A Blatant Failure to Fund A Pension: Governor Christie
Governor Chris Christie of New Jersey has just made budget proposals that will create an even bigger deficit for a pension plan that already faces plenty of problems. Last year the Governor pushed through a series of pension reforms in exchange for a promise to fund the plan, so that the deficit could be whittled away over the next several decades. Yesterday he reneged on the promise.
New Jersey’s tax revenues have not met the Governor’s expectations, so he has decided to slash payments to the pension plan. For fiscal 2014-15, the pension plan will receive $696 million instead of $1.6 billion, and in fiscal 2015-16, he proposes contributing $681 instead of $2.25 billion.
The Governor’s rationale for the reduction is truly irresponsible. Governor Christie
said, "We will not make the payments that apply to the sins of the past." In other words, the Governor is unwilling to take responsibility for the unfunded liability that accrued before he was Governor. When someone becomes governor of a state, he assumes all the opportunities and challenges. Whether it’s potholes that weren’t filled or schools that weren’t built by his predecessors, the current Governor has to address the problems. In this instance, Governor Christie admitted that he is shirking his duty.
New Jersey’s public pension is 64.5% funded using the current set of defective assumptions. The true deficit is significantly higher. Thus New Jersey’s pension plan is headed to an even bigger crisis in the next decade. Predictably, the public unions and their supporters are expected to file lawsuits against the Governor. You might expect money managers to join the unions in trying to protect the pension. While I doubt that money managers care about the retirees and current state employees, they earned $414 million in fees last year, and can expect to earn even more in the coming years. You’d think that they’d want to protect their economic interests by opposing the Governor’s proposal. Instead they’ll continue to encourage and fund the White House aspirations of a man who has demonstrated fiscal irresponsibility.