The New Jersey Treasury Department offered mixed news about the state's pension system.
On the one hand, the department reported that the funded ratio of the state's pension system fell to 56.7% at July 1, 2012 from 60.8% at July 1, 2011. New Jersey's fiscal year begins July 1. The total market value of the pension system fell to $38.3 billion from $40.8 billion.
On the other hand, the funded ratio would have been substantially worse had state government not taken steps in 2011 to address the pension problem, said Treasury spokesman Bill Quinn.
In 2011, Gov. Chris Christie and the legislature took steps to roll back pension benefits, including suspending cost-of-living increases for retirees and requiring increased employee contributions. These changes immediately increased the pension's funded ratio to 65.2% from 56.4%, according to the State Budget Crisis Task Force report on New Jersey, co-chaired by former New York State Lt. Gov. Richard Ravitch and former Federal Reserve Chairman Paul Volcker.
In addition, New Jersey committed to ramping up its contribution to the pension system over seven years. The government now plans to contribute 100% of the actuarially required contribution to its pension plan in fiscal 2019.
The state payments in the first two of the seven years have been according to its seven-year commitment, Quinn said. In the first year, the state contributed about $500 million and in the second year it contributed about $1 billion. In his proposed budget, Christie proposes contributing slightly less than $1.7 billion in the coming fiscal year. To contribute 100% of the actuarially required contribution to its pension plan, the state would have to contribute in the ballpark of $3.6 billion. By comparison, the Christie proposes an overall budget of $32.9 billion in fiscal 2014.
The state's pension system had an investment return of 2.52% in fiscal year 2012, compare with its assumed rate of 7.95%.
However, New Jersey's pension system outperformed the California employees' pension plan in the period that had an investment return of 1% and the Harvard University endowment that had a return of negative .05%, according to Quinn. The pension plan also had an investment return of 13.32% in calendar 2012, Quinn said.