A recession would thwart the modest progress New Jersey has made in aiding its troubled state pension fund, a report by S&P Global said Wednesday.
"The record national economic expansion has helped the state achieve its current contribution percentage," said the report, referencing state payments to the $76 billion New Jersey Pension Fund, Trenton. "New Jersey's inability to contribute full pension annually determined contributions after 10 years of national economic recovery raises questions about what could happen in another recession."
In recent years, New Jersey has made incremental contributions to the New Jersey Pension Fund, which are still below the actuarial annually determined contribution.
For the fiscal year ending June 30, 2020, the state is contributing $3.8 billion, or 70% of the ADC. The proceeds include money from the state's operating budget as well as the New Jersey Lottery, which became a New Jersey Pension Fund asset in the 2018 fiscal year.
The state contributed $3.2 billion, or 60% of the ADC, for the fiscal year that ended June 30.
For the next budget, the state is supposed to contribute 80% of ADC, according to a payment schedule started by former Gov. Chris Christie. The goal is to make contributions rising 10 percentage points a year until 100% annual ADC is achieved.
A preliminary state estimate for an 80% ADC is about $4.49 billion. Gov. Phil Murphy will announce the next proposed payment in January, when he delivers his budget message.
"However, each year the state avoids contributing full ADC, it increases the size of the ADC in the following years," the S&P report said. "Reaching full ADC funding might prove difficult if a recession intercedes between now and 2023."
The S&P report said accounting principles outlined by the Governmental Accounting Standards Board Statement 67 actuarial valuation, as of July 1, 2018, show the New Jersey Pension Fund — which includes seven retirement funds — had a combined net pension funded ratio of 38.4%, "which we consider low."
This ratio "could improve somewhat in the 2019 valuation," after incorporating the 60% ADC contribution in fiscal 2019, the report said.