N.J. pension funds' deficit increases

INQUIRER STAFF WRITER

New Jersey's pension funds, which are supposed to pay retirement benefits to teachers, firefighters and government workers, faced a $34.4 billion long-term deficit as of June 30, up $6 billion from the previous year, the Treasury Department said yesterday.

The gap between what the pension funds have and what they are expected to pay in retirement benefits has surely grown significantly larger since then, analysts said. Since June 30, the state's pension investments have lost an estimated one-quarter of their value; lawmakers approved a plan to let towns skip half of their payments into the funds this year, and Gov. Corzine proposed a budget that would contribute only a fraction of what the state owes in the coming fiscal year - 6 percent in the case of the two largest retirement funds.

The seven retirement plans had about 73 percent of the money needed for their long-term costs as of June 30, according to the Treasury Department, so benefits for the 600,000 people covered are not in immediate danger.

But the growing deficit means future budgets could be weighed down by increasing amounts of money needed to make up for shortfalls that have been years in the making.

The costs could consume money that could be spent on other services, or require tax increases or budget cuts or a combination.

The seven state retirement systems largely cover teachers, police, firefighters, judges, and state and local workers.

The largest of the funds, which pays benefits for state and local government employees, fell $1.9 billion further behind its obligations last fiscal year and faces a $10.7 billion long-term shortfall, actuaries reported yesterday.

As of June 30, it had $29.5 billion in actuarial terms, compared with $40.2 billion in long-term obligations.

As with the other systems, the picture is sure to get worse due to the recession and the funding shortfalls expected this year.

The evaluation of the Public Employees' Retirement System (PERS) also counts only $6 million of the $181 million of increased pension costs from last year's early-retirement incentives, said Janet Cranna, an actuary for Buck Consultants. The rest of the costs will be reflected in next year's report.

The PERS fund covers retirement benefits for 319,000 people.

Cranna's report comes roughly two weeks after actuaries reported that the teachers' pension fund, which covers about 232,000 people, had a $14.1 billion shortfall as of June 30.

Annual snapshots of each pension fund look back to that date the previous year to evaluate where the systems stand and how much money is owed in a given year to help make up for any shortfalls.

While actuaries questioned the long-term viability of the teachers' retirement fund, Cranna did not go as far in her comments.

But she said Corzine's plan for the state to pay $30 million out of the $580 million it owes to PERS this year will increase the funding shortfall.

"Not only are you not making any inroad into getting your unfunded liability down, but you're not even covering your accrued liability for this year," Cranna told the PERS board.

Local governments owe $578 million in the coming year to help make up the gap, but it's unclear how much will be paid because of a law that will allow them to delay those contributions.

The Corzine administration noted that Corzine has put $3.4 billion into the pension fund during his term. That's more than other governors had done in 14 years, according to the administration, although some past governors were not required to make contributions when the funds were flush. Corzine also has negotiated benefit changes expected to save $6 billion over the next 10 years.

"There are multiple factors that influence the liabilities of the system, not the least of which is investment returns, which have not kept pace with rising liabilities," said a statement from the Treasury Department.

Hetty Rosenstein, New Jersey director for the Communications Workers of America, said the labor union was "incredibly concerned" about the pension fund.

"At a certain point in time, you reach a tipping point where more money is going out than is coming in, and the plan stops being viable, and then you have a disaster," she said.