Bond Buyer: Murphy's full pension payment revives debate over New Jersey overhaul - Garden State Initiative

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Bond Buyer: Murphy’s full pension payment revives debate over New Jersey overhaul

February 25, 2021

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By Paul Burton

Gov. Phil Murphy’s call for New Jersey to make its first full pension contribution in 25 years is generating questions about retirement-system overhaul in one of the nation’s lowest-rated states, and how might the capital markets respond.

Murphy on Tuesday revealed the proposal to pay toward pensions roughly $6.4 billion, or about 14% of his $44.8 billion fiscal 2022 budget proposal to lawmakers. Overall spending would rise 10%. Democrat Murphy’s election-year budget would increase aid to schools and provide income-tax rebates to low- and middle-income families.

Making the full actuarially required contribution will need an additional $1.6 billion expense, according to Murphy. New Jersey was initially scheduled to earmark 90% of its full contribution this year under a ramp-up plan.

“We’re now on the road to fixing one of the biggest financial problems of any state in America,” Murphy said during his fourth budget address, this time pre-recorded in an empty Trenton War Memorial. He bypassed the traditional speech to lawmakers because of COVID-19 protocols. “And when we keep making this pension payment, we will go from a pension system that many said was destined for bankruptcy to one that is solvent, healthy and sustainable.”

Postponing or reducing pension contributions would risk a collapse of New Jersey’s retirement system, Pew Charitable Trusts said last October. Pew showed New Jersey’s pensions 38% funded, with lllinois only slightly better at 39%. Illinois is the only state with lower ratings than New Jersey, and pensions are the big drag on both.

Read the full report here.