New Report: Murphy Must Address New Jersey’s Ever-Growing Pension Debt

NEW YORK, NY – When Governor-elect Phil Murphy takes office later this month, he’ll face a familiar but growing problem — the state’s severely underfunded pension system. Although during the Murphy campaign he committed to solving the pension problem, he offered no precise plans on how he would do that.

A new report from the Manhattan Institute’s Steven Malanga and Josh McGee shows he is running out of time — projections show that the pension system, already the worst-funded in the nation, will continue taking on debt for at least five more years. By then the cost of bailing out the system could consume virtually all of the new tax revenues the state generates, leaving little money for other crucial spending.

Malanga and McGee note:

• New Jersey’s pension system may have already reached an unfixable tipping point: the system is now missing so much money that even when it achieves its investment goals, it falls far short of the money it needs to remain solvent over time.
• Since 2014, it became clear that New Jersey needs a new strategy to address its pension problems. A commission created that year recommended further cost-saving reforms, but political opposition stymied the proposals.
• Despite consistently failing to make its required pension contributions, New Jersey largely required its municipalities to meet their own required pension contributions. As a result, the municipal portion of New Jersey’s pension system is better funded than the state’s portion.

Governor-elect Murphy already faces a difficult budget environment, thanks to slow growth in tax revenues and federal tax reform, which may further squeeze the state’s budget. Yet, failing to address the pension system’s deep problems and allowing it to continue accumulating debt could push it toward a potentially catastrophic failure, the report concludes.

Click here to read the full report.