As reported by NJ.com, State Senate President Stephen Sweeney said the answer to New Jersey’s rising public employee pension debt lies in creating a trillion dollar federal loan program that will help states avoid insolvency, spare millions of government workers from economic devastation and take the pressure off state budgets. The government aid program, which Sweeney stressed would not be a bailout, would allow financially strapped New Jersey to shed its $50 billion unfunded liability and cut the State’s required annual pension contribution in half.
At a Statehouse news conference, Sweeney said his office has begun reaching out to the Garden State’s congressional delegation and labor interests across the country to build support. Sweeney is attempting to spark a national revolution on behalf of the 27 states facing funding shortfalls of more than $10 billion. Under the plan, states would be eligible to borrow about $50 billion from the Federal Reserve at 1 percent interest over 30 years.
Based on its current funding levels, New Jersey will soon be on the hook for $6 billion a year, but paying off the unfunded liability up front and investing the money from the reserve, would save the State $3 billion a year, Sweeney estimated. To this end, Sweeney’s proposal assumes the investments yields beat the 1 percent loan interest. For a state to sign on, it would have to get approval from the voters and pass a constitutional amendment promising to make the full payment recommended by actuaries.
While Sweeney is looking at a federal solution, his counterpart in the Assembly, Speaker Vincent Prieto, has quietly floated a plan giving the State five years to phase in the full payment.
“So far we have seen some ideas from the Assembly Democrats and now another viable idea from the Senate Democrats,” said Pat Colligan, president of the New Jersey State Policemen’s Benevolent Association. “Our members appreciate the forward thinking.” Wendell Steinhauer, president of the New Jersey Education Association, said the constitutional amendment would be key to preventing a backslide. “I think (Sweeney is) playing it smart. He’s getting the voter approval. He’s getting the money from the biggest lender in the world. And he’s got a financial plan to pay back 1 percent. Who doesn’t want a 1 percent loan?” he said.
Please continue to check this blog periodically to ascertain updates regarding the proposal.