Says Course Reversal Will Weaken Public Employee Pension Funds
Senate Republican Budget Officer Anthony Bucco blasted a move by Acting State Treasurer Elizabeth Muoio that would weaken New Jersey’s public employee pension funds by backtracking on an important fiscal reform.
Sen. Anthony Bucco blasted a move by the Murphy Administration that would weaken the state’s pension funds by backtracking on an important fiscal reform. (Pixabay)
“Our pension funds got into bad shape by making overly optimistic projections on the rate of return that we could expect,” said Bucco. “An important part of the fiscal reforms instituted during the Christie Administration was reducing that assumed rate of return to a realistic level. It wasn’t an easy thing to do, but it was necessary. It’s disturbing that one of the Acting Treasurer’s first official announcements is to backtrack on such an important pension reform.”
During the Christie Administration, the assumed rate of return for the state’s pension funds was reduced in steps from 8.25 percent to 7.0 percent, with the most recent reduction implemented last year to account for high asset valuations and an expected shift to lower realized returns over the long run. Those reductions were praised by pension fund actuaries and ratings agencies.
The move announced today by Muoio would increase the assumed rate of return to 7.5 percent for FY2019, with reductions over several years before returning to 7.0 percent for FY2023.
The rosier assumptions will result in lower required payments into the pension funds by the State and local governments.
“We spent the past eight years digging out of a massive pension hole left by previous administrations,” said Bucco. “We need to stay the course and keep making the biggest pension payments that we can. This move by the Murphy Administration to cut pension payments should serve as a warning sign to public employees. The gimmicks are back.”
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