Video: Top New Jersey Lawmaker Weighs in on Pension Payment Ruling; Talks Taxing Millionaires to Fund Pensions

New Jersey Senate President Steve Sweeney sat down for an extended interview this week, and it didn’t take long for the conversation to swing to pensions.

In the clip above, Sweeney shares his reaction to the court ruling that will force the state to pay its full pension contribution in 2015, pending appeal.

Below, Sweeney talks about the idea of levying a tax on millionaires and using the revenue to pay down pension debt.


Photo credit: “New Jersey State House” by Marion Touvel – Licensed under Public domain via Wikimedia Commons –

Moody’s: New Jersey Pension Ruling A “Credit Negative” For State

Chris Christie

A New Jersey Superior Court judge ruled this week that Chris Christie acted outside the law when he cut the state’s pension contributions $2.4 billion over two years.

That means, pending appeal, the state will be making its full contribution in 2015 – a development that hasn’t yet been budgeted for.

So while the ruling was good news for the state’s underfunded pension system, the decision is a “credit negative” for the state itself, according to Moody’s.


The flexibility of the state’s pension payment has been “a tool essential” to balancing the budget, Moody’s Investors Service said. Putting limitations on that amounts to a “credit negative.”

“Going forward, making the full pension contribution would incrementally improve the pension funding position, but would significantly increase budget pressure by reducing the state’s ability to fund other programs and potentially challenge the state’s liquidity,” Moody’s said.


“While it remains unclear whether the payment will be increased in fiscal 2015, a $1.6 billion obligation would comprise nearly 15 percent of the unspent budget,” Moody’s said.

A credit negative assessment doesn’t suggest a rating or outlook change — which could affect New Jersey’s interest rates — is imminent, but rather assesses the impact of a single event, Moody’s said.

Since the full pension payment isn’t budgeted for, lawmakers are worried that “devastating” cuts will have to be made in the current budget.

The situation might have been avoided had the state taken the same approach as Illinois in 2013.

When Illinois passed it’s pension overhaul it didn’t count the savings in the budget — because it knew a legal challenge was imminent.


Photo By Walter Burns [CC BY 2.0 (], via Wikimedia Commons

New Jersey Pension Investment Return Falls Short of Assumed Rate in 2014

New Jersey State House

New Jersey’s pension system earned a 7.27 percent return on its investments in 2014 – down from a 16.9 percent return in fiscal year 2013-14.

The growth fell short of the system’s assumed rate of return.


New Jersey’s pension fund earned 7.3 percent on its investments last year, which state officials said beat market expectations.

But those gains didn’t live up to the 7.9 percent annual rate experts say is needed to keep troubled pension fund from adding to its liabilities.

The investments returned 7.27 percent, but were hurt largely because of market volatility in the second half of the calendar year, said Tom Byrne, acting chairman of the State Investment Council.

“For that period of time we were ahead of our benchmark by just a tiny bit but behind the 7.9 percent bogey,” Byrne said. “One period of time only tells you so much.”


Byrne noted that the investment council’s role is only half the battle. While it manages the state’s investments, it doesn’t have any say in setting or making pension contributions.

“The pension is still underfunded, and we can only do what we can do,” Byrne said.

Governors from both parties have underfunded the pension system since 1996, shortchanging the annual payments or skipping them altogether.

Pension officials defended the system’s recent dive into alternative assets; officials said those investments have earned the system an additional $2.8 billion in returns since 2010.


Photo credit: “New Jersey State House” by Marion Touvel – Licensed under Public domain via Wikimedia Commons –

Meet the Nine People Tasked With Reforming New Jersey’s Pension System


When it comes to pension reform, this isn’t New Jersey Gov. Chris Christie’s first rodeo.

Christie signed his state’s initial pension overhaul back in 2010. A major part of the law was the requirement that New Jersey slowly work its way up to paying its full actuarially required contribution into the state pension system.

But that plan never came to fruition, as Christie is using a large portion of the state’s pension contributions this year and next to fill budget shortfalls elsewhere.

