NEWARK, N.J. — While New Jersey overhauled its retirement plans and health care options this year, much work is still undone, the state’s treasurer said Friday.
“Victory can’t be a zero-sum game or permanent,” Andrew Sidamon-Eristoff said at a pension forum at Rutgers University, Newark. “We’re not alone. This is a national if not an international issue.”
Sidamon-Eristoff, a former New York state commissioner of taxation and finance and New York City finance commissioner and City Council member, designed Gov. Chris Christie’s pension and health care changes. Legislation Christie signed in late June makes employees contribute to health care premiums in increments that are adjusted by salary range and ramped up over time.
New Jersey’s pension funding ratio in early August was 56.4%, well below the 80% level many analysts consider adequate, according to data provided by Janney Capital Markets. That low ratio, among other factors, prompted Fitch Ratings that month to lower its rating for the state’s general obligation bonds to AA-minus from AA. Moody’s Investors Service and Standard & Poor’s rate New Jersey Aa3 and AA-minus, respectively.
“A pension funding level this low for this long at this point in time is disconcerting, and our ratings reflect our concern about the pressures facing the state,” Richard Raphael, a group manager of U.S. public finance for Fitch, said at Friday’s forum, which was co-sponsored by the Rutgers School of Public Affairs and Administration and the Hall Institute for Public Policy.
New Jersey’s pension problem is still “one of the worst,” said Hall Institute executive director Michael Riccards. “The new changes are more proactive. The question is what do we do now.”
States dug their own hole long before the recession of 2008 and 2009 took hold, according to Susan Urahn, managing director for the Pew Center for the States. Pew’s study in April warned that funding shortfalls, which had widened nationally to $1.26 trillion in fiscal 2009, could bankrupt state and local governments.
“New Jersey faces some very serious challenges,” she said.
Urahn cited New Jersey as a state in trouble because it fell behind in pension contributions. While New York’s pension liability is nearly $147 billion and New Jersey’s is $136 billion, New York continued to pay its annual bill in full. Now its required annual contribution is $1.6 billion less than New Jersey’s.
“This makes a very significant difference when it comes to tradeoffs with other kinds of funding,” she said.
But Urahn said the worsening problem of pension liability has effectively served as a wake-up call. Recognizing the problem was the first step, she said, adding: “States need to understand defined benefit plans, and other options available.”
