New Jersey Treasurer Ford Scudder told state lawmakers that a proposal to boost the state’s underfunded pension system through lottery revenues over the next 30 years would not negatively impact future budgets.
Scudder told the Senate Budget Committee that moving the roughly $1 billion a year of New Jersey Lottery proceeds now dedicated to social service and education programs would increase the pension fund’s value by $13.5 billion and help create budgetary flexibility. His presentation said the plan, proposed by Gov. Chris Christie in February, would immediately jump the state’s pension funded ratio from 45% to 59%.
“While the lottery will be transferred to the pension system, that will reduce the pension system’s unfunded liability and correspondingly reduce the annual required contribution from the General Fund to the pension system,” Scudder said in testimony Thursday. “While the General Fund will lose the lottery proceeds, the General Fund contribution to the pension will be reduced by exactly the same amount, leaving the same amount of resources available to fund all current programs.”
A report from Pew Charitable Trusts released in April said New Jersey had the worst pension funding level of the 50 U.S. states for the 2015 fiscal year at only 37%. Pension woes are a major reason for 11 bond rating downgrades since Christie took office in 2010. Scudder said the lottery proposal would aid in “mitigating the fears of bondholders, rating agencies and public employees by significantly reducing the unfunded liability of the retirement system.”
Scudder has pushed for the state Senate and Assembly to pass legislation authorizing the lottery pension plan before the close of the current fiscal year on June 30 or before Christie’s term expires in December. No bill has been introduced yet, but New Jersey Treasury spokesman Willem Rijksen said Thursday’s presentation received a positive bipartisan response from Senate budget committee members. Business groups also came out in support of the proposal this week, including the New Jersey Chamber of Commerce.
“The 30-year Lottery Enterprise Contribution will reduce the pension system’s unfunded liability, elevate its funded ratio and reduce the General Fund obligation – thereby helping transform New Jersey’s fiscal outlook,” New Jersey Chamber of Commerce president Thomas Bracken said in a statement. “This is a significant step in solving our pension crisis.”