Now, Christie says he’s going to give pension reform another shot. Last week, he announced plans to create a panel to analyze the state’s pension system and brainstorm ideas for cutting costs. From the NJ Star-Ledger:

The Pension and Health Benefit Study Commission will review the history of New Jersey’s public retirement system, which has been neglected by governors of both parties since 1997, who did not make required contributions whenever they ran into budgeting difficulties. Christie’s special commission will also look at reforms implemented in other states and then recommend changes to the governor.

Although Christie has been on the town-hall circuit this summer speaking of the need to reduce current contributions for public workers, those benefits in some cases are protected by the state constitution – and could be hard to claw back.

Christie, however, may be able to reduce health benefits, which are not as strongly protected as pensions under New Jersey law. He could also try to increase pension contributions for future workers, and their retirement age, as he did in 2011. Still, a Democratic-controlled Legislature is unlikely to go along with those moves.

Today, he announced the people that will populate the panel. Here’s a breakdown of who they are:


big_picThomas J. Healey – Partner, Healey Development LLC

Mr. Healey joined Goldman, Sachs & Co. in 1985 to create the Real Estate Capital Markets Group, and founded the Pension Services Group in 1990. He became a Partner in 1988, a Managing Director in 1996, and remains a Senior Director of Goldman Sachs. Prior to joining Goldman Sachs, Mr. Healey served as Assistant Secretary of the U.S. Treasury for Domestic Finance under President Ronald Reagan.

He is Chairman of the Rockefeller Foundation Investment Committee and is actively involved with other charitable institutions. Mr. Healey graduated from Georgetown University in 1964 and Harvard Business School in 1966.

tom-byrne-colorTom ByrneFounder, Byrne Asset Management:

Tom founded Byrne Asset Management in 1998. He serves as the Managing Director and Head of Equity Portfolio Management and brings over 35 years experience in the securities industry to his clients.
Governor Chris Christie appointed Tom to the New Jersey State Investment Council. The Council oversees New Jersey’s public pension fund assets, currently about $73 billion. Tom also serves as a trustee and treasurer of The Fund for New Jersey and is a trustee of several other civic organizations. He also served two terms as Chairman of the Democratic State Committee in New Jersey.

Tom is a graduate of Princeton University (1976) and Fordham Law School (1981).

chambers-circleRay ChambersSpecial Envoy, United Nations:

Ray Chambers is a United Nations Special Envoy for Financing the Health Millennium Development Goals and For Malaria (United States). [He] is a philanthropist and humanitarian who has directed most of his efforts towards at-risk youth.

He is the founding Chairman of the Points of Light Foundation and co-founder, with Colin Powell, of America’s Promise — The Alliance for Youth. He also co-founded the National Mentoring Partnership and served as Chairman of The Millennium Promise Alliance.
Chambers is the founder and Co-Chairman of Malaria No More, with Peter Chernin, President of News Corporation. He is taking a leave of absence from that role to focus on his appointment as the United Nations Secretary-General’s Special Envoy for Malaria.

Leonard W. Davis – Chief Investment Officer, SCS Commodities Corp:

Mr. Davis has organized and managed private equity, technology, and natural resource companies.  He has been the principal financial manager in a private equity company and has been the Chief Financial Officer to the lead investor of a natural resource company active in metals and energy.

Mr. Davis received his B.S. in Accounting from Spring Garden College and is a Certified Public Accountant.

Carl Hess – Managing Director of Americas, Towers Watson:

Carl A. Hess (age 52) has served as Managing Director, The Americas, of Towers Watson since February 1, 2014, and has also served as the Managing Director of Towers Watson’s Investment business since January 1, 2010. Prior to that, he worked in a variety of roles over 20 years at Watson Wyatt, lastly as Global Practice Director of Watson Wyatt’s Investment business. Mr. Hess is a Fellow of the Society of Actuaries and the Conference of Consulting Actuaries, and a Chartered Enterprise Risk Analyst. He has a B.A. cum laude in logic and language from Yale University.

Ethan Kra – Founder, Ethan Kra Actuarial Services LLC:

Ethan Kra is an independent actuary, specializing in litigation support/expert witness, advice on multi-employer plan exposures and strategies and the financial aspects of executive benefits. Previously, he was a Senior Partner and Chief Actuary-Retirement of Mercer, where he consulted in the areas of the design and funding of pension and group insurance benefits, structuring and funding of non-qualified pension benefits and the proper accounting for expense of employee benefits.

