New Jersey Senate leader touts $1T US loans to save pensions
TRENTON (AP) — The president of the New Jersey Senate called Wednesday for a national solution to problems facing public worker pension systems in the state and others in the form of about $1 trillion for low-interest loans.
Steve Sweeney, a Democrat, said that with many states facing pension funding problems -- including some in worse shape than New Jersey -- it makes sense for the federal government to help before the situation gets worse.
"Let's be clear, this is not a bailout or a handout," he said. "When a state defaults, who's going to come in? The federal government. Then it's a bailout."
The proposal, which would require congressional action, is the latest in a series of ideas aimed at stabilizing pension plans, which have suffered in New Jersey and elsewhere from decades of no or small contributions from cash-strapped state governments.
The senator said he has started pitching the plan to members of Congress and will try to enlist state legislative leaders from around the country to help.
In New Jersey, Gov. Chris Christie teamed up with Sweeney and other Democrats in 2011 in a deal to ramp up the state's contributions while also requiring employees to put more into the system. But since a surprise revenue shortfall last year, Christie cut the state's contributions from what was planned for three straight fiscal budgets.
Now, the Republican, who is running for president, is calling for making public employees' health insurance benefits less generous and using the savings to stabilize the pension plans.
A spokesman for Christie on Wednesday criticized Sweeney's plan, saying it does nothing to address that retirees get far more in pension and health benefits than they contribute toward them.
"The math does not work at all. That is the fundamental problem that needs to be solved," spokeswoman Nicole Sizemore said in a statement.
Sweeney's plan would use a different source of money to make the funds whole. He wants the federal government to make loans to states to restore pension funds. States would pay the amount back -- plus 1 percent interest -- over 30 years.
Sweeney said the amount generated from investing the windfall -- around $50 billion in New Jersey's case -- would far exceed the cost of repaying the loans.
In its budget, New Jersey is set to pay $1.3 billion toward pension funds. To make up the funding gap under the current plan, the annual contributions must rise eventually to about $6 billion.
Sweeney said that under his proposal, the annual cost of paying the new pension costs plus the principal and interest to the federal government would be about $3 billion.
With the savings of $3 billion a year, he said, the state could fund other priorities.
Sweeney said states would have to agree to make all required pension contributions as part of the loan deal; he said New Jersey would need to make that promise with an amendment to the state constitution.
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