issue a blank check with no way to pay for these exorbitant costs or ignore the underlying need to reform a broken system," said Christie spokesman Brian Murray in a statement responding to Sweeney's legislation. "The pension system is in desperate need of widespread reform that constitutionally required pension payments alone will not solve."
Sweeney said the legislation is needed to help fix a $40 billion unfunded liability in the pension system for teachers and state employees that has been created within the past decade. He emphasized that the pension underfunding has led to credit downgrades and the constitutional amendment would "help restore fiscal stability to the state's finances." The amendment would require the state make 60% of the actuarially-required pension payment in Fiscal Year 2018 and ramp up to full funding by 2022.
New Jersey ranked the lowest among states making required pension payments in 2013 paying only 28% of its obligated contribution, according to Loop Capital Markets. The state also has the second lowest credit rating ahead of only Illinois at A2 by Moody's Investors Service and A by Fitch Ratings and Standard & Poor's.
