A new Common Sense Institute of New Jersey pension study finds the state is doing a better job of making payments into the pension system, but those will have to increased by billions of dollars over the next few years to prevent the system from falling into further debt, and no one knows where that money will come from.

Steve Malanga discusses the Common Sense Institute of NJ Pension Study. (Photo by David Matthau, Townsquare Media)
Steve Malanga discusses the Common Sense Institute of NJ Pension Study. (Photo by David Matthau, Townsquare Media)

In his State of the State message a few weeks ago, Gov. Chris Christie suggested the state needs to rethink its pension payment plan and lower payments, so we can hire more police officers and increase aid to education.

One of the authors of the report, Manhattan Institute senior fellow Steve Malanga, said during a Trenton news conference that the New Jersey Legislature has had a long history of intervening improperly in pension matters - first of all artificially lowering pension payment rates, and secondly skipping payments altogether - and that has caused projected income growth to fall lower and lower over time.

"In New Jersey, when we put in nothing some years," he said. "We got nothing out of that nothing - eight percent of nothing is nothing."

He added that we not only have missed our investment targets because they were too aggressive, but at the same time by not putting money into the fund, we have forgone the investment gains from that money.

Malanga also pointed out investment ratings services like Moodys have now added pension debt to their rating formula, and that will cause additional problems for New Jersey in the future.

Business consultant Rick Dreyfuss, a co-author of the report, said right now New Jersey is on the hook for about $129 billion in pension payouts, but when you examine our assets they don't quite match up.

"We have what's called the market value of assets of $56 billion," he said, "so we have a shortfall of $72 billion."

He was quick to add that New Jersey is going to have to hit the reset button sometime soon in order to get Jersey's pension system to be sustainable.

"Because right now the track that we're on, it's not a question of will these plans become insolvent, it's a matter of when."