Christie Administration Shows How It Plans To Slash Public Pension Debt
TRENTON -- A proposal from Gov. Chris Christie's administration to pump proceeds from lottery ticket sales into the public worker pension fund took shape Thursday as it released long-awaited details of the scheme to drive down New Jersey's pension debt.
State Treasurer Ford Scudder, in a presentation to reporters, described the transaction as a foolproof way to dramatically and immediately improve the health of the notoriously weak pension fund.
The proposal "positively addresses the chief fiscal burden on the state, mitigating the fears of bond holders, rating agencies and public employees, by significantly reducing the unfunded liability of the retirement system," Scudder said.
It's an idea conceived years ago and brought to the fore by Christie during his final budget address in February. Lawmakers were eager for more information, but since then answers have been scarce.
Senate President Stephen Sweeney (D-Gloucester) said in a statement the details finally released "show that this could be a promising endeavor."
The potential surge of cash immediately played well with lawmakers and some labor unions, who later hardened after the governor suggested he planned to barter for reductions in employee benefits.
"I'm for the concept. I'm not for the concessions," Patrick Colligan, president of the Policemen's Benevolent Association, said Thursday.
The strategy involves pledging the lottery, which generates about $1 billion a year, as an asset to the pension fund.
An outside consultant valued the lottery at about $13.5 billion, Scudder said. Its deposit in the pension fund would cut the unfunded liabilities to $36.5 billion. And it would lift the ratio of assets to liabilities from about 45 percent to 59 percent.
The asset would be divided among three of the seven pension funds, with the Teachers' Pension and Annuity Fund seeing the greatest financial gain. The Public Employees Retirement System would receive about 21 percent of the assets and the Police and Firemen's Retirement System would get 1 percent, Scudder said.
Steve Baker, spokesman for the New Jersey Education Association, said the union still has its suspicions and would put it to the test before its own actuaries.
"At some point you have to deal with real dollars. You have to pay real pensions with real dollars, and if the state believes that they can put fewer dollars into the pension system to create a healthier system, I believe that's misguided," he said after the briefing.
There are no losers, Scudder said.
The lottery, which is expected to bring in $965 million this year, helps fund higher education programs, psychiatric hospitals, centers for people with developmental disabilities and homes for disabled soldiers.
Scudder assured the programs would be funded by the state budget because a healthier retirement system requires smaller annual contributions. That, in turn, frees up dollars in the general fund to pay for those and other programs.
"Not only do we improve the solvency of the pension system ... but we also improve the future prospects of every priority in the state budget," Scudder said.
This year, Christie will contribute about $1.86 billion, four-tenths of what's recommended by actuaries. For the fiscal year that begins July 1, he's proposed to put in half, about $2.5 billion.
Hetty Rosenstein, state director of the Communications Workers of America, said the guaranteed revenue would be a boon to the pension fund in the eyes of actuaries, whereas funding from each year's state budget is not secure.