• NJ Spotlight explains how the state changed the pension calculation to lower its required contribution.

Steinhauer statement on state pension contribution

Published on Thursday, March 27, 2014

NJEA president Wendell Steinhauer issued the following statement in regard to the state’s proposed FY2015 pension contribution:

“Since the new pension law went into effect in 2011, NJEA has carefully watched the state’s contributions to ensure that New Jersey lives up to its obligations under the law, just as pension fund members always have.  Like many others, we were surprised to see that the state had made changes to its actuarial assumptions that led to a decrease in the state’s projected contribution in the upcoming year from $2.4 billion to $2.25 billion.  We also noted the retroactive decrease from $1.68 billion to $1.58 billion in the current year’s contribution, and publicly questioned why both of those changes were made. 

“Actuarially required contributions, which form the basis for determining how much the state must put into the pension system, are, by their nature, educated estimates of what is required to adequately fund the pension system.  It is not unusual to see small variations in assumptions from year to year or from one actuary to another.  However, upon close inspection, it appears that the state has begun to adopt assumptions which tend to lower its contribution while ignoring advice to adopt other assumptions that would increase the required contribution.  That is a very dangerous first step back toward the state’s irresponsible funding practices that created our pension problem in the first place.

“We believe the state’s behavior highlights the need for an independent actuary, employed by and answerable to the pension fund rather than the state, to determine each year’s required state contribution. Putting that responsibility in the hands of an independent actuary will reduce the likelihood of inappropriate political interference in the calculation of the state’s required contribution, and will help ensure that the pension funding law serves its purpose of returning the state to sound, sustainable funding practices.

“We, therefore, call on the Legislature to pass, and the governor to sign, legislation that ensures an independent, non-political process for determining the state’s required pension payment beginning in FY2016.  We also call on the Legislature and the Governor to reiterate their commitment to following the law and funding the pension to ensure the long-term stability of the system.”


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