Top NJ Lawmaker Proposes Restructuring Pension Debt With Federal Loan Program

New Jersey Senate President Stephen Sweeney on Wednesday took another stab at paying down the state’s pension debt: he proposed restructuring the state’s pension debt by creating a federal loan program.

Democratic lawmakers in recent months have come out with a laundry list of different pension proposals; they are trying to offer countermeasures to Chris Christie’s plan, which involves cutting benefits.

More from NJ.com:

The government aid program — which Sweeney stressed would not be a bailout — would allow financially strapped New Jersey to shed its $50 billion unfunded liability and cut the state’s required annual pension contribution in half.

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States would be eligible to borrow about $50 billion from the Federal Reserve at 1 percent interest over 30 years under the plan.

Based on its current funding levels, New Jersey will soon be on the hook for $6 billion a year, but paying off the unfunded liability up front and investing the money from the reserve, would save the state $3 billion a year, Sweeney estimated.

“This is not a bailout or a handout,” he emphasized. “It’s a loan program.”

Sweeney’s proposal assumes the investments’ yields beat the 1 percent loan interest.

For a state to sign on, it would have to get approval from the voters and pass a constitutional amendment promising to make the full payment recommended by actuaries. Pay less, and the state would simply slide back into debt.

Sweeney said he is already talking to unions and lawmakers across the country to gauge interest and “build support”.

Photo credit: “New Jersey State House” by Marion Touvel – http://en.wikipedia.org/wiki/Image:New_Jersey_State_House.jpg. Licensed under Public domain via Wikimedia Commons