New Jersey’s retirement system could suffer even more if the state Supreme Court strikes down a 2011 law that froze pension benefits, Moody’s warned on Jan. 20. A group of state retirees have sued the state over the law.
According to NJ.Com, the rating agency said that if the court invalidates the law, the state pension system’s unfunded liability — which it says amounts to $55 billion — would increase by one-third if the system is unfrozen and the state and municipal governments have to restore cost-of-living increases. For good measure, Moody’s says the New Jersey has the lowest average annual contribution to its pension system in the United States — 13.5%.
It’s not the first time in the last three months that Moody’s has had sobering analyses for the Garden State.
In October 2015 it warned that if a plan unveiled in 2015 by a commission created by New Jersey Gov. Chris Christie (R) for reforming state employees’ pension and health benefits is implemented, the plan could pursue solvency at the expense of New Jersey public school systems.
Moody’s questions whether the money the plan would save municipalities in health costs would be sufficient to cover school districts’ increased expenses to cover teacher retirements. It also questions how municipalities will handle such expenses as costs for health care and pension plans rise.
But that’s not to say that Moody’s opposes reform per se. NJ.com says that Moody’s warns that school districts will be at risk if reforms are not put in place, and that the likelihood of the state needing to take alternative actions such as cutting state aid will increase the longer it takes to enact reform.
According to NJ.Com, the rating agency said that if the court invalidates the law, the state pension system’s unfunded liability — which it says amounts to $55 billion — would increase by one-third if the system is unfrozen and the state and municipal governments have to restore cost-of-living increases. For good measure, Moody’s says the New Jersey has the lowest average annual contribution to its pension system in the United States — 13.5%.
It’s not the first time in the last three months that Moody’s has had sobering analyses for the Garden State.
In October 2015 it warned that if a plan unveiled in 2015 by a commission created by New Jersey Gov. Chris Christie (R) for reforming state employees’ pension and health benefits is implemented, the plan could pursue solvency at the expense of New Jersey public school systems.
Moody’s questions whether the money the plan would save municipalities in health costs would be sufficient to cover school districts’ increased expenses to cover teacher retirements. It also questions how municipalities will handle such expenses as costs for health care and pension plans rise.
But that’s not to say that Moody’s opposes reform per se. NJ.com says that Moody’s warns that school districts will be at risk if reforms are not put in place, and that the likelihood of the state needing to take alternative actions such as cutting state aid will increase the longer it takes to enact reform.
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