BY JANE WOODRUFF
A task force has revealed that New Jersey’s underpayments to its public pension fund have been grievous, and the resulting shortfall will going to create an extraordinary strain on state government over the next few years.
The nonpartisan State Budget Crisis Task Force has been analyzing the finances of six different states, reports the New York Times, and in New Jersey, the burgeoning pension commitments are set to wreak havoc.
The pensions for public workers have been underfunded for years, by both Democratic and Republican governors. Administrations have constantly diverted funds from the pension fund to pay for other projects, with no provision to repay it later. Governor Christie has tried to remedy this behavior, and last year, $1 billion was paid into the fund. However, according to a report on Reuters.com, that was only about one-third of the actuarially required amount that should have been contributed. By 2018, the yearly payment needs to be $5.5 billion. There is no way revenue is on target to meet that goal.
Governor Christie has tried to overhaul the system by raising the retirement age to 65, forcing workers to pay more toward their pension, and halting the automatic cost-of-living adjustments. Employees at all levels were outraged: a state judge actually sued to protect his own compensation, saying judges’ pensions were exempt from the cuts. An amendment to the state constitution passed easily by voters this fall and declared that yes, judges had to face the cuts, too.
New Jersey’s expenses, particularly in education and Medicaid, are growing faster than their revenue. The changes to the system have narrowed the deficit in pensions from $37 to $26 billion. But those changes have been planned a ramp, so that each year the required pension payment increases. Making those payments will mean spending cuts in other areas, forcing some very difficult choices in Trenton.