Analysis: Wall Street skeptical of N.J.’s pension reforms
APRIL 10, 2014, 10:15 PM LAST UPDATED: THURSDAY, APRIL 10, 2014, 10:20 PM
BY JOHN REITMEYER
STATE HO– USE BUREAU
THE RECORD
Governor Christie is calling for pension reforms, but analysts from the Wall Street ratings agency Standard & Poor’s said on Thursday that it’s unclear if that will put the state on a better financial footing.
Their concerns came a day after the agency lowered New Jersey’s bond rating, making it third worst among U.S. states.
In major speeches this year, and at many public events lately, Christie has said he wants to work with lawmakers to come up with new reforms, changes like those he negotiated with Democrats in 2011.
During a town-hall-style event in Fairfield on Wednesday, Christie said he would “force this discussion” again with lawmakers.
“I’m going to put a plan out there, and they’re going to have to deal with it,” Christie said.
But on Thursday, spokesman Kevin Roberts would not say exactly what Christie is considering at this stage.
“The governor has been clear that he is engaging the Legislature, and absent an indication from them that they are willing to recognize reality and negotiate next-step reforms in a bipartisan way, he will put forward a proposal of his own,” Roberts said.
Roberts also disputed the notion from the ratings agency analysts that recent changes to the pension formula and debt restructurings have pushed costs on to future budgets.
And it’s that uncertainty from Christie, along with his recent budget practices, like over-eager estimates for tax revenues that fall short, that have analysts concerned.
After years of skipped or only partial contributions from the state, the public employee pension system remains grossly underfunded and continues to weigh down New Jersey finances.
The burdensome pension payment — Christie’s latest spending plan calls for a record, $2.25 billion contribution that is still only a fraction of what actuaries say the state should be spending on an annual basis to bring the fund closer to solvency — was among the factors cited by Standard & Poor’s in announcing its move on Wednesday.
The downgrade was bad news for Christie, a Republican who has tried to portray his administration as having improved New Jersey’s finances after years of Democratic mismanagement. But the analysts said New Jersey is still dealing with some economic struggles while most other states have enjoyed fuller recoveries that have put their budgets back on solid ground.
The lower rating for New Jersey’s debt also comes just as state lawmakers are reviewing Christie’s latest spending plan, a $34.45 billion budget that is the largest in state history. The credit rating is an important factor in the budget talks because it helps determine how costly any future borrowing or refinancing will be.
Christie used the downgrade’s announcement to apply more pressure on Democratic lawmakers to enact new pension system changes, something they are reluctant to do yet again.
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