Fact check: Despite Stellar Investment Returns, NJ’s Public Pensions Are Still in Crisis

There’s lots of happy talk coming out of Trenton about the state of New Jersey’s public pensions.  This plays very nicely into Gov. Murphy’s hands by providing a seemingly rational basis for Murphy’s decision to drop a whopping $6.9 billion (15% of the entire state budget) into public pensions.  Unfortunately, the reality is that despite good news New Jersey’s public pensions are still in crisis.

Recently the Star-Ledger published an article about the stellar returns on the state pension investments: up almost 25% for fiscal 2021, the best performance in 25 years.  These returns increased the value of the pension assets to $92.7 billion (up from $84.8 billion last year).  So far, so good, but the Star-Ledger then uses the state’s own flawed calculations for the pension system’s funded levels, which put them at 58% funded as of July 2020 (meaning that the state has set aside 58 cents for every dollar it owes in pensions).

A 58% funded level is not very good but it still gives the impression that the pension system is in better shape than it really is.  Using the more realistic General Accounting Standards Board (GASB) methodology (which accounts for the precarious nature of the state’s large unfunded liabilities), as of June 30, 2020, the state’s total pension liabilities came to $208 billion against which the state has $92.7 billion in assets.  This amounts to a 44.6% funded level, which is a “crisis” level.

Looking at the state’s largest public pension, the Teachers Pension and Annuity Fund (TPAF), the situation is even worse.  TPAF was an abysmal 24.6% funded as of last year.  Assuming the same percentage increase in assets as the overall system, the stellar investment returns improved TPAF’s funded level to a still abysmal 28.6%.  Sunlight believes that if teachers knew that there was only 29 cents set aside for every dollar owed to them, they would be outraged.

It is true that Murphy’s $6.9 billion contribution will likely bump up the asset levels more, but it is also true that liabilities will also increase as more teachers retire and live longer.  We will have to await future numbers to determine this, but what is clear is that New Jersey’s public pension system is still in deep crisis and neither Murphy’s record pension payment nor the stellar investment returns change this fact.

This is why Murphy’s pumping 15% of the state budget into an unreformed pension system is an unsustainable waste of money.  Where will New Jersey be when the federal money stops coming or investment returns inevitably shrink?

Apparently the future of New Jersey is not Murphy’s primary concern.  His primary concern is taking care of his public union pals in an election year.