New Jersey and Pennsylvania underfunded their public pension systems much more than other states between 2001 to 2013, according to a
New Jersey paid an average of 38% of its annual actuarially required contribution during those years, with Pennsylvania at 41.2%, the NASRA study shows.
NASRA research director Keith Brainard and research manager Alex Brown authored the report and attribute the "chronic underfunding" to the market’s struggles during the early 2000s following an economic boom in the late 90s.
"For both states, the chronic underfunding began when required contributions had dropped to very low levels by historical standards, including to as low as zero for some plans, chiefly as a result of strong investment gains experienced from 1995 to 1999," Brainard and Brown wrote. "When required contribution rates rose, chiefly as a result of the 2000-02 market decline, the states experienced great difficulty in restoring the stream of pension funding payments that had previously been in place."
The NASRA report was released as both New Jersey and Pennsylvania looking to initiate reforms to their pension plans.
New Jersey Gov. Chris Christie agreed in 2010 to increase state pension contributions over a seven-year period, before cutting the previously-agreed upon payments last year due to a budget shortfall prompting a legal showdown against multiple public unions. New Pennsylvania Gov. Tom Wolf proposed $3 billion in pension obligation bonds as part of his $30 billion fiscal 2016 budget proposal that aims to address unfunded pension liability that led to credit downgrades by all three major rating agencies.
New Jersey and Pennsylvania were among six states that NASRA found had paid less than 75% of their annual requirement contribution on a yearly basis during the 2001 to 2013 period. The others included Washington at 56.5%, North Dakota at 69%, Kansas at 70%, and Colorado at 74.5%.
