I posted yesterday at Public Sector Inc on what New Jersey’s pension reforms are likely to accomplish. Steve Malanga expands on the reforms today and rightly notes that it’s not enough to fix the system. While these reforms were politically difficult to accomplish they are also modest relative to the magnitude of the problem. The legislation includes a provision that allows contribution rates to be lowered by a pension oversight committee when the fund hits 80 percent funded. The problem is what they calculate to be 80 percent funded is closer to 40 percent funded. The Wall Street Journal reports that these pension reforms are calculated by the Trenton to save local governments $120 billion over 30 years, and thus relieves some fiscal pressure in municipal governments.
My forthcoming analysis of local budgets shows one of the problems that worries me: what localities contribute to pensions on their books varies according to state policies that modify contributions based on flawed accounting and actuarial assumptions.
This legislation buys governments a little more time. And the bills shows a willingness by both parties to cooperate on a very politically contentious issue. Unfortunately, the liability still looms large.