Top NJ Lawmaker Still Pushing Proposal to Restructure Pension Debt With Federal Loan Program

640px-New_Jersey_State_House

New Jersey Senate President Stephen Sweeney last month made a bold proposal: he suggested paying down the state’s pension debt with the help of a massive federal loan.

The state’s Democratic lawmakers have made a laundry list of pension-related proposals in the last year in a bid to solidify an alternative to Christie’s reform plan – which Christie has indicated would achieve savings largely by cutting benefits.

More on Sweeney’s plan, from NJ.com:

Within a decade, the state’s annual pension contribution is expected to hit $6 billion a year. But drawing on a $40 billion federal loan, paying off the unfunded liability up front and investing the money from the Federal Reserve would halve that bill, Sweeney said.

The savings assume the state’s investment yields beat the interest rate on the loan.

Using interest figures based on a 2.7 percent 30-year treasury note and New Jersey’s 7.9 percent assumed rate of return on investments, the state would owe about $1.1 billion in interest, a $700 million pension payment and a $1.3 billion principle repayment in the first year of the program, according to estimates from Sweeney’s office.

For a state to participate, it would have to get approval from the voters and pass a constitutional amendment promising to make the full payment recommended by actuaries.

Sweeney himself has admitted several times that the proposal is a “long shot” to come to fruition.

 

Photo by: “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 – http://commons.wikimedia.org/wiki/File:New_Jersey_State_House.jpg#mediaviewer/File:New_Jersey_State_House.jpg

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