NJ’s pension investments miss growth target for 2019
New Jersey’s investments that support public workers’ pensions grew last fiscal year, though not at the levels the state counts on when calculating future contributions to the retirement systems.
In a report to the State Investment Council at its Wednesday meeting, the state Department of the Treasury said the pension investments returned 6.27% in the 12 months that ended in June, which trailed the 7.5% assumed rate of growth. The state had hit its targets in the two prior years.
“We believe that the fiscal year 2019 results are generally in line with the returns of similar matched peer pension plans,” said Corey Amon, director of the state Division of Investment.
“The majority of the difference between the pension fund return and the policy benchmark is the result of relative returns within the pension fund’s largest portfolio, the U.S. equity portfolio, which comprises approximately 30 percent of the total pension fund,” Amon said.
The pension funds’ investment in U.S. stocks grew, but not as strongly as the S&P 1500 benchmark against which it is measured.
The investments were closer to their benchmark target, though slightly behind, over the last three years and five years. Over the longer term, it has been ahead of it over the past 10 years and 20 years.
The results won’t immediately lead to higher pension contributions for taxpayers through the state budget, though they could a year from now.
In fact, Assistant Treasurer Dini Ajmani said pension contribution notices sent to municipalities recently include “a positive surprise” – up only half a percent, after double-digit increases in some years.
“That’s the good news that’s been delivered to the municipalities … that while they had budgeted 10, 15% increase, they’re finding some good news there,” Ajmani said.
Ajmani said the pension funds are in stronger position in part because of larger contributions by the state, which has been increasing its payments each year with a goal of putting in 100% of the annual payment suggested by actuaries starting in three years.
“But what has also made a difference is the performance of the pension fund in fiscal year 2018, which is what determines it. An over 9 percent return definitely had a positive impact,” she said.
Ajmani said local governments will also be required to pay slightly less toward their employees health care through the state plan.
“So we’re just pleased to say that fiscally, things are looking up,” Ajmani said.