As reported by NJ.com, Governor Phil Murphy’s administration is rolling back a change to New Jersey’s public worker pension system that Chris Christie slipped in during the waning days of his administration that raised government contributions by more than $800 million. The acting State Treasurer, Elizabeth Muoio, said Christie’s surprise reduction in assumed rate of return from 7.65 percent to 7 percent placed a “undo stress” on the governments that would have to find the extra cash. Muoio said she would phase in the rate cut over five years.
The State uses the assumed rate of return to calculate how much money state and local governments will need to pay out benefits to nearly 800,00 active and retired workers. Christie’s administration slashed the rate in December in a move that increased local governments’ bills by $422.5 million and the State’s by $390.3 million, according to actuary reports. If the State only contributes 60 percent of what actuaries recommend next year, as expected, the revised payment would have been $234 million higher. A spokesman for Murphy said then that Christie was “playing politics with the pension fund by rushing this decision at the 11th hour.”
The pension fund actuaries have said a 7 percent assumed rate of return is a more conservative estimate of what pension investments can achieve over the long term and is in line with other large funds. In contrast, assuming the investments will earn a high rate makes the pension fund look healthier than it really is and does not reflect the reality of the State’s investment outcomes, actuaries say. The fund returned 13 percent in the fiscal year that ended in June, but lost nearly 1 percent the year before. It returned 4.16 percent and 16.9 percent in the years prior.
Muoio said she will set the rate at 7.5 percent for the fiscal year beginning in July, otherwise known as fiscal year 2019, and fiscal year 2020. The rate will then drop to 7.3 percent for 2021 and 2022 and then finally land at 7 percent in 2023. “A gradual path to a lower rate will help mitigate the undue stress that would otherwise have been placed on local governments to address the significantly increased contributions required of them and the consequences this would have on their structural budget, reserves, and ultimately, their taxpayers,” Muoio said.
This seems to be one of the first measures taken by the new gubernatorial administration to address the pension crisis prevalent in New Jersey. As you know, the pension crisis is one of the foremost issues affecting New Jersey public employees, and most notably, public safety officers. Therefore, we are hopeful this a first step in the right direction in an effort to ensuring the pension of New Jersey Public Safety Officers remain intact. Please continue to check this blog periodically for updates regarding the pension crisis and other important issues affecting New Jersey Public Safety Officers.