NJ makes single largest pension payment in decades, $6.9B

Listen to this article

The Murphy administration formally made the state’s largest pension payment in decades, marking the first time in 25 years that the state has come through on its full pension bill.

Under the $46.4 billion spending plan rushed to Gov. Phil Murphy’s desk in the span of a week and approved on June 29, the New Jersey Treasury Department made a single lump sum payment of $6.9 billion – rather than quarterly payments – into the state worker pension fund, it announced on July 1.

The pension system was sorely underfunded for years – by as much as $100 billion – making it the source of a combined 11 credit downgrades by the three major Wall Street rating agencies over the past decade.

Murphy, a first-term Democrat vying for reelection this November, said the payment is part of a process to “start filling in the hole that has been dug over the last 25 years.”

The last time the state made its full actuarially recommended pension payment was in 1996, when Christine Todd Whitman, a Republican, was governor.

“After years of kicking the pension can down the road, a practice which has cost the state billions and billions of dollars, today we are officially turning the corner,” reads a statement from New Jersey Treasurer Elizabeth Maher Muoio.

Treasury officials said that after several years of making full payments into the pension system, they would eventually be able to lower the annual state appropriations.

Top lawmakers like Senate President Stephen Sweeney, D-3rd District, have floated ideas to bring more funds in for the pension, such as express lanes on Routes 78 and 80 that would toll drivers to access them. And he’s suggested transferring other revenue-generating state assets, like the New Jersey Turnpike Authority, over to the pension fund, so that they would not be subject to the “high stock market volatility,” he said in an April statement.

“The system faced bankruptcy, pure and simple,” Sweeney said on July 1.

Other state assets, like money from the State Lottery, already go toward the pension system. Out of the $6.9 billion in this payment, nearly $5.8 billion comes from state appropriations and the other $1.1 billion from the State Lottery.

A variety of Sweeney’s so-called “Path to Progress” proposals, championed by the Senate president and first rolled out in 2018, call for switching newer public workers into a hybrid retirement system consisting of a defined pension plan up to a certain income amount, after which workers would utilize a 401(k)-style plan.

“Governor, you fulfilled a dream of mine. I know that’s scary. I know you’re going to be thinking ‘oh s**t’ … But we’re making the full pension payment,” Sweeney said during the June 29 budget-signing ceremony.