Christie Changes Funding Formula to Pay Less Toward Pensions
Facing another year of fiscal problems, Gov. Chris Christie changed the funding formula for the state’s pension contribution so that he could cancel $93.7 million in previously budgeted pension payments due in June, cut next year’s pension bill by $150 million, and put $900 million less into the underfunded pension system by the end of his term.
Christie’s decision to change the pension calculation formula will further add to New Jersey’s $51 billion unfunded pension liability -- which was one of the main reasons Fitch’s Ratings cited last Friday when it followed Moody’s and Standard & Poor’s in downgrading the state’s credit outlook from “stable” to “negative.” Over a 30-year period, Christie’s formula change would swell the state’s unfunded pension liability by 10 percent, actuaries for the state’s pension funds reported.
Christie complained during his annual Budget Message on February 25 that the rising costs of pensions, retiree health benefits, and debt service were crowding out other budget priorities. The governor threatened to take unilateral action unless the Democratic-controlled Legislature took further steps to reduce the state’s retiree liabilities, presumably by requiring public employees to pay more toward their pensions.
What Christie didn’t tell the Legislature or the public that day was that his Treasury Department had already instructed the actuaries responsible for calculating the state’s required pension payment to change the formula not only to cut the state’s pension payment for the upcoming year, but to do so retroactively for the current year.
Christie’s decision to change the pension calculation formulas came as a surprise to Democratic legislative analysts, who wondered why Christie was putting only $2.25 billion -- instead of the expected $2.4 billion into the pension system in the Fiscal Year 2015 budget. The change in the funding formula was buried in the actuarial reports on the state’s pension systems that were issued on February 27 -- two days after Christie’s speech.