Making full pension payment would have 'incredible' impact on N.J. residents, treasurer says
By Samantha Marcus | NJ Advance Media for NJ.com
on March 30, 2015 at 7:09 PM, updated March 31, 2015 at 10:06 AM
TRENTON - Gov. Chris Christie's treasurer said Monday that the administration has reached out to lawmakers to comply with a judge's orders to work together to restore $1.6 billion to this year's pension payment, but stressed that actually doing that would mean lots of budget pain for New Jersey residents.
A state Superior Court judge ruled last month that the administration and legislators must work together to come up with the cash, which Christie slashed last year to balance the budget.
Christie plans to appeal the ruling, and Treasurer Andrew Sidamon-Eristoff said they're "quite confident" in their legal position that the state can't be forced to make the payment. Labor unions, meanwhile, have argued the governor broke a contract requiring him to ramp up payments into the public worker pension system.
The treasurer's office contacted lawmakers to "indicate our willingness" to review the state's resources and unspent balances.
"Coming up with $1.6 billion in the last few months of the fiscal year would impose incredible and I believe universally unacceptable impacts upon our residents here in New Jersey," he said.
Sidamon-Eristoff appeared before the state Assembly Budget Committee Monday afternoon on the heels of a similar 2016 budget presentation from Office of Legislative Services Budget and Finance Officer David Rosen that morning.
In that earlier hearing, Rosen said that the revenue estimates by OLS and the administration for the next year largely match up — something that's rarely happened since Christie took office. Rosen noted that the state's planned pension contribution is less than what's required under pension reform signed by Christie and that while the state "cobbled" together enough funding for transportation projects in 2016, that won't work beyond next year.
The $1.3 billion pension payment proposed in Christie's 2016 budget is less than half of what is required under pension reforms Christie signed.
"We hope you will agree that the governor's proposed fiscal 2016 contribution represents a fiscally responsible and sustainable foundation for moving forward," Sidamon-Eristoff told the committee.
Rising pension costs make up 62 percent of new spending, and pension and health care costs combined will consume 14 percent of the upcoming budget, he said.
Sidamon-Eristoff countered arguments that the state's transportation is on the verge of disaster. The $1.1 billion transportation funding plan for next year is made up of cash balances, bond proceeds and a loan repayment from New Jersey Transit, he noted.
"There is no proverbial sword of damocles hanging over the state's transportation capital program as of July 1, 2015," Sidamon-Eristoff said. "This does not, however, obviate the critical need to secure a new reauthorization of the (Transportation Trust Fund) as soon as practicable to support appropriate long-term capital program planning and project management."
Assembly Budget Committee Chairman Gary Schaer (D-Passaic) grilled the treasurer on the state's debt burden and what effect eight credit downgrades has had on the state's borrowing costs.
The state is still attractive to lenders, and any impact from those ratings drops would be negligible, he said, adding "we've done better than our ratings would suggest."
The past two years the state has taken out $2.6 billion in short-term debt to pay its bills throughout the year, and Sidamon-Eristoff said he expects the same in 2016. The state pays off the borrowing in full at the end of the year, and has benefited from low interest rates, he said.
"We're not in any way ashamed of taking advantage of the interest rate environment," he said.
Sidamon-Eristoff, with some backup from Assemblyman Declan O'Scanlon (R-Monmouth), argued that Christie's administration has slowed the growth rate of bonded debt.
Debt from bonds — usually borrowing for big capital projects — increased less than 1 percent from 2013 to 2014, according to the state's annual debt report. The state has since added $2.7 billion in new borrowing.
O'Scanlon told the treasurer "We really are scraping the bottom of the barrel to come up with something to beat you up about."
Committee members also drilled down on the fees New Jersey pays its consultant to manage the pension fund's alternative investments, about 15 percent of fund's portfolio.
"It seems to me we need to review how we're managing that 15 percent," Assemblyman John Burzichelli (D-Gloucester) said.
Sidamon-Eristoff challenged reports that suggest the state spent $600 million in fees in 2014. Less than half of that figure is paid in management fees, he stressed, while the rest are performance bonuses for the investment managers.
The state's decision to report that number in a 2014 annual report released earlier this year should be recognized as "enhanced transparency and not an opportunity to distort facts," he said.