CONSTITUTIONAL AMENDMENT TO ENSURE PENSION PAYMENTS GAINS SENATE APPROVAL
LEGISLATION WOULD REQUIRE GOVERNOR TO KEEP PAYMENT PLEDGE
TRENTON – The state would be required to make the required pension payments under legislation approved by the Senate today that would place a constitutional amendment to fix the pension system on the November 2016 ballot. The vote was 23 – 16.
“This is a smart and fiscally responsible way to manage state finances and the pension system,” said Senator Steve Sweeney, the bill’s sponsor. “It will save the taxpayers money and help bring more fiscal stability. This is about living up to promises and agreements but it is also the best way to serve all taxpayers.”
The amendment will have the administration do what it has already promised to do — to make a projected $2.4 billion payment representing 50 percent of the actuarially-required contribution in Fiscal Year 2018, as detailed in Treasury Department documents submitted to the Office of Legislative Services back in June, said Senator Sweeney.
The legislation that would seek voter approval for the plan is also sponsored by Senators Shirley Turner (D-Mercer) and Linda Greenstein (D-Middlesex/Mercer).
“The governor has already certified that he can make the 2018 pension payment that would be required by the constitutional amendment out of existing revenues without any tax increase of any kind,” Senator Turner noted.
“We have a legal and ethical responsibility to meet our pension requirements,” said Senator Greenstein. “Public employees are living up to their responsibilities by making their contributions, the state should be meeting its responsibilities as well.”
The payment schedule would require the state to ramp up to the full actuarially-required pension payment by 2022 – one year ahead of the governor’s proposed schedule.
Senator Sweeney noted that the courts have affirmed that it is the state’s responsibility to provide the required pension benefits. If the pension funds go bankrupt – which could happen as early as 2027 if the state does not start making the required payments — the full cost of paying the pension would have to come out of the state budget, which could cause a fiscal crisis.
The legislation requires the state to make pension payments on a quarterly basis – which the federal Employee Retirement Income Security Act requires underfunded private pensions to do to maximize investment earnings. Making quarterly payments will save taxpayers between $10 billion and $13 billion over the next 30 years.