NJASA

Bill Would Use Infrastructure Assets

to Bolster Pension System Funding

A bill, S-3637, introduced by Senate President Steve Sweeney into the state Senate in mid-April would generate funding for the state pension systems by adding revenue-generating assets like water utilities, parking lots and toll lanes to the State’s investment portfolios. Much like the New Jersey Lottery, whose revenue is dedicated to funding the pension systems, these currently governmentally-owned public assets could become other sources of income for the retirement systems by the creation of a trust fund to be called the Retirement Infrastructure Collateralized Holdings Fund (RICH, for short). This fund would hold and manage transferred assets from the State government and local governments and the revenue produced would be used to fund the retirement systems.

Sweeney says that the legislation is “ground-breaking” and would have “multiple benefits.” He says that “State and local governments, and their taxpayers, would be able to lower their annual pension contributions based on the value of the assets transferred and the assets would be professionally managed in the RICH Fund, with the state’s Infrastructure Bank serving as trust administrator safeguarding the interests of the public, the customers and the pension funds.” He points out that “municipalities that don’t want to consider privatization of a key asset” could have the “option of a public-to-public transfer to an infrastructure trust fund that can make the long-term investments needed to improve the quality of service while realizing a fair return over 30 years and longer.”

The idea of utilizing public infrastructure assets to help fund municipal and state retirement systems is being used in other venues. In California, the California Public Employees Retirement System, one of the nation’s largest public pension systems, has invested billions of dollars in water and wastewater ventures, in toll roads and in forests, while in Ontario, Canada, the Ontario Municipal Employees Retirement System has significant investment in infrastructure.

Should the bill become law, it would provide an economic boost for New Jersey by generating investment in infrastructure projects, increasing and stabilizing dedicated funding for the State’s pension systems and saving taxpayers money.