The New Jersey General Assembly and Senate have unanimously approved a bill that would require state payments to the New Jersey Pension Fund to be made quarterly rather than in the traditional practice of a lump sum toward the end of each fiscal year.
The bill was introduced in the Senate on Nov. 14 and passed 35-0 on Monday; the Assembly approved it 72-0 the same day. The bill now goes to Gov. Chris Christie.
Democrats control both the Assembly and Senate, and the bipartisan support indicates that there are enough votes to override a veto by the Republican governor. Mr. Christie vetoed a similar bill in 2014.
The bill doesn't make any provisions for the amount of state payments to the $72.2 billion New Jersey Pension Fund, Trenton. The quarterly payment plan would take effect during the next fiscal year, which starts July 1. Payments would be made on the last day of each quarter. Supporters have said quarterly payments would enable the pension fund to increase investment income.
Critics, including the governor, have argued in the past that setting a mandated quarterly payment fails to take into account the unpredictability of tax collections that finance the state's budget, forcing the state to borrow money to make the pension payments.
The bill said the pension fund would reimburse the state treasury if the state must borrow money to make the quarterly payments. “The amount of the contribution shall be net of the amount of any increase in the interest on the tax and revenue anticipation notes attributable solely to the need to borrow an increased amount in order to make the quarterly payments,” the bill said.
The bill received a tepid endorsement from the Communications Workers of America, which represents some participants covered by New Jersey's pension fund. “Unless the full amount due to the plan is appropriated, quarterly payments are meaningless,” CWA NJ State Director Hetty Rosenstein said in a statement. “When it comes to this state's pension, history shows we simply cannot rely on the word of the governor or legislature.”
The quarterly-payment strategy was a component of a proposed constitutional amendment — supported by CWA — that would have guaranteed specific state payments each year to the pension fund.
The General Assembly voted to put the amendment on the November 2016 ballot, but the Senate didn't vote on the proposal. The Senate has until the end of the current legislative session in January to vote on the measure to place it on the November 2017 ballot. Mr. Christie cannot veto a constitutional amendment proposal. The Legislature's vote came one week after S&P Global Ratings cut the state's general obligation bond rating by one notch to A- from A. The outlook remains negative.
"We base the downgrade on our expectation that state budget pressures will intensify in future years," credit analyst David Hitchcock said in a Nov. 14 news release. "Recent events have added incremental out-year budget pressure, in our opinion, to what is already a sizable structural budget imbalance driven primarily by pension underfunding."
The S&P news release attributed the negative outlook to “our view that the state's pension liabilities will remain a source of downward pressure on the rating.”