Underinvestment, mismanagement continue to drive N.J.’s pension liability crisis

TRENTON, N.J. – Wednesday’s Assembly budget hearing with state Treasurer Elizabeth Muoio raised plenty of eyebrows.

During the hearing, Assemblyman Ned Thomson of Monmouth County (an actuary by trade with ample experience overseeing pension investments) warned that the Murphy Administration’s FY 2020 budget plan will only serve to exacerbate the unfunded pension liability crisis that’s destroying New Jersey’s fiscal health.

Originally? The Christie Administration wanted the state to make a full pension payment by 2023. Murphy’s planned contribution is nevertheless $100 million less than what would need to be contributed to keep the state on course. The end result is an additional $1.63 billion in unfunded liabilities – even more than originally anticipated.  

“That’s not going to bring us to full funding is it?” Thomson asked Muoio during Wednesday’s hearing. “There will still be an unfunded liability is what my point is.  And the unfunded liability is still much more than the funded liability.”


And then there’s the issue of poor management of what has actually been invested.

The Murphy Administration assumed a 7.5% rate of return but the 10-year average is 10.23%.

Notwithstanding all of that and a relatively hot stock market, the Murphy Administration has overseen a sub-2% rate of return.

How large is the per capita pension liability in light of all of these under-investments and poor management moves? Possibly north of $103.5 billion; the state is in a position where there is $25.5 billion in assets easily eclipsed by a $221 billion debt load. The unfunded liability translates to a $26,000 per capita burden for New Jersey residents and, as of last year, was already growing 4.3-times faster than New Jersey’s GDP.

Senate President Steve Sweeney (D-Gloucester), having waited for the Assembly primary filing deadline to pass, is ramping up his attempts to bring down his intra-party adversary Governor Murphy by proposing sweeping pension reforms including moving newer employees into a 401(k) hybrid system.