From the Star Ledger:
For years, New Jersey had assumed its public pension fund would make more money on its investments than it could realistically expect. So, Christie went ahead and changed it.
Without notice, the outgoing governor cut how much the pension system should expect to earn on investments from 7.65 percent to 7 percent a year.
Doesn’t seem like much, right?
But Christie’s sudden move — and Murphy’s reaction to it — set into motion a complex and controversial budget quagmire that will soon become a ticking $1.2 billion time bomb for New Jersey.
When it will explode: 2022 (the year after the next gubernatorial election).
At stake: Benefits to nearly 800,000 active and retired state and local workers.
A likely result: Your state taxes could go up.
And how the state will manage to pay the bill when it comes due remains to be seen.
The change was praised by the pension fund actuaries, who say expecting a 7 percent return on investments is closer to what other large funds can reasonably figure they’ll get over the long term.
But there’s an impact to all of this, which means the decision sent ripples through the pension system.
When you assume you’ll reap more from investments, it makes the pension funds look healthier than they really are, even if it isn’t realistic. When you expect less, the system looks less healthy.
That all figures into the calculations that determine how much money state and local governments will need to pay for benefits to nearly 800,000 active and retired workers. In short, expecting less in investments means governments would have to pay more to keep the pension system afloat.
Christie’s move would have cost local governments, which by law have to pay the full contribution recommended by actuaries, an additional $422.5 million in Murphy’s first year, according to an NJ Advance Media analysis.