Departing treasurer touts New Jersey's lottery funding for pensions

New Jersey’s Lottery Enterprise Contribution Act implemented last year is paying dividends in lowering the Garden State’s borrowing costs while also tackling pension liabilities, state treasury officials said.

The Department of Treasury released a report Monday claiming that the state has realized to date $47 million in gross debt service savings related to the legislation signed by Gov. Chris Christie that steers New Jersey Lottery revenues toward pension funding. Treasurer Ford M. Scudder said the state’s December sale of $170.5 million in New Jersey Health Care Facilities Financing Authority refunding bonds priced by Goldman Sachs generated $584.315 million in orders and generated $15 million in net present value savings.

“The strong response by investors to New Jersey’s most recent bond issuances is proof that New Jersey’s fiscal future is brighter today following LECA’s enactment,” said Scudder in a statement. “The bipartisan Lottery Enterprise Contribution Act is providing a stable stream of funding to the State’s pension system while lowering the State’s borrowing costs and thereby saving taxpayers’ hard-earned dollars.”

Scudder, who was appointed by Christie, will depart soon, as Christie's term in office ends this month. Democratic Gov.-elect Phil Murphy tapped Assemblywoman Liz Muoio, D-Pennington, as his treasurer pick on Dec. 13.

State officials also credited the lottery bill with yielding $32 million in savings during the New Jersey Economic Development Authority’s late September $350 million school facilities construction bond sale that ended up 10 times oversubscribed. The lottery legislation is estimated to put $37 billion into the state’s underfunded pension system over the next 30 years. New Jersey’s heavy pension burden has weighed heavily in 11 rating downgrades since Christie took office in 2010, bringing it the second lowest bond ratings among the 50 states. The Garden State's debt is rated A3 by Moody’s Investors Service, A-minus by S&P Global Ratings and A by Fitch Ratings and Kroll Bond Rating Agency.

Scudder said New Jersey has issued an average of $3.7 billion in refunding and new money debt per year. If the state continues at this pace for the next 25 years, the lottery legislation’s impact is expected to save roughly $191 million in net present value debt service costs for each year of borrowing. A five-year scenario at these bonding levels could lead to $960 million in net present value debt service costs, according to treasury officials.