New Jersey pension reform not enough, Moody’s says

Pension funding in New Jersey “will continue to deteriorate for several years” despite budget reform proposals by Gov. Chris Christie, according to a Moody's Investors Services report.

Moody's, in a two-page report issued Monday, said that even if the state Legislature approves Mr. Christie's proposals, “it is likely that the proposed reforms will face union-led litigation.”

The report cited Mr. Christie's recent budget proposals that include making a $506 million pension contribution, rolling back a 9% benefit increase granted in 2001, eliminating automatic cost-of-living adjustments for current and future retirees, raising the retirement age and increasing employee contributions to the pension system.

The report called the proposals “a credit positive and initial step” toward addressing the state's $87.5 billion in unfunded liabilities for pension and health benefits.

The Moody's report said New Jersey now has a “sizable” $30.7 billion unfunded pension liability “making it the seventh-lowest funded system in the country.”

New Jersey's funded ratio for its pension system “has declined sharply over recent years because annual pension contributions were cut to fractions of the annual required contribution or eliminated completely,” the Moody's report said. The funded ratio for the pension system was 62% as of June 30, 2010, the latest available data.

“Moody's recognizes that the governor's proposed pension and health benefit reforms are an important step toward getting New Jersey's fiscal house in order,” said William Quinn, a spokesman for the State Department of the Treasury, in an e-mailed response to questions.

The department's Division of Investment manages investments for the state's $71.6 billion public pension fund, which comprises seven retirement systems.

“If the Legislature takes timely action to approve (the proposals), they will deliver both budgetary savings and enhanced retirement security for public workers,” Mr. Quinn wrote.