The impact of COVID-19 on New Jersey will produce "precipitous declines in revenues" for the current fiscal year ending June 30 as well as the next fiscal year affecting "revenue collections and pension funds contributions," state Treasurer Elizabeth Maher Muoio warned.
The alarm was sounded late Monday in a voluntary disclosure statement sent to bondholders. The notice didn't provide specific numbers other than to report that New Jersey had frozen $920 million in state spending for the current fiscal year "to ensure sufficient cash and budget authority to meet emergency and statutorily required obligations."
Among the key points in the letter to bondholders:
- New Jersey "expects precipitous declines in revenues" in fiscal year 2020 and FY 2021, which will include "significant reductions in gross income tax revenues, corporate business tax revenues, and sales tax revenues."
- The state expects lower lottery revenues, "which have already started to decline." (The lottery accounts for about $1 billion a year in the state's contribution to the pension system. According to the state's revenue report through February — the first eight months of the current fiscal year — lottery proceeds were $629.5 million, down 9.8% from the same period a year ago.) Parenthetical information added by Pensions & Investments.
- The state might face increases its "actuarially recommended contributions to the State's pension plans to the extent that the valuation of pension plans is affected by the deterioration in value in the investment markets." The New Jersey Pension Fund, Trenton, had assets of $79.7 billion as of Dec. 31, 2019.
- New Jersey "expects to encounter negative impacts on its liquidity" in FY 2020 because of an expected extension of the state's tax filing deadline from April 15 to potentially in July.
- The state "expects that it will need to significantly revise the estimated revenues and projected appropriations" for FY 2020 and FY 2021 contained in the governor's budget message for FY 2021 that was delivered Feb. 25, before the outbreak of the coronavirus in New Jersey.
During that Feb. 25 budget message, Gov. Phil Murphy proposed making a $4.6 billion contribution to the state pension system for the fiscal year starting July 1, which includes the lottery proceeds. This represents 80% of the actuarially determined contribution. In recent years, the state has been increasing its contribution by 10 percentage points annually, a practice started by former Gov. Chris Christie.
The state is supposed the contribute $3.75 billion for the current fiscal year, or 70% of the actuarially determined contribution.
During his budget message, Mr. Murphy said that amount would be supplemented by an additional $279 million.
Jennifer Sciortino, a spokeswoman for the Treasury Department, said she could not provide information at this time on whether the $279 million had been contributed or whether the proposed contribution for the current fiscal year would be paid in full.
State contributions to the pension system are done on a quarterly basis. Ms. Sciortino said she didn't have information on whether the payment for the third quarter of the current fiscal year had been paid. The payment is due March 31.