As reported in NJ.COM, New Jersey’s unfunded public employee pension liabilities have soared to $83 billion, more than double previous estimates, as the state comes into compliance with new accounting rules, according to a report released today by Moody’s Investors Services, a Wall Street ratings agency.
Governor Chris Christie’s administration acknowledged the change in a Nov. 25 supplement attached to a Transportation Trust Fund bond offering. In a report released today examining the disclosure, Moody’s said it “underscores the significant pension funding challenges that New Jersey faces.”
The two largest pension plans, Public Employees Retirement System and the Teachers Pension and Annuity Fund, could run out of money by the end of 2024 and 2027, respectively, according to the bond disclosure.
A Moody’s ranking of pension liabilities as a percentage of total revenue puts New Jersey fourth behind Illinois, Connecticut and Kentucky. One reason for the higher pension liability is that the new rules call for a smaller rate of return when estimating how much money the pension system will earn in interest and investments.
New Jersey has been basing its calculations on optimistic investment returns of 7.9 percent. The new rules say that past the point a pension plan is projected to run out of money, liabilities will be based on a lower rate of return tied to municipal bond rates, Moody’s analyst Ted Hampton said. With that change, the unfunded liability ballooned from $37.3 billion to $82.8 billion, according to the state’s bond offering. Moody’s own methodology estimates unfunded liabilities at $77 billion for 2013, and once revised for 2014, that amount is expected to surpass the state’s $83 billion figure, Hampton said.
The bond disclosure identified changes to both the asset and liability sides of the ledger. New Jersey has $40 billion in assets and $122.8 billion in liabilities, rather than $44 billion in assets and $81 billion in liabilities, according to Moody’s report.
State Sen. Paul Sarlo (D-Bergen), chairman of the senate budget committee, added that no matter the accounting standard, it’s clear the pension fund is grossly underfunded.
A task force appointed by Christie is expected to make recommendations on how state should deal with its pension problems.
A report issued by the commission in September said that the state faces $53 billion in unfunded health benefit liabilities on top of the pension problem.