New Jersey Gov. Chris Christie last week unveiled a plan that would use lottery proceeds to pay down the state’s mounting pension obligations.
The plan would make the state lottery an asset of the pension fund, generating an estimated $37 billion over the next 30 years, according to the state Treasury.
However, some lawmakers — particularly Democrats — balked at the proposal, calling it a distraction and an excuse for Christie to continue to short the pension fund’s annual required contribution. Christie will be shorting the pension system roughly $2.5 billion in required contributions in 2018, according to the state budget.
Additionally, the lottery is essentially a regressive tax — meaning the state’s poor/working class families who are playing the lottery would now be a source of funding for the pension fund.
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On paper, the pension system would benefit for the next 30 years by having the Lottery – which generates nearly $1 billion in annual revenue and was recently valued at $13.5 billion – effectively transferred onto its balance sheet.
That shift would create a new and dedicated source of revenue for the pension system. In fact, the Christie administration expects the Lottery transfer will improve the state pension system’s overall funded ratio from a disastrous 45 percent to near 60 percent.
The fiscal maneuver should also have little immediate impact on the state budget because it will reduce an unfunded pension liability that right now measures, and that figure is used by actuaries each year to determine how much the state should be putting into the pension system out of the budget to help maintain its solvency.
The view of Democrats, via NJ Spotlight:
Phil Murphy, Democratic frontrunner for his party’s gubernatorial nomination, compared it to the boardwalk-arcade game Whac-A-Mole during a gubernatorial debate that was held in Newark last week.
“That’s what this is,” said Murphy, a former Goldman Sachs executive. “You’re going to pile down some source of funding over here, and you’re going to expose another source of expense required over there.”
Democratic hopeful Jim Johnson, a lawyer and former U.S. Treasury official from Montclair, dismissed the scheme as a gimmick intended to distract from Christie’s decision to once again short the full payment.
Other lawmakers and union leaders have not taken positions on the bill.