We don’t know if the move acting state Treasurer Elizabeth Muoio made in regard to assumptions of the rate of return on investments for the state pension will start to solve New Jersey’s most burdensome — and, potentially, most destructive — problem.
We’ll give it time to see if the stock markets participate and give New Jersey the 7.5 percent returns it needs.
But we do feel it’s safe enough to say this: Gov. Phil Murphy still hasn’t released a definitive plan to fix the pension shortfall, something he repeatedly hinted at when he said the state must “meet its obligations” involving pension payments during the campaign.
That’s not surprising. Spoiler alert: Murphy likely does not have the answer to how he is going to fund some of his other campaign issues — education and transportation, for starters. It’s Campaigning 101. And both sides do it.
Speaking of the parties, here’s something else that shouldn’t be considered a surprise: The parties seemingly have flip-flopped their positions on funding the pension now that they have exchanged the power seat.
Muoio was not immediately available for comment, but the feeling on her side of the aisle was that she wasn’t raising the expected rate of return from 7 percent to 7.5 percent, but rather lowering it just a bit. Remember, it was at 7.65 percent until former Gov. Chris Christie, in one of his final moves in office, lowered the expected rate of return from pension investments from 7.65 percent to 7 percent.
That massive drop was due to cause huge harm to local municipalities, which would have had to find $400 million more in pension payments, some reports said.
Muoio, in a released statement, said it would cause “undue stress” — as if there is any easy way to close the colossal pension shortfall. Under Muoio’s proposal, the assumed rate of return will gradually drop until it hits 7 percent in 2023. Seems fair.
Except to Republicans, who seemingly had no issue with Christie underfunding the pension for eight years. They now have a different view.
Republican State Chairman Doug Steinhardt criticized the move and called for Muoio’s nomination as state treasurer to be turned down. He knows that won’t happen.
It was pure political bluster.
Looking for a nonpartisan voice, we turned to Moody’s, one of the major ratings services, which dropped New Jersey’s bond rating 11 times in the Christie administration — mostly because of the state’s huge and underfunded pension issue.
Moody’s analyst Tom Aaron, in a statement, said New Jersey’s new assumption would be “a credit negative” — mostly because the assumption is higher than those of other large public pension funds.
Aaron said New Jersey would be viewed more favorably if it forced more contributions.
The truth is, New Jersey can only be viewed more favorably if it comes up with a real solution.
A reader offered this one: Start this year’s budget process with zero-based budgeting, assume that nothing but debt obligations are sacred, and go from there: Auction off underutilized state assets and mandate budget cuts from each agency for starters, and go from there.
We don’t know if such an idea would make a difference for the pension. That may be an unwinnable game. But such drastic measures would offer a fresh start. And that’s what New Jersey needs.