The Star-Ledger reports the Public Employees Retirement System board of trustees was presented with the fund’s annual check up this week. The board was told the fund contains only 68.8% of the amount needed to meet the long-term cost of benefits promised to its state government members and 81% of the amount needed to fund the benefits promised to local workers.
State law requires local governments to make the full payment due for their pension benefits for the first time in a decade. However, the state is not held to the same standard. Governor Jon Corzine’s proposed budget includes less than half the amount Janet Cranna, the actuary who presented the report, calculated the state should pay into the funds, increasing the shortfall by another $300 million.
The shortfalls in both accounts grew over the past year, despite robust investment returns and increased contributions by employees, according to the news report. Cranna said continued underfunding by the state accounted for most of the growing shortfall, with higher-than-expected salaries adding to the problem.
Commenting on the report, board member Ned Thompson said: “The problem I have with this as an actuary and as a taxpayer is, A, the inability of the Legislature to recognize that they messed up and, B, to take any action to fix it,” according to the Star-Ledger. “To fix it is going to take a significant amount of work; it’s just a question of whether they have the will to do it.”
The state’s three largest retirement funds – the Teachers Pension and Retirement Fund, the Public Employees Retirement System, and the Police & Firemen’s Retirement System – now have a shortfall of $26.8 billion, an increase of about $2.5 billion from the year prior.
Last week, trustees of the Police and Firemen’s Retirement System received a similar update, showing those accounts contain only 77.6% of the amount needed to pay the long-term benefits promised to those members. In 2006, a New Jersey law enforcement union sued the state to to make up for years of shortchanging the officers’ retirement system (See NJ Police Union Hits State with Pension Underfunding Suit).
Last week, The Chicago Public Schools system filed a similar suit charging it was unconstitutionally required to maintain certain pension funding levels despite a shortfall in state funding (See Chicago Schools Sue State over Pension Funding ).