Governor Chris Christie has announced his plan to tackle New Jersey’s pension shortfall. Officially estimated at $46 billion, Andrew Biggs and I estimate the figure is closer to $174 billion (using the risk-free discount rate to assess the size of the liabilities).
Today’s Philadelphia Inquirer reports Christie will ask for a rollback the 9 percent benefit enhancement enacted in 2001 for current workers. This is a good step to putting New Jersey’s pension plan on more stable footing.
In addition to this announcement, Orin Kramer writes in the New York Times about the role investment assumptions played in the pension crisis. He points to government standards that allow pension systems to measure their asset values looking back over a period of years which ultimately gives the plan the appearance of a higher level of funding.
Both articles emphasize the impact of decades of pension deferrals and also raise the issue of the role of government accounting standards in creating the pension crisis. As these issues are hammered out states will continue to face increasing fiscal pressures as benefit payouts increase making public employee benefits, in Governor Christie’s words, “the public issue of this decade.”