NJ Fund Weighs On Garden State Budget

November 1, 2002 (PLANSPONSOR.com) - Significant pension fund shortfalls are going to have a dramatic impact in the Garden State.

New Jersey’s public pension fund has lost nearly $27 billion over the past two years, and State Treasurer John McCormac told lawmakers yesterday that the 2004 budget would be significantly impacted as a result, according to Reuters.

Among other challenges for the fund, which is managed in-house and overseen by an 11-member State Investment Council, is its current policy of trading securities only on Tuesdays.

“Bottom” Line

Compared with other state pension funds  measured by Wilshire Associates , New Jersey’s pension fund ranks near the bottom.   In fact, nearly all (94%) of the state funds did better over the three years ending June 30, 2002, according to McCormac.   Over the last 10 years, New Jersey’s fund ranked in the 18th percentile, according to the report.

The state’s pension fund assets, which were at a high of $83 billion in June 2000, have slipped to about $56.3 billion as of September 30 – and McCormac told the Assembly Task Force on Fiscal Responsibility Thursday that until just three years ago the state has not used internal benchmarks as a comparison.  

The state has now hired a private company, Independent Fiduciary Services, a Newark, New Jersey-based firm, to perform an audit of its system. Two former governors, Thomas Kean and Brendan Byrne, as well as Princeton University professor and former Federal Reserve Vice Chairman Alan Blinder have also been appointed by Governor James McGreevey to examine the state’s ailing pension system.

Task Force Report

Orin Kramer, who became chairman of the Investment Council six weeks ago, also presented a report to the task force on Thursday, according to the Reuters report.   Kramer criticized the lack of risk controls and the lack of funds to support better oversight.   McCormac told the task force that understaffing was also an issue.

The state’s last payment to the pension fund was in June 1996, but, “Every indication is that there will be a significant payment in the budget,” McCormac said, referring to the 2004 budget.

McCormac said the state would have a better idea of what its contribution might be after it received an actuarial report in the next couple of weeks.