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N.J.’s Pension Crisis Growing Deeper

Wednesday, July 2, 2014   (0 Comments)
Posted by: Greg Mayers
Share | 06/01/2014

New Jersey’s pension fund is estimated to be underfunded by $52 billion and is currently facing the increasingly serious threat of insolvency as another fiscal year starts in July, and the full payment for pensions estimated by actuaries will not be met. The trend of only making partial payments to the fund or none at all has proven to be a common practice among NJ administrations. This is precisely why the problem is so severe.

According to analysts, each time payments are skipped has a compounding effect on the fund’s liabilities. For example a $1 billion contribution made by the Christie administration in 2013 only accounted for 30 percent of the payments sought, while the same $1 billion payment made by Corzine in 2007 satisfied 60 percent of the fund’s demand. Furthermore, not making the full payments detracts from the ability of the State Investment Council to help the fund grow. This is especially costly during the current market growth and a time when the investment council has been surpassing expectations.

The hole seems to be worsening as this year’s $1 billion dollar budget shortfall has caused the administration to cut the planned $1.58 billion pension allotment to just $696 million. These cuts  have been proposed to continue for the fiscal year beginning in July, where a once scheduled $2.25 billion dollar payment would be shaved down to $681 million pending legislative approval.

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