New Jersey OKs $4.7 billion payment to pension fund

New Jersey Gov. Phil Murphy on Tuesday signed a fiscal 2021 budget law that calls for a $4.7 billion contribution to the New Jersey pension system and authorization to borrow up to $4.5 billion to fill revenue gaps caused by the economic impact of the coronavirus outbreak.

The $32.7 billion budget is for the nine months starting Oct. 1, the first day of the revised fiscal year.

"It's the right thing to do," Mr. Murphy said of the pension contribution during the budget-law signing ceremony in Trenton.

In April, Murphy signed a law extending the traditional fiscal year to Sept. 30, rather than June 30, because of the pandemic. He also signed an emergency appropriations bill for $7.6 billion for those three extra months.

The $4.7 billion state contribution is below the $4.9 billion that Mr. Murphy requested in his budget proposal in August. The contribution will be made in four quarterly payments during the revised fiscal year — the first is set for October — and encompasses both general funds and proceeds from the state lottery, which has been a pension system asset for several years.

The state has counted on an estimated $1 billion in lottery proceeds each fiscal year, but the pandemic cut into that amount during the 12 months ended June 30. Lottery proceeds accounted for $937 million, and the state didn't make up the difference.

Aggregate lottery proceeds for July and August were $166.7 million, or 8.4% higher than the year-ago period. (Lottery proceeds for the pension system are counted for the traditional 12-month fiscal years starting July 1). During July and August, major revenue was down 14.9% to $2.1 billion from the year-ago period.

The $4.5 billion in borrowing was approved by the Legislature. On Monday, a four-member legislative committee — all Democrats — signed off on the amount. The panel, which was established by the borrowing law signed by the governor in July, determines how much is needed to balance the budget.

The law allows the state to borrow up to $7.2 billion for the 2021 fiscal year. It was immediately challenged as unconstitutional by the state Republican party and several legislators.

However, the New Jersey Supreme Court ruled unanimously on Aug. 12 that the law was constitutional, adding that governor must prove the need for the requested borrowing and to make sure the borrowing doesn't exceed the amount required to cover the budget's revenue shortfall caused by the coronavirus.

The New Jersey Pension Fund, Trenton, had assets of $74.1 billion as of May 31, according to the latest available data.