New Jersey’s public worker pension system lost $6 billion in the first months of 2020, as the COVID-19 pandemic ravages the national and regional economy, rattles markets, and leads to some of the worst days on Wall Street in U.S. history.
Between Dec. 29, 2019 and Feb. 29, 2020, the state’s pension system dropped in value from $80 billion to $74 billion, while investments dropped by 3.8 percent, according to Investment Director Corey Amon at the State Investment Council teleconference meeting on Wednesday.
Since July 1, investments fell 13 percent, Amon added.
“Clearly we are in the midst of a near-term public health crisis that is central to market turmoil, and we are focused on navigating through this,” Amon said.
And the drop does not include the market chaos that has ensued in March, including a “Black Monday” on March 9 and 16.
“With heightened uncertainty in terms of the future path of a pandemic health emergency, the broader economy, corporate earnings and extraordinary monetary and fiscal interventions, it will be some time before the pension fund will be able to fully measure the impact of the COVID-19 pandemic and other market factors on the performance of the fund,” Amon added.
The state’s pension system invests in various segments of Wall Street and the global market, and as such is in flux with the performance of the global economy.
Some sectors where the state pension system invested – including energy, restaurants and hotels, and airlines and other travel industries – have been slammed during the ongoing stock market crash, Amon said.
And with lottery ticket sales sagging, according to the state’s Assistant Treasurer Dini Ajmani, that could spell more bad luck for the pension system, which depends on much of its tax revenue.
New Jersey’s pension has been one of the worst-funded systems in the country by at least $100 billion, making it the primary source of its 11 credit downgrades over the past decade.
As pension fund performance sags, the onus falls on the state government and ultimately taxpayers to make up the difference.
“The pension system, by design, is based on longevity,” State Treasurer Elizabeth Maher Muoio said in a recent statement. “Factors such as the rate of return and the Actuarially Required Contribution, which impact employer obligations, are based on long-term assumptions, which help mitigate short-term volatility.
“Therefore, it’s not prudent to speculate on short-term activity,” she concluded.
Gov. Phil Murphy’s budget, which would start on July 1, calls for $4.6 billion into the pension system, still far less than the $6.1 billion that the state is actuarially required to pay each year. That amount should be reached by the 2023 fiscal year, which starts on July 1, 2022.
Treasury officials said they still plan to push toward the full pension payment, even as the administration begins tightening its belt amid highly anticipated drops in tax revenue.
On Monday, the state treasury said it would freeze $920 million of state spending through June 30, due to potentially “significant” nosedives in tax revenue.