New Jersey’s pension burden continues to worsen, according to Moody’s Investors Service.

New Jersey's latest accounting results showing a 22% yearly jump for the period ended on June 30, 2016, Moody's said in a report issued Thursday, with the Moody’s-adjusted net pension liability reaching $116 billion based on the state’s new data.

New Jersey’s June 2016 pension results will appear on its 2017 balance sheet. Moody's rates New Jersey debt at A3, the lowest credit rating of the 50 U.S. states with the exception of Illinois, due largely to pension liabilities.

The New Jersey capital building in Trenton where lawmakers have grappled with a mounting pension burden.
The New Jersey capital building in Trenton where lawmakers have grappled with a mounting pension burden. Bloomberg News

“Despite the state annually increasing contributions, New Jersey's unfunded pension obligations continue to grow faster than its revenues, a credit negative,” Moody’s analyst Thomas Aaron wrote in the report. “Continued growth in New Jersey's pension balance sheet burden signals rising long-term obligations, while the severe underfunded position of its pension plans and the state's weak contribution levels also drive an annual cash flow challenge.”

Aaron noted that the state's pension funds experienced poor investment performance with money-weighted returns falling 1.15% compared to the state's assumed return of 7.65%. He also wrote that while the state displayed “incremental improvement” with pension contributions, it is still far below funding needs.

All five of New Jersey's active pension funds projected insolvency under governmental accounting rules with depletion dates ranging from 2022 to 2050, according to Aaron.

The state's two largest pension funds, the Teachers' Pension and Annuity Fund and the Public Employees' Retirement System, projected asset depletion by 2029 and 2034, respectively.

New Jersey pension assets dipped by more than $8 billion for 2015 and 2016 combined after rising by nearly $7 billion in 2014, which Aaron said was driven by benefit payment outflows that far exceeded contributions.

The state is planning to annually increase contributions in one-tenth increments compared to its actuarial payment requirement, but Aaron emphasized that its ability to grow pension assets will “heavily depend on investment performance.”

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