New Jersey Gov. Chris Christie urged his successor to reduce health benefits for public employees as a way to boost the state’s underfunded pension system.
Christie released Wednesday the fourth and final report from the New Jersey Pension and Health Benefit Study Commission, which recommends using health benefit savings to bolster pension funding among other sweeping changes. The Republican governor urged Gov.-elect Phil Murphy, a Democrat, to act on recommendations from the bipartisan panel, appointed by Christie in 2014, as a way of preventing public employee benefit costs from interfering with other fiscal concerns in in the state.
“The Commission’s report makes clear the commitment to pursue aggressive reforms must continue to prevent public employee benefits costs from overtaking the State’s other budget priorities, including education, healthcare, and public safety,” said Christie in a statement. “The risk to these basic government priorities is great if more cost saving measures are not adopted with urgency.”
The commission noted in the report that despite “unprecedented levels of funding” and the dedication of state lottery revenues to pensions over the next 30 years, unfunded liabilities have increased $10 billion by Governmental Accounting Standards Board standards since the panel’s founding three years ago to $90 billion. The panel warned that without overhauls, pension and health costs will consume 26% of the state’s budget by 2023, and backs keeping these benefits to around 15% of annual spending plans.
“The state can’t do the things it needs to do if it has to spend 26% of the budget on benefits,” said commission member Tom Byrne. “We have to find a way to bring costs down, but do so in a way that ensures employees and retirees receive all of the pension benefits earned to date and a fair package of benefits going forward.”
Under the commission’s reform recommendations, public workers would receive health benefits aligned with those in the private sector at a gold level of the Affordable Care Act. This approach would have saved the state $1.4 billion in 2016, according to the report.
Murphy, a former Goldman Sachs executive and U.S. ambassador to Germany, called for boosting pension funding during the campaign without giving specifics on how to fund the increase. He also proposed divesting from private equity and hedge funds as a way to up pension investment returns.
“Governor-elect Murphy is acutely aware of these issues, having chaired the first state commission on pensions and benefits more than a decade ago,” said Murphy spokesman Dan Brian. “He remains committed to the state living up to its obligations as a first and necessary step and working in good faith with all sides on a sustainable path forward."
New Jersey’s pension burden has weighed heavily on the state’s credit conditions is a major factor in the 11 bond rating downgrades over Christie’s two terms. The Garden State’s debt is rated A3 by Moody’s Investors Service, A-minus by S&P Global Ratings and A by both Fitch Ratings and Kroll Bond Rating Agency. It had the worst pension funding level of the 50 U.S. states in 2015 at 37%, according to a recent report from Pew Charitable Trusts.