More bad news on the Teachers’ Pension and Annuity Fund (TPAF), New Jersey’s largest public pension fund currently covering 262,000 active and retired teachers.  Last week, we wrote about the Brookings Institute report that both confirmed that TPAF was the worst public pension plan in America and projected that it would become insolvent in the next 12-15 years.

Now New Jersey’s Division of Pension & Benefits has come out with its own updated auditor’s report for TPAF for FY2021 (ending June 30, 2020).  It’s our first look at the impact of COVID on TPAF’s investment returns.  The news is not good.

TPAF’s investments were up a mere 1.4%, which means that TPAF had an overall net loss of $1.2 billion.  That meant that once again, TPAF had to burn assets to pay for current benefits, so total TPAF assets went down from $22.7 billion to $21.5 billion (-5%).  Meanwhile, because the state did not make the required pension payment, liabilities increased from $84.2 billion to $87.5 billion.  Assets down, liabilities up means that TPAF’s funded ratio – the amount of money set aside to meet future pension obligations – dropped from 27% to 24.6%.  That’s right: TPAF has less then 25 cents set aside for every dollar it owes.

Sadly, this sort of deterioration has been an annual occurrence for TPAF.  All told, since FY2015, TPAF’s assets have dropped from $27.3 billion to $21.5 billion (-21%) while it liabilities have increased from $81.1 billion to $87.5 billion (+8%).

Gov. Murphy has proposed making a full $3.9 billion payment into TPAF, which when combined with positive investment returns, should mean that TPAF’s condition will not worsen, but at 25%-funded, TPAF is broken and needs to be fixed.  Throwing in billions and billions merely to slow its decline is a colossal waste of taxpayer dollars.

Unfortunately, New Jersey does not have political leaders willing to face facts or cross a powerful special interest like the NJEA, which opposes reforming TPAF.  And certainly not Murphy, whose cozy relationship with the NJEA has been likened to a “puppet on a string” by the Star-Ledger’s Tom Moran.

New Jersey: Government by and for the special interests.