Pension crisis to deepen
TRENTON — New Jersey's pension crisis
will get worse in the next several years,
even if state officials add $500 million to
the pension systems as planned, a state
actuary testified last week.
Actuary Janet H. Cranna also said the state
will be forced to continue selling assets,
such as stocks and bonds, in order to pay
pensioners, thereby weakening the system
But the pension crisis would not have been
nearly as bad had the state government
contributed to the system all along, Cranna
said, instead of largely skipping payments
for 10 years.
The testimony, which came as the state
released its annual valuation reports for the
pension funds, further clarified not only
how badly underfunded the state's pension
system is, but that billions of dollars in
state contributions are needed to turn
around the fortunes for the funds for
800,000 current or retired government
Yet, contributing billions of dollars to pensions
would put further pressure on the
state budget in a year in which the state
already faces a $10.5 billion deficit and
officials could be ordered by the state
Supreme Court to provide more money to
educate children from low-income families.
Eileen Norcross, a senior researcher at
George Mason University in Virginia, who
has written about New Jersey's pensions,
said state officials are only beginning to
grapple with the enormity of the system's
"They can't get around the fact that they
have to increase the amount they pay into
the system," Norcross said in an interview.
"These are budget choices. But they are
benefits for vested workers that they have
Norcross said some experts have
estimated New Jersey will have to
contribute $10 billion a year toward its
pensions by 2020.
The valuation reports, and the comments by
the actuary, prompted an exchange
between officials that rose to a near
shouting match as they blamed various
interest groups for the system's woes.
Some of the overall numbers — such as the
fact that the state system faces a $53.8
billion unfunded bill for pensions to paid
over the next 30 years — had been
released in late December. That does not
even factor in some $56 billion in long-
term retiree health care costs, for which
virtually no money has been set aside.
Cranna's pointed comments came while
she presented reports on the systems that
oversee pensions for local police and
firefighters, as well as most rank-and-file
local and state government workers in the
Cranna's firm, Buck Associates, was not
hired to review the teachers' system. But
since that system faces the largest
unfunded liability, at $24.5 billion, her
comments would apply just the same.
"The state is in a negative cash-flow
position," Cranna said. "It would be prudent
to start making (the full) contributions. At
these ratios, the system is not funded well
Gov. Chris Christie has proposed broad
changes for the pension system. He wants
employees to work longer before they
retire, roll back a 9 percent boost given in
2001, and require that some contribute
more money toward their pensions. Last year,
the state passed a series of
reforms for new employees. Those reforms
would not have any effect on the pension
system's current condition, Cranna said.
Another law would require the state to
catch up to its needed pension contribution
in seven years. In the budget to be
adopted by July, that would amount to a
little more than $500 million, or one-
seventh of the $3.5 billion necessary if the
system were to be considered fully funded
for the year.
Christie, a Republican, has said he may not
even want to make that one-seventh
payment in the upcoming budget. State
Senate President Stephen M. Sweeney, a
Democrat, has insisted on that payment in
order for pension reforms to be passed.
But Cranna said that approach — taking
seven years to catch up to full needed
contributions — will only put the system
The pension system is still factoring in losses in
the stock market from the
financial crisis in 2008 and 2009, Cranna
added. Meanwhile, more state workers are
retiring, causing further stress on the
If the state had never stopped making its
pension contributions, the pension covering
local police officers would have another $3
billion and 83 percent of the money it
needs, Cranna said. That's a level of
funding that experts say is considered safe
The pension fund that pays for most rank-
and-file state workers would have 60
percent of the money it needs if the state
had continued to make contributions, well
up from the 42 percent it has now, Cranna
Similarly, the pension funds for most rank-
and-file local government workers would h
ave $2.2 billion and also be better
funded, Cranna added.
State worker Anthony F. Miskowski stood
up and told the trustees for the police and
fire fund that they need to tell the state's
leaders that they must do everything
possible to shore up pensions.
"It's your responsibility," Miskowski said.
"Sell the Statehouse, and put the money in
the pension fund."
Board Chairman John G. Sierchio
responded by telling Miskowski that such a
message is hard to sell to political leaders.
"Actuary reports don't get people elected,"
Miskowski said. "I think everyone agrees
with you. It's been said before."
Then, L. Mason Neely, chief financial officer
for East Brunswick, told Sierchio, a
representative of the New Jersey
Policeman's Benevolent Association, that
the unions were partly to blame for the
The unions, including the PBA, Neely said,
had in previous years endorsed the idea of
skipping pension payments so that there
would be more money for state aid and
Sierchio shot back quickly.
"I didn't hear your mayor going to the
Senate and Assembly saying, "Don't do this,
we want to pay,' " Sierchio said, his voice
"You're wrong," interjected Neely, a
longtime pension watchdog. "I stood there
and said it."