Will programs take hit if pension funds take over NJ Lottery?
TRENTON — State lawmakers seem willing to act on Gov. Chris Christie’s plan to prop up public workers’ pension funds by handing over the New Jersey Lottery to them, though they’re still anxious for more details.
At budget hearings this week, state Treasurer Ford Scudder shared more information than had been made public in the five weeks since Christie floated the transaction in his Feb. 28 budget speech.
The lottery, being valued at $13 billion, would be contributed to the pensions – adding to the funds’ security, reducing their unfunded liability and cutting the annual required payments to the fund.
“Not the revenue stream but actually take the lottery as if it were a business and place it into the pension system,” Scudder said.
Scudder said people wouldn’t notice any differences in lottery operations.
“To a retailer or to a customer, it would look exactly the same. You would still be buying the same lottery tickets. The retailers would still be getting their commissions for sales,” he said. “It would still be a division within Treasury. It would still have a director appointed by the governor and subject to the advice and consent of the Senate. It would still be directed by the state Lottery Commission. It would just be owned by the pension system.”
About $1 billion in revenues now transferred to the general state budget would stay in the pensions. Currently that money supports education, centers for people with developmental disabilities, psychiatric hospitals and homes for disabled veterans.
Scudder said those programs would still be funded though the general budget using its newfound flexibility achieved through the lower pension payments.
“So net-net, while revenues would be down, so would appropriations, and that would approximately wash out,” said Scudder, who didn’t provide specific data.
In fiscal 2016, the lottery funded $667 million of the state’s higher education spending and $71 million of its K-12 spending. It also provided $163 million for psychiatric hospitals, $70 million for centers for the developmentally disabled and $16 million for veterans’ homes.
“I just wanted to make sure that some of the services that we offer through the revenues of the lottery, that they wouldn’t be cut – specifically when we’re talking about education, since it’s probably been the hottest topic when people have spoken to us in our public hearings,” said Assemblywoman Eliana Pintor Marin, D-Essex.
“Right. No, that’s not the intention of the proposal,” Scudder said. “The intention is solely focused on pension solvency, but not in the process cutting any other services.”
Sen. Linda Greenstein, D-Middlesex, noted the state constitution dedicates lottery revenues for state institutions and state aid for education, but Scudder said the state’s outside counsel has advised that the plan adheres with existing federal and state law.
“I don’t envision it being an obstacle. We do not believe we need a constitutional amendment,” said Scudder. “As you said, state institutions, state education – there are a number of pension plans that employees that fall into those two buckets.”
Sen. Anthony Bucco, R-Morris, said “the biggest gain would be our credit rating.” Wall Street agencies have cited New Jersey’s pension obligation as a major factor driving recent downgrades – three or four each by the three major bond-rating agencies during Christie’s tenure.
Scudder said the deficit, calculated at $49 billion by actuaries, is cited by rating agencies and is a concern among public employees.
Scudder said payments are being ramped up. The proposed contribution for next fiscal year is $2.5 billion, which is half of what actuaries recommend. That’s up from a 40 percent payment this year.
“Where we stand today, even if we continue on the one-tenths plan, the pension system as a whole won’t get to 80 percent funded until 2047,” Scudder said, adding that the lottery transaction “would move us forward on the funding timeline by 10 to 20 years.”
Sen. Paul Sarlo, D-Bergen, who heads the Senate budget committee, said lawmakers “should and will have an open mind” to responsible actions to improve the health of pension funds but that they need to know they’re fiscally responsible.
Sarlo asked to see a plan soon. Scudder said that’s likely and that the administration aims to have it enacted by the end of June.
Assemblyman John Burzichelli, D-Gloucester, criticized the shortage of details about the lottery transaction, which he called a “Hail Mary plan” to fund the pensions.
“It raises the concern that this administration either lacks specifics or has already checked out,” said Burzichelli.