He specializes in analyzing the economic and accounting implications of financing strategies and vehicles for employee and executive benefits. For over 17 years, he chaired Mercer’s Actuarial Resource Network, a committee of the senior technical actuaries throughout the United States.

Ken Kunzman – Partner, Connell Foley LLP

Kenneth F. Kunzman was Chairman of the Connell Foley Executive Committee from 1995 to 2002. He has been a partner in the firm since 1968 and has been responsible for a variety of areas of law.

Additionally, Mr. Kunzman serves as Chairman and Trustee of the Corella A. and Bertram F. Bonner Foundation of Princeton, NJ which provides scholarships for needy students of 26 colleges based upon community service. He is Trustee Emeritus of Caldwell College, former Trustee of St. Peter’s Prep, and Co-Chairman Emeritus of Seton Hall University Pirate Blue Fund. Mr. Kunzman served as Captain, US Air Force from 1962-1965.

Mr. Kunzman serves as a member of the Board of Trustees and the Executive Committee of the Scholarship Fund for Inner City Children and is the former Chairman of the Essex Legal Services Foundation, where he continues to serve as a Trustee.

Larry Sher – Partner, October Three Consulting LLC

Larry Sher is a member of the actuarial consulting team and part of the senior leadership for October Three.  Larry also is head of our dispute resolution practice, which provides support to clients in disputes related to their retirement plans, both in litigation and otherwise.  Larry’s experience in this area is extensive, having served as an arbitrator outside of litigation and as an expert in many lawsuits, including prominent cases involving cash balance pension plans.  Larry is a highly sought after expert and advisor.

Margaret Berger – Principal, Mercer Consulting


One thing is certain: the panel has no shortage of impressive resumes. But it’s ideas, not resumes, that will effectively reform New Jersey’s Pension System. Pension360 will keep you updated on subsequent developments surrounding the The Pension and Health Benefit Study Commission.

New Jersey Fund Rakes In Nearly 16 Percent Returns For Year


Amidst all the pension-related turmoil in New Jersey, a piece of bright(er) news: the state’s pension fund raked in double-digit returns for fiscal year 2013-14, which ended June 30. The fund returned more than double the actuarially assumed rate of return, although the S&P 500 returned about 25 percent over the same period.

From Bloomberg:

New Jersey’s pension fund return is expected to exceed 16 percent for fiscal 2014 on gains that include an unanticipated $6.1 billion, according to the state Treasury Department.

Data as of June 30, which exclude some investments reported on a delayed basis, showed returns of 15.9 percent, treasury officials said in a statement. The fund’s total value was $80.6 billion, up from $66.9 billion four years earlier. The state investment division will report the performance to its oversight council at a meeting tomorrow.

Interestingly, unions are now presenting the argument that the strong returns only further demonstrate the need for the state to make its full contributions into the system. From

The impressive returns, however, highlight an argument from unions that New Jersey may have missed out on even bigger gains in recent years because state contributions into the pension fund have been reduced or cut altogether, including the payment Governor Christie slashed at the end of June. Christie said he cut that payment — from a planned $1.57 billion, to $697 million — to prevent tax hikes or funding cuts to schools, hospitals and other crucial services amid a $1 billion budget shortfall.

New Jersey’s actuarially assumed rate of return stands at 7.9 percent.

In New Jersey, the Pension Tension Is Rising

Screen shot 2014-06-24 at 1.35.00 PM

By now, you know the story: New Jersey Gov. Chris Christie’s plan to cut pension funding by $2.4 billion over two years has been met with controversy, outrage, a string of lawsuits and numerous legal questions.

The answers to some of those legal questions may come as soon as Wednesday, when Christie’s plan will see its first day in court.

But outside the courtroom, a new bill is gaining steam among state lawmakers—a bill that finally puts a tangible, short-term solution on the table. And even if it doesn’t come without its kinks, it’s the first plan that has been offered up to counteract Christie’s measure. (More on the bill below).

