americans for prosperity - fixing nj's pension problem

Fixing New Jersey’s Pension Problem What’s the Problem? • The New Jersey pension and health benefit system 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 that’s 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 it’s 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. What’s 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.com

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Americans for Prosperity-New Jersey policy brief regarding New Jersey's pension crisis.

TRANSCRIPT

Fixing New Jerseys Pension ProblemWhats the Problem?

The New Jersey pension and health benefit system 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.com