Moody’s: New Jersey’s Pension Funds Could Run Dry in Just 10 Years

By Mark J. Magyar for NJ Spotlight

If the state government doesn’t start properly funding its pension system, New Jersey’s two largest pension funds will run out of money in 10 to 13 years, creating a budgetary nightmare, Moody’s Financial Services warns.

Based on the state’s failure to make required pension contributions over the past five years, including Gov. Chris Christie’s most recent $2.4 billion in pension cuts, the state Treasury Department reported in a recent bond prospectus that the Public Employees Retirement System (PERS) and the Teachers Pension and Annuity Fund (TPAF) “could fully expend their assets as soon as 2024 and 2027, respectively, even assuming the funds meet assumed investment returns.”

“Once plan assets are depleted, the state will have to fund pension benefits directly from its operating budget, driving its annual retiree benefit expenses significantly higher,” Moody’s warned. “For example, benefit payments from TPAF and the state portion of PERS amounted to approximately $4.9 billion in fiscal 2013 (equivalent to about 16 percent of the state’s operating revenues), according to plan actuarial valuations. In comparison, combined state contributions to these plans were approximately $878 million that year.”

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