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  • Mort Reinhart
  • Christie Wants Concessions

    for Lottery Pension Funding!

    In case you missed the latest pirouette by Governor Chris Christie on funding the retirement systems of public employees, let me bring you up-to-date. 

    The Governor suggested in his February budget message that state lottery monies be used to shore up the retirement systems, which, according to the actuaries of the systems, are currently funded at about 50% of what the actuaries say they should be. He again raised this same idea earlier this month without providing any details of how this could be accomplished. He did point out that transferring the lottery monies to the pension system could increase the funded ratio of the system by as much as 15%, increasing that ratio to somewhere in the 60% to 65% range.  

    A few days later, however, he announced that in order to transfer the lottery monies to the pension system, he would expect some concessions from the public employees in their current benefits. He said that he had been in discussions with public employee unions and gave the impression that he had discussed this latest wrinkle with them. Immediately, several of the union leaders who had talked to Christie about the lottery said that the idea of benefit concessions had never been included in their conversations. They stated that they were not interested in further pension or health concessions and mentioned how their members had sacrificed more than enough in 2011 with the passage of Chapter 78 which, among other things, froze their retiree cost-of-living benefits, increased their pension contributions and required them to pay for a percentage of their health benefits. Additionally, they stressed that the Governor had not lived up to his end of the bargain struck in 2011 to increase the State’s contributions to the pension systems through a funding schedule that would require the State to pay $16 billion over the next seven years. Initially, the Governor increased contributions to the retirement systems, but in 2014, when a budget crisis arose, he reduced the contributions below those to which he had agreed three years earlier. In his last few budgets and in his 2018 proposed budget, he has continued to contribute far less than the 2011 agreed upon amounts.  

    This new position might have been triggered by a recent opinion piece in N. J. Advance Media written by Tom Byrne, chairman of the New Jersey Investment Council, and Tom Healey, who chaired Christie’s appointed 2014 commission on pensions and benefits. That commission had initially raised the lottery idea in its report. In the recent opinion piece about pension funding, the two men argued that the lottery proposal alone would not solve the pension problem, but additional steps, including among other things, forcing employees into less costly health plans and switching to a new type pension program would be necessary. Thus, a basis for Christie to ask for concessions from the employees.   

    Meanwhile, many questions remain about how such a lottery transfer could take place. Foremost among them is the legality of using the lottery monies to fund the retirement system. The constitutional amendment  that created the lottery specifically states that the lottery monies be used to benefit “state institutions and state aid to education.” How this language could be interpreted to include retirement benefits is a question for the legal community.  

    A second issue is how to replace the monies being used to support the current programs receiving funding from the lottery. If those replacement funds must come from the regular state budget, then the money from the lottery being redirected to the pension systems might as well come directly from the state budget and allow the lottery to carry out its mandated mission.  

    So far, there have been no answers for these and other questions. In fact, except for the statements by the Governor, no information has been released.