New Jersey Gov. Chris Christie signed legislation that requires the Garden State to begin quarterly pension payments.
The new law requires New Jersey governors to make pension payments by Sept. 30, Dec. 31, March 31 and June 30 rather than the end of the fiscal year in June. Under the bill, which was unanimously approved by the state Senate and Assembly last month, the pension fund will reimburse the state treasury department if borrowing is needed to make payments. Christie signed the legislation Thursday.
State Senate President Steve Sweeney, D-Gloucester, has argued that the quarterly pension plan would position New Jersey to make full actuarially required pension payments by 2022 and cut the state's unfunded liability by a projected $4.9 billion over 30 years.
"This will provide greater stability to state finances, produce ongoing savings for the taxpayers and help make the pension funds more secure," said Sweeney in a statement. "A scheduled timetable for making the already-required payments will help correct the costly and irresponsible mistakes of the past when contributions were delayed, deferred or ignored altogether."
The new law revives elements of a proposed constitutional amendment Sweeney unsuccessfully sought to place on this November's ballot. Christie previously opposed the concept, saying in his State of the State speech last January that it would cost taxpayers $3 billion. The state entered 2016 with $40 billion in pension liabilities, according to Moody's Investors Service.
"Quarterly pension payments by themselves do not solve the funding problems that have long plagued the pension system but it is an important step in cutting the unfunded liability and reducing the amount of money needed in the future," said Sweeney. "The past practice of waiting until the end of the fiscal year to make the contributions was a lost opportunity for greater investment income and an open invitation for the state to ignore its commitments."
New Jersey has experienced 10 credit downgrades since Christie assumed office in January 2010 and now has the second lowest rating of the 50 U.S. states, ahead of only Illinois. Underfunded pensions have weighed heavily on the downgrades, the most recent a one notch drop by S&P Global Ratings on Nov. 14 to A-minus. The state's general obligation bonds are rated A2 by Moody's, A by Fitch Ratings and A by Kroll Bond Rating Agency.