NJ Poised To Spin Off Investment Management for Public Safety Pension

New Jersey currently places the assets of all its pension systems in a $71 billion pool, which is managed by the State Investment Council.

But that could change this week.

A bill in the state legislature, which has gained bi-partisan support thus far, would spin off the investment management of the assets of the Police and Firemen’s Retirement System.

Public safety unions have been pushing for the change, arguing they can make better investment decisions on their own. They’ve also argued that their system — which, at 70 percent funded, is in much better shape than the state’s other systems — shouldn’t be pooled in with the under-achievers.

The idea was first proposed by a commission created by Chris Christie in 2014.

From NorthJersey.com:

Supporters say that by managing their own money, police and firefighter unions would be able to outperform the State Investment Council and avoid the pension “gimmicks” often seen in government.

“There is little question that the PFRS is New Jersey’s healthiest pension system,” Patrick Colligan, president of the state Policemen’s Benevolent Association, wrote in a letter to members Wednesday. “But no one should deny that nearly 20 years of pension gimmicks have reduced the value of PFRS from well over 100 percent funded in 2000 to just over 70 percent funded today. Who is to blame for that serious drop in value? The state of New Jersey and its municipal governments.”

But some are strongly opposed to the bill, because although it transfers the public safety System’s assets out of the pool, it leaves the liabilities. If the experiment fails, taxpayers would be on the hook.

From NorthJersey:

The bill, however, only transfers management, not liabilities, to the police and fire unions, leaving taxpayers on the hook if investments yield poor returns, said Michael Cerra, executive director of the New Jersey League of Municipalities.

“The PFRS is a defined benefit system where the amount of retirement pay is calculated on a formula considering factors such as length of employment, salary history. It is not calculated on the return of the fund’s investments,” Cerra told a Senate budget panel this month. “As a result, if there’s a shortfall in that return, then the employers — in this case the municipalities and the counties — must make up the difference from their general funds.”

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