November 25, 2008
Re: Pension Payment Deferral Details
Following up on Governor Corzine’s proposal to allow a partial, temporary deferral of local government pension payments, the Division of Pensions yesterday released further details that would apply if the legislature enacts the proposal in its current form.
The Division’s press release, which includes a link to revised contribution estimates, can be accessed at http://www.state.nj.us/treasury/pensions/pension-deferrment-press-release.pdf.
At our Annual Luncheon, in Atlantic City, last week, Governor Corzine announced a plan to help ease the near-term budget crunch – and keep property taxes in check – by allowing counties and municipalities to temporarily defer 50 percent of next April’s payment into the employee pension system.
The deferral proposal – which requires action by the state Legislature – would only be temporary, and would require 100 percent funding by 2012. Governor Corzine said this move must come in conjunction with across-the-board budget cuts across all levels of government, common-sense fiscal management, and relief to taxpayers.
The Governor did not comment on cap law constraints on municipalities that may want to fully fund their pension obligations in 2009, in order to avoid increased ‘catch-up’ and interest requirements. Nor has there been any discussion of cap law treatment of subsequent ‘catch-up’ payments, for those who elect, or are forced, to take advantage of the deferral.
The State’s pension assets have lost value, and we, like everyone else, are very concerned about the bottom-line implications. We hope for and look forward to a better market in the out years to help close this gap.
We await introduction of a legislative initiative to implement this proposal. At that time, we will conduct a careful review and articulate a position on this. We will keep you posted on further developments. For further information, contact Jon Moran at 609-695-3481, ext. 121.
Very truly yours,
William G. Dressel, Jr.