Sweeney — This time, I can get Christie on board with pension fund payments
Senate President Stephen Sweeney says he thinks Gov. Chris Christie would sign a bill requiring New Jersey to start making payments into the pension funds every three months, rather than once a year.
Christie has twice vetoed the idea, but Sweeney thinks this time would end differently.
“I’ve been working, I’ve been sharing information with the administration, and I’m confident that if I get this to his desk, he’ll be supportive,” said Sweeney, D-Gloucester.
“I’m not going to say absolutely he’s going to sign it, but I’m confident that he will because he’s as concerned, I would think, about the condition of the fiscal health of the state,” Sweeney said.
Christie’s office didn’t respond to a request for comment on the bill, or Sweeney’s expectation.
Sweeney said he worries about the impact if it fails – and that this year’s election showed voters are in a dour place.
“Clearly if we had put up a ballot question on quarterly pensions, it would have failed. You saw the casino question went down in a big way. The gas tax was very close, as you know,” Sweeney said. “And mandating that kind of a payment with the mood of the people wouldn’t have worked. And once that happened, we would have been in a situation where we would never make the pension payments.”
A proposal to amend the constitution to allow two casinos in North Jersey suffered the most lopsided defeat of a ballot question in New Jersey history. The proposal was defeated by 1.66 million votes – supported by around 23 percent and opposed by more than 77 percent.
A constitutional amendment dedicating all gas-tax revenues to transportation passed, though not by a big margin. It was supported by 54.3 percent and opposed by 45.7 percent, according to the latest unofficial results, a margin of close to 256,000 votes out of almost 3 million cast.
Sweeney said candidates running for governor next year have expressed support for funding the pension, including quarterly payments. Only two quarterly payments would come during Christie’s tenure, presuming he doesn’t leave office early for a post under President-elect Donald Trump.
For both those reasons, a proposed constitutional amendment seems unlikely for the 2017 ballot.
“Listen, my concern is it passing,” Sweeney said. “And if anyone was to skip payments, then we always can go to it and make that effort. But the voters were in no mood this year to guarantee anything, as you know. This was a very different election year for us.”
The proposed constitutional amendment wouldn’t only require quarterly payments into the pension funds – it would guarantee that those payments would be made.
Current law doesn’t specify when the contributions to the pension systems must be made. They are generally paid around June 30, the last day of the fiscal year – which makes them vulnerable to be reduced, in years that state revenues miss their forecasts and the budget falls out-of-balance.
A constitutional amendment could not be evaded, while a law can be superseded by the budget.
Assembly Speaker Vincent Prieto, D-Hudson, said he would review Sweeney’s proposal but noted he wanted the proposal before voters last week.
“As is always the case I'll review any idea, especially one that the Assembly has already supported several times in the past, but the Assembly backed sending this to the voters this year and that's what should have happened,” Prieto said.
The bill, S2810, would requires the state to pay its pension contributions on quarterly basis by September 30, December 31, March 31, and June 30 of each year, beginning July 1, 2017. Sweeney said it’s similar to the past proposals, but not identical.
The Senate is scheduled to vote on the proposal at its session next Monday.
If the money is put in more regularly, the pension funds would then have additional time to increase investment returns – presuming stocks, bonds and other investments are rising.
It could also mean the state would have to do additional short-term borrowing, which it does for cash-flow purposes early each budget year.
Sweeney estimates the gains from the pension funds’ investments would surpass the cost of the additional short-term borrowing by around $200 million a year, once fully phased in.
“By getting money in sooner, you bring the fund back to health quicker,” Sweeney said.
Under a law Christie signed in 2010 – in fact, the first law he enacted as governor – a full contribution would have been required starting in fiscal 2018, the budget year that begins next July, the final budget of Christie’s second term.
Instead, Christie is planning to pay in half of what actuaries recommend, $2.4 billion rather than $4.8 billion, then increase that by 10 percent each year until starting to make full contributions in fiscal 2023, when the payment is projected at $5.7 billion.
The proposed constitutional amendment lawmakers had been pursuing this year would have included the same 50 percent contribution in 2018, then sped up those increases by 12.5 percent each year, so that full contributions would be made starting in 2022.
Annual state spending on the pensions would be higher for four years under the Legislature’s constitutional amendment plan, compared with Christie’s timetable – by $126 million in 2019, $250 million in 2020, $370 million in 2021 and $477 million in 2022.
However, annual payments would then be lower under the Legislature’s approach starting in 2023 because larger payments would have been made earlier, rather than deferred. The difference in the first year is about $131 million lower.
Had the 2010 law been followed, the payments in 2023 would have been around $520 million less than they will be if Christie’s timetable is followed – around $5.2 billion, rather than $5.7 billion.
The payment in 2023 would be around $389 million higher under the Legislature’s timetable than it would have been had the 2010 law been followed.
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