N.J. Pension-Funding Measure Off 2016 Ballot as Deadline Missedby and
Bill backed by unions but Christie called it ‘road to ruin’
Obligations would threaten cash flow, ratings companies warned
New Jersey won’t ask voters to mandate quarterly pension payments after the Democrat-controlled state Senate missed the deadline to get the measure on the ballot this November.
The proposed constitutional amendment, supported by public-employee unions, had appeared on track. Then, Senate President Steve Sweeney said he wouldn’t put the measure up for a vote in his chamber because of an impasse over how to fund roadwork and mass-transit projects.
“The pension amendment does not die because it was not voted on by today,” Sweeney, 57, a Democrat from West Deptford, said Monday in a statement. “The Senate can still approve it with a simple majority vote any time before the legislative session expires in January, putting it on the November 2017 ballot.”
The pension-funding effort sought to make full actuarially required contributions by 2022 and cut the unfunded liability by $4.9 billion over three decades. The bill would have mandated quarterly payments, straining the state’s cash flow, Moody’s Investors Service and S&P Global Ratings had said.
The state’s growing pension liabilities have led to higher borrowing costs relative to other governments. The Garden State pays the second-highest yield premium on 10-year bonds among 20 states surveyed by Bloomberg.
The state pension funds, with assets of $71.9 billion, have an $83 billion unfunded liability. That pressure has led to higher borrowing costs and a debt rating that is second-lowest among U.S. states, behind Illinois. Over the past decade, New Jersey paid about $24 billion less than it should have into the funds, freeing up cash to close budget shortfalls, spend or ease taxes, according to data compiled by Bloomberg.
Republican Governor Chris Christie has called mandated pension payments a “road to ruin” that would prioritize retirement payments over education, health-care and other spending.
The measure’s demise stemmed from his dispute with Sweeney over how to pay for road work. Christie said he would back a gasoline-tax increase so long as it was accompanied by a cut in the sales levy. Sweeney, who’s considering a run for governor next year, says that maneuver would create a $1.6 billion budget hole. He said he wouldn’t allow the pension measure to come to a vote until the gasoline tax question was settled.