“We’ve already put in the two largest pension payments in the history of the state, and we’re going to up the ante in a big way,” Gov. Phil Murphy said ahead of his budget address during his Monday evening “Ask the Governor” segment on News 12 New Jersey.
The 2021 budget unveiled by the Murphy administration a day later calls for $4.6 billion toward the state’s pension obligation—an amount still far less than the $6.1 billion that the state is actuarially required to pay each year.
“[B]ecause of the work we’ve done together over our first two years to restore our state’s fiscal standing, we’re also able to fulfill our obligation” to the pension, Gov. Phil Murphy said in his prepared remarks Tuesday.
New Jersey’s pension for the state’s hundreds of thousands of public workers and retirees is unfunded by at least $100 billion and was the source of 11 credit downgrades under the Christie administration.
The state expects to make the full pension contributions by the 2023 fiscal year, which starts July 1, 2022.
The ways in which the state tackles New Jersey’s pension obligation sets up a political showdown between Gov. Phil Murphy and Senate President Stephen Sweeney, D-3rd District, in the coming months. Sweeney’s proposals, called the Path to Progress, call for deep cuts to the public worker retirement and health plans.
One proposal calls for a shift of many public workers – those employed by the state for less than five years – from a pension retirement plan to a 401k-style system. Another calls for shifting health plans from the equivalent of platinum to a gold level of coverage under the Affordable Care Act.
Murphy has shown his resistance to both ideas, and Sweeney, in turn, said he might opt to put both proposals before voters as a constitutional ballot question in the 2020 presidential election.
Sweeney is offering Murphy his much sought-after millionaire’s tax in return for an additional $1 billion into this year’s pension payment, which could ultimately mean cuts elsewhere in the state’s spending plan.
Editor’s note: This story was updated at 7:31 a.m. EST on Feb. 26, 2020. A previous version of this story identified the state’s pension obligation as $500 million; it is $6.1 billion. Additional remarks from Gov. Phil Murphy were also added.