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New Jersey governor proposes using lottery money to bolster state pension system

New Jersey Gov. Chris Christie
New Jersey Gov. Chris Christie

New Jersey Gov. Chris Christie recommended that the state lottery be used to bolster public pension funds, a strategy that could raise the funding ratio of the state pension system to 64% from 49%.

“I am proposing to contribute the revenues from the lottery to eligible pension plans,” Mr. Christie said in delivering his annual budget message to a joint legislative session in Trenton. “The contribution would have the immediate effect of reducing the unfunded liability of the pension system by approximately $13 billion, and would increase the funded ratio of the pension system by almost 15 percentage points in one fell swoop, from 49% to 64%.”

Using New Jersey Lottery revenue would also “significantly reduce the amount we have to pay into the pension system every year out of the general fund,” Mr. Christie said.

Mr. Christie repeated his pledge that the state would contribute $2.5 billion to the $71.2 billion New Jersey Pension Fund, Trenton, for the fiscal year that starts July 1, representing a $647 million increase over the state contribution for the current fiscal year.

Mr. Christie did not discuss details on how the state lottery could help the pension system. “I look forward to sitting with all stakeholders right away to discuss the specifics of implementing this plan,” he said. “If implemented correctly, this action would increase the value and stability of our pension funds immediately and would please bond investors and credit rating agencies, also giving greater confidence to New Jersey’s public employees.”

Using lottery money to assist the pension system would be similar to some private-sector pension plans that “make large transfers of assets into the pension fund,” Mr. Christie added. The state lottery “is a state-sponsored monopoly that spins off large amounts of cash. Today, though, we have no ability to recognize the significant value of that asset.”

Mr. Christie added that he and state Treasurer Ford M. Scudder on Monday reduced the assumed rate of return for the pension system to 7.65% from the 7.9% that had been in place since 2013.

“By reducing the assumed rate of return, we are stopping the gimmickry,” Mr. Christie said. “When we have too high an assumed rate of return, we are not telling the public the truth. While this concerted effort has contributed to increases in the annual required contribution into the pension system, those payments are crucial in ensuring the long-term viability of the pension system.”