Pension Expert Says New Jersey System in Dire Straits
The problems of New Jersey’s pension system have been exacerbated by Gov. Christie’s decision not to make promised payments, according to an executive looking for ways to fix the system.
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New Jersey Gov. Chris Christie in a file photo last month
Associated Press
“The solution mandated payments Gov. Christie didn’t make,” said Thomas Healey, a former Goldman Sachs partner and now chairman of Mr. Christie’s pension commission. “That’s one reason it’s getting worse. Every day you don’t fund it, it just gets bigger.”
Mr. Healey, a Republican who was appointed by the Republican governor earlier this year to lead the Pension and Health Benefit Study Commission, faces a daunting task: finding ways to fix the state’s pension and health-benefits system, which is underfunded by about $90 billion.
High on his list of changes is making sure the state makes its required payments. “They’ve all failed the citizens by not funding it,” Mr. Healey said.
Mr. Christie struck a deal with the Democrats in 2011 to pay more into the system in exchange for concessions from unions. In June, Mr. Christie said he would forgo $2.4 billion in payments over the next two years as he tried to close a budget gap, a move that infuriated the Democrats and unions.
In 2014, New Jersey’s required contribution was $3.7 billion, but it paid about $700 million, according to a state report.
At stake are the pensions and benefits of some 250,000 employees in the system.
Mr. Healey is expected to submit a blueprint in coming weeks that outlines a range of solutions, which could include switching state workers to a 401(k)-style retirement plan, which many companies use, instead of a defined benefit plan that promises specific payments.
The report will show the system is in even worse shape than when Mr. Christie took office in 2010 and make proposals that are “painful but fair,” Mr. Healey said. He declined to give specifics before the release of the report, but said that everyone would have to make sacrifices to solve the problem.
Changing the state’s pension system, which has been underfunded by governors of both political parties for more than a decade, has been a signature issue for Mr. Christie, who is eyeing a 2016 bid for the presidency.
A spokesman for Mr. Christie declined to comment Thursday on Mr. Healey’s remarks.
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Senate President Stephen Sweeney, a Democrat, has said he has no plans to compromise with Mr. Christie again because the governor didn’t make the payments.
Mr. Christie spent much of the summer traveling around the state, holding town halls that were designed to raise awareness on the pension issue.
Since then, he has largely been quiet on the issue, traveling the country for other Republican governors and focusing on other problems, such as Atlantic City’s financial woes and the state’s deeply indebted transportation trust fund.
Mr. Christie appointed Mr. Healey, who founded an investment and development company and who has written extensively about pensions, to lead the committee.
A report that shows the system in worse condition could hurt Mr. Christie in a Republican presidential primary, particularly with the state’s weak economic record, say political scientists. The pension system shortfall has hurt the state’s credit rating, which is second-worst in the nation, according to Moody’s Investors Service.
Aides to Mr. Christie say he was handed a budget that was already suffering from more than a decade of governors not paying enough into the system and that he had tried to rein in spending on pensions and other benefits.
Mr. Healey and his commission faced problems that were deep and systemic when they began work earlier this year. In 2011, when Mr. Christie and the state legislature touted a solution, “they didn’t really do enough homework” in assessing the challenges, he said.
Health-care costs are likely to climb 25% over the next 10 years, he said, and the aging baby boomer generation will further strain the system.
“You’re under time pressure. Let’s do it and move on. You don’t always get the right answer,” he said. “They thought they had it partially fixed a couple of years ago, but that assumed the payments would be made.”
A judge could still rule what Mr. Christie did was “wrong or illegal,” Mr. Healey said, as several unions and pension funds have filed suit in state Chancery Court to force Mr. Christie to make the required contributions. A spokesman for the governor said on Wednesday the state would respond in court.
Mr. Healey said his commission’s report could spark serious discussion or “be in the library of unread reports.” The report was taking longer than some expected because the committee was still weighing options, he said.
“We may not get it solved,” Mr. Healey said. “It’s hard as hell. But if we don’t get it solved in 2014, we’ll never get it solved in 2018. Eventually it will just totally overwhelm the budget.”
