Coronavirus Creates A Huge Double-Whammy for New Jersey’s Finances
March 24, 20202019 NJ State Debt Report: The Facts
April 7, 2020Thanks to BuryPensions for alerting SPCNJ to a Bloomberg article by Aaron Brown that highlights the risks that the Covid19-related economic recession and market crash have created for New Jersey’s public-sector pensions. Brown estimates that the value of NJ’s pension assets has declined about 25%, and that the current funding level is in the area of 24% (meaning that only 24% of the pension liabilities are covered by assets; the remaining 76% are unfunded liabilities).
If overall public pensions are at 24%, that likely means that the Teachers Pension and Annuity Fund, the state’s largest public pension, is under 20% funded. With that low a funding level, the harsh reality is that it is diffcult to see how its liabilities can ever get paid in full.
As Senator Sweeney, BuryPensions, SPCNJ (see SPCNJ’s “Job Number One” report) and others have warned for years, NJ’s public pensions were not prepared to handle a crisis. Prior to Covid19, NJ’s public pensions already had the worst negative cashflows of any state (payments out of the system to retirees were 6.6% greater than the contributions coming in), and going forward the reduction in state tax revenues will likely force a concomitant reduction in state contributions into the pension system.
As a result, Brown anticipates that the bond rating agencies will react and NJ may have difficulty borrowing in the municipal bond market – precisely when it will need to. Then we will have to address our broken public pension system under duress.
Brown is just presenting the facts, unpleasant as they are, and SPCNJ feels duty-bound to share them. We dislike the implications as much as anyone, but absent a miraculous rebound in the economy and the markets, they appear unavoidable.
Focusing back to the present time, SPCNJ echoes all New Jersey’s thanks to our healthcare workers, public leaders and all those who are on the front lines for their courage and dedication. Their self-sacrifice for the good of their fellow citizens is an example for us all.