Meanwhile, more data is emerging on the true costs of Christie’s plan. Spoiler alert: the snowball effect is real, and it’s prohibitively expensive.

Cuts Bring Consequences, Now and in the Future

Every passing day brings a bit more clarity as to just how expensive Christie’s plan to cut pension funding by $2.4 billion would be. In a bond disclosure released by the state, the ramifications of the cuts are outlined in four points.

The proposed reduction in contributions…could have the effect of (1) delaying the phase-in of the State’s full actuarially required contribution, (2) increasing the amount of such contribution, (3) increasing the size of the UAAL and (4) decreasing the percentage of the Funded Ratio of the Pension Plans once the phase-in is completed.

Indeed, New Jersey can expect all four of those points to materialize, some sooner than others. And when you attach numbers to them, the urgency of New Jersey’s upcoming fiscal situation really starts to set in. If Christie goes through with his plan, here’s what New Jersey could be facing in fiscal year 2019:

  • The state’s actuarially required contribution would be $4.8 billion—for context, that sum would represent 26 percent of New Jersey’s general fund budget, based on 2012 expenditures.
  • The unfunded liabilities of the state’s pension plans would total $46 billion. Christie could decrease these liabilities by $4 billion if he scrapped his plan to cut contributions by $2.4 billion in 2015-16.
  • The funded ratio of state plans would drop to 48.25 percent. The funded ratio sat at 67.5 percent in 2011.

Rest assured, Christie has seen these numbers—they came from his own financial team.

A New Bill Emerges in the Legislature

On Monday, news broke that New Jersey state legislature had agreed on an alternate budget proposal that would raise enough revenue to cover the state’s full contribution to the pension system, a payment that Christie’s plan had drastically cut.

Sources inside the legislature told the Star-Ledger that Democrats in the state Senate and Assembly had reached a deal to raise more than $1.3 billion in revenue—money that would cover the state’s full annual contribution of $2.25 billion to the pension system. Christie’s plan had cut that payment down to just $681 million.

The revenue would come from tax increases on high-income earners and businesses, among other things. From the Star-Ledger:

Under the Democrats’ budget:

• The marginal tax rate on income above $1 million would rise from 8.97 percent to 10.75 percent, retroactive to January of this year, netting $667 million.

• The corporate business tax would rise from 9 percent to 10.35 percent, yielding $375 million.

• The Business Employment Incentive Program (BEIP) of tax abatements would be suspended for a year, freeing up $175 million.

• A tax hike on income between $500,000 and $1 million that Sweeney had proposed would be scrapped, as Prieto suggested.

In addition, some new taxes or fees Christie proposed would be folded into the Democrats’ budget, such as a penalty for making bad electronic payments ($25 million) and a move to subject all online retailers to the state sales tax ($25 million).

Taxes Christie proposed on electronic cigarettes and the Urban Enterprise Zone program would be cut out of the budget under the Democrats’ deal.

Of course, the deal doesn’t come without its hitches. Despite the bill’s focus on raising revenue, it actually earmarks more money toward several of the areas that Democrats lost out on in the last budget dealings: the new bill restores funding for the Earned Income Tax Credit, nursing homes, legal services for the poor, and women’s health care centers.

Those are all items that deserve funding, but their inclusion makes the bill much less politically palatable to lawmakers on the other side of the aisle. Of course, it was already unpalatable to politicians who, on principle, oppose tax increases.

Indeed, state Republicans are none too happy about the proposed measure.

“It would be suicidal to…New Jersey’s economy,” said Assemblyman Declan O’Scanlon (R-Monmouth) during a Monday morning press conference.

The Democrats would likely be able to overcome Republican opposition. They hold 48 seats (60 percent) in the General Assembly, and 24 seats (60 percent) in the Senate.

The Senate and General Assembly are holding hearings on the bill Tuesday, and the measure is expected pass by vote through the two houses by Thursday.

Still, the chances that the bill becomes law in its current form, or at all, are slim. That’s because the buck stops with Gov. Christie, who has line-item veto power and has repeatedly states he will oppose any tax hikes on wealthy individuals or businesses.

Lawmakers have until July 1 to pass a new budget.


Photo by Jim Bowen and Marissa Babin via Flickr Creative Commons License