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News & Press: Pension

NJ Seeks Help From Bankers to Bring Down Public-Worker Costs

Friday, January 13, 2017   (0 Comments)
Share | 01/13/17

New Jersey is already one of the nation’s most indebted states, and its public-employee pension system, according to one recent estimate, is now the worst-funded state-retirement plan in the country. But the state is also facing even more fiscal trouble thanks in part to nearly $3 billion in pension bonds that were issued two decades ago. In the face of that burden and other rising costs tied to retiree benefits, the state Department of Treasury last month issued a formal Request for Proposals from investment-banking institutions looking for their recommendations for “reducing the budgetary burden on the State.”

The request from Christie’s administration forcefully emphasized that New Jersey is not interested in issuing any new pension-obligation bonds like those floated 20 years ago by then-Gov. Christie Whitman. Instead, it appears to be a sort of brainstorming exercise to see what, if any, new ideas the financial community can come up with to help the state deal with its rising retiree-benefit costs.

When it comes to New Jersey’s debt and pension obligations, things are on schedule to get even worse thanks to the 1997 pension bonds. The debt-payment structure for the bonds was backloaded, and the state is approaching the most punishing payments, according to Treasury’s latest official debt report. The payments tied to the pension bonds will rise from about $400 million in the current fiscal year to $500 million in the 2022 fiscal year, and they won’t mature until the 2029 fiscal year.

The request for investment-banking services that was issued last month by Treasury indicates that the Christie administration — which has also tried unsuccessfully to convince lawmakers to adopt new reforms following the benefits changes made in 2011 — remains on the lookout for new ways to further reduce retiree costs. Among other duties, the request says the state is looking for an investment-banking firm to “advise the State regarding the identification, evaluation, and development of strategies to most effectively and efficiently satisfy its obligations toward its Pension Plans and Other Post-Employment Benefit Obligations.”

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