November 26, 2008
UNDERFUNDED / OVER-GENEROUS PENSIONS UPDATE:
New Jersey’s pension fund has lost more than $23 billion this year, dropping to its lowest level since 2003 as a collapsing financial market battered its investments, a new state report shows.
The latest losses — nearly $9 billion in October, and another $3 billion so far this month — mean the fund is now worth $57.8 billion, or less than half the $118 billion in benefits it is due to pay out over time. . . .
While Clark delivered his report to the State Investment Council in Trenton, Gov. Jon Corzine was in Atlantic City promising a convention of local government officials that he would let them postpone about a half-billion in payments they are scheduled to make to the pension funds in April.
Specifically, Corzine proposed letting local governments skip paying $541 million of the $1.1 billion due. They would gradually work their way back to full payments by 2012 under his plan.
Cutting the payments in half may avoid a big surge in property taxes, but it also will add to the shortfall in the pension accounts dedicated to local government workers, police and firefighters.
One analyst translates things thus:
The state of New Jersey is insolvent. Bankrupt might be a better word. New Jersey is $60 billion in the hole on pension funding and the Governor is planning on skipping payments in a “pension payment holiday” until 2012 so as to not increase property taxes. To top it off, the ongoing plan assumptions are 8.25%. Sorry NJ, that simply is not going to happen.