TRENTON, N.J. – The state’s pension problem, and that Gov. Phil Murphy is not doing better than the path former Gov. Chris Christie paved, was questioned during an Assembly budget hearing with state Treasurer Elizabeth Muoio Wednesday.
Assemblyman Ned Thomson, an actuary who has administered more than 500 pension plans, explained that Murphy’s proposed payments are increasing unfunded liabilities rather than decreasing debt – worsening the state’s outlook.
The state pension system is on a schedule Christie set with Democrat legislators to make a full pension payment by 2023.
Murphy’s proposed contribution this year is only 70 percent of a full payment, adding $1.63 billion to the unfunded liability. The original path called for a $3.9 billion pension payment this year, but Gov. Murphy reduced the payment to $3.8 billion because of an accounting change.
“That’s not going to bring us to full funding is it?” asked Thomson (R-Monmouth). “There will still be an unfunded liability is what my point is. And the unfunded liability is still much more than the funded liability.”
The assumed rate of return on pension investments is 7.5 percent. Over the past ten years total returns have averaged 10.23 percent. Under Murphy returns have been below two percent during this fiscal year despite the stock market reaching a record high last September and steadily climbing since a small correction in December.
Poor investment performance increases long-term obligations and increases necessary pension payments to amortize the debt.
State pension liabilities are at least $103.5 billion according to Truth in Accounting’s September 2018 financial breakdown. New Jersey only has $25.5 billion in assets to cover $221 billion in total debt.