Fixing New Jerseys Pension Problem

Whats the Problem?

The New Jersey pension and health benefit is woefully underfunded.
The state currently has an astounding $83 billion in unfunded pension liabilities as well as
an additional $53 billion in unfunded healthcare liability. Once more local governments
are on the hook for $20.7 billion in pension liability and $13.8 billion in healthcare liability.
Taken together thats a whopping $169.5 billion in unfunded obligations.
Each year without Pension reform is another year of increased debt.
According to the Pension and Health Benefit Study Commission in New Jersey will add an
additional $3.6 billion in debt this year. This amount will only continue to grow as benefits
promised will continue to outpace funding.
Pension and Health Benefits promised are out of line with similar private sector benefits.
Under the current system, the State of New Jersey pays for approximately 95% of essential
benefits. The average employee by contrast only contributes 18% of premium costs. While
a great deal for state employees its a poor deal for taxpayers.
New Jersey has routinely failed to make promised pension payments.
In 2014 and 2015 alone Governor Christie has fought to not make the pensions payments
required by law due to revenue shortfall. Governors from both parties have a long history
of not making payments which indicate systemic problems within the benefit system.
The Pension system makes unrealistic expectations with return on investment.
Rather than the historical average of 7 percent returns on investments, New Jersey
assumed a rate of 8.25 percent. These unrealistic assumptions lead to overly optimistic
predictions and an underestimation of unfunded liabilities.

Whats the Solution?

Bring Public Benefits in line with Private Benefits
Currently only 19% of private employers offer a defined benefit plan while over 60 percent
offer a defined contribution plan, moving to this model would cut costs and increase
flexibility.
The more generous cash balance hybrid plan suggested by the Pension and Health Benefit
Study Commission found that the savings would be an astounding $2 billion in 2016 alone.
Enact a long term plan towards adequately funding pensions.
Rather than rely on unrealistic assumptions on both costs and revenue then failing to
make payments, New Jersey needs realistic and accurate assessments for both. This
means funding core functions of government such as roads and police as well as living
up to promises made towards state workers while cutting unnecessary programs such as
corporate welfare.

AFPNewJersey.org