11/18/14 Garden State Pensions

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Last week, I reported on 27 states that are nearly $600 billion short in their state pension funds.  State employees – and, in some cases, local government employees – won’t get the pensions promised them without drastic changes.

We’ve examined another state which has a major pension problem.

New Jersey has nearly a $50 billion pension shortfall.  And the situation is getting worse. 

Since Governor Chris Christie took office in 2010, New Jersey has shifted a sizeable chunk of state pension funds to higher risk investments such as hedge funds.

Christie’s senior appointee overseeing the pension fund promised a higher investment return.  This hasn’t  materialized.  In fact, New Jersey’s pension investments trail the S&P 500 market index often used as the benchmark to measure state investment decisions.

This is among the reasons why Moody’s, Fitch, and Standard & Poor have downgraded New Jersey’s bond rating.

New Jersey is now the second biggest investor [of defined benefit programs] in hedge funds.

Not only are the pension funds underperforming the S&P but the state has also been socked with extremely high management fees.  Nearly $400 million was spent on fees just last year.  A quarter of a billion dollars more than before Christie took office.

Investment research and management firm Morningstar has ranked New Jersey among the bottom states when it comes to fully funding their pension obligations.

[Pension Fund                                                         Millions
Public Employees Retirement System (State)           $  9,872
Public Employees Retirement System (Local)          $  6,635
Teachers’ Pension and Annuity Fund                       $21,423
Police & Firemen’s Retirement System (State)         $  1,953
Police & Firemen’s Retirement System (Local)        $  6,205
State Police Retirement System                               $     798
Judicial Retirement System                                      $     327
Consolidated Police & Firemen’s Pension Fund     $        2

TOTAL                                                                    $47,215]

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