June 9, 2011

New Jersey Pension Reform is Modest in Light of the Problem

Governor Christie and Senate President Stephen Sweeny’s agreement on pension and healthcare benefit reform for New Jersey has been opposed by the unions, but the call for reform is being made by the New Jersey State League of Municipalities (NJSLOM). Mercatus Center pension expert Eileen Norcross, who is currently researching the salary, health care, and pension costs on New Jersey’s local budgets, says that the proposed reforms are modest relative to the size of the problem.

“A big lesson from our analysis is official budget numbers only tell part of the story,” said Norcross. “Government accounting assumptions and decades of pension-policy changes meant that these risks were not recognized, ultimately contributing to the magnitude of the problem.”

Norcross says that while the state reports an unfunded liability in its pension system of $54 billion, when you discount the liability correctly, the liability figure is actually five times larger. 

“On the local level, pension and health-care costs are putting immense pressure on budgets,” Norcross said. “With health benefits and pensions for public safety workers amounting to an average of $47,000 per employee annually for a municipal government, NJSLOM would like to see local workers contributing more to their health benefits.”