Moody's: N.J. Pensions to Run Dry in Ten Years


A new report from Moody’s Investors Service warns that two of New Jersey’s largest public employee pensions will run out of money and exhaust their underlying assets within ten years. 

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Moody’s says the New Jersey Public Employees Retirement System (PERS)  and the Teachers’ Pension and Annuity Fund (TPAF) “could fully expend their assets as soon as 2024 and 2027… even assuming the funds meet assumed investment returns.” 

Last week, New Jersey reported its unfunded pension liabilities doubled to an astonishing $83 billion at the end of June.  New more realistic accounting guidelines required by the Governmental Accounting Standards Board require New Jersey, and other states, to use smaller discount rates to determine investment results. The Moody’s report -- New Jersey Reports Surge in Unfunded Liabilities Under New Pension Accounting Rule -- indicates New Jersey has limited time to fix its poorly funded public pensions, or the state’s taxpayers face a nightmarish future of higher taxes and fewer services.

According to Moody’s: “Once plan assets are depleted, the state will have to fund pension benefits directly from its operating budget, driving its annual retiree benefit expenses significantly higher.” 

Benefits paid to teachers and public sector retirees in 2013 from TPAF and PERS assets totaled $4.9 billion, roughly 16% of the states operating revenues. The state’s contribution to those plans last year was $878 million. When those pension plan assets are depleted, taxpayers will have to fund the $4 billion shortfall.  New Jersey has already delayed plans to better fund its public pensions, and Moody’s warns the new accounting standards will cause the state’s unfunded liability to continue to grow.

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