Christie pension and health benefit commission's report warns of massive budget shortfalls

Government And Institutions Associated Press

A commission convened by Gov. Chris Christie to look into the health benefits and pension liabilities for public employees reported Thursday that the costs threaten to put a $90 billion drain on New Jersey's future state budgets.

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The commission issued its preliminary report on Thursday, putting numbers to an issue that's widely acknowledged in state government.

The bipartisan group's critique was blunt: "Both public employees and taxpayers as a whole have been poorly served by a long-standing and bipartisan tradition of increasing benefit levels without adequate funding."

The report did not recommend specific action; that's planned for the commission's final report, which is due in a month.

Christie, a Republican who is considering running for president in 2016, has been hammering at pension and health care costs all year.

Early in the year, he warned that growing spending on the benefits is taking up most of the state's new revenue and crowding out other priorities, such as funding schools. He said changes made in 2011 that raised the retirement age and required bigger contributions from employees was just a first step.

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After the state's revenue came in behind expectations for the fiscal year that ended June 30, he decided to make pension payments lower than expected both for that fiscal year and the new one.

He said he would have recommendations for long-term changes over the summer before he changed course and named the bipartisan commission to examine the issue.

The commission found that the state's contributions to the pension system are underfunded by $37 billion or 46 percent, largely because of a nearly 20-year pattern of governors skipping or skimping on contributions.

It found that the state government would have to contribute $4 billion to $5 billion each year over the next 30 years to fully fund the currently promised pension payouts. It also said that if the investments of those funds fall behind the projected 7.9 percent annual returns, the state would have to kick in far more. On the flipside, sustained higher returns could significantly reduce what taxpayers would have to kick in.

While the commission did not make recommendations, it did note ways other governments have tried to deal with similar issues. One of them is by shifting away from retirement plans that promise retirees a certain amount each year to plans that combine elements of defined benefit plans and defined contribution ones in which the employer agrees to invest a certain amount but has the employees assume the risk.

The commission also pointed out that the state does not have a fund to pay for retirees' health benefits but instead pays for them each year, leaving a long-term liability of $53 billion.

There is likely to be a political battle over recommendations.

The Democrats who control the state Legislature have said they will not consider changes until Christie adds more money to the state's pension fund.

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Associated Press writer Jill Colvin contributed to this report from Newark.