The State of Public Pensions in New York and New Jersey
Public pension payments often make up a huge portion of state budgets. At the end of fiscal year 2013, New York State paid $9.5 billion into its pension funds – a little over seven percent of the total state budget. New York City paid $8.06 billion into its pension funds – more than 11 percent of the city’s total budget. For the upcoming fiscal year, New Jersey Governor Chris Christie decided to cut $887 million from the state’s required pension payment. It was a controversial move that was ruled constitutional by a New Jersey Superior Court judge because the governor was “backed into a corner.”
Is there a public pension crisis? Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at The New School, says no. “A crisis is what we’re facing in the private sector with people going into their old age without anything but Social Security. Now that’s a crisis. There’s no public employee that I can see in my data that is going to face the risk of poverty. So there is no crisis,” she told host Rafael Pi Roman.
Steve Malanga, senior fellow at the Manhattan Institute for Policy Research, sees it a little differently. “The crisis may actually more be of a crisis of budgets as opposed to a crisis of, ‘Do we have the next dollar to pay right now?'” he said. “New York State has a long time before it gets in trouble. But once upon a time, New Jersey had a long time before it got [in trouble.]”
So what is the solution to keeping public pension funds afloat, crisis or no crisis?
“We should look at the best practices of the funds that are healthy,” Ghilarducci advised. “We need to make sure employers…always pay into the fund.”
“If we look at the history of 50 years, sometimes 70 years…the employers that kept funding them…they’re fine,” she added. “There are really healthy kind of prescriptions from experts about how the outliers can become more like the average.”