K-12 tax & spending climate: “Gutting Pension Reform = Gutting Education Aid”

NJ Education Aid:

Unfortunately, New Jersey is bankrupt even without having to pay COLA benefits. The state pension funds are only 38% funded, the worst in the United States. In absolute terms, New Jersey’s debt is usually estimated at $85 billion, although some measures put New Jersey’s debt at twice that. New Jersey’s debt per person is $52,300, also the worst in the United States. In terms of debt to Gross State Product, New Jersey’s debt is the second worst, after Hawaii’s.

New Jersey’s bond rating is the second worst in the US, after Illinois’, and the pension funds will start going broke in 2021, when the judiciary fund (JRS) will zero-out. The state portion of PERS will be depleted in 2014 and TPAF, the teachers fund and the biggest of all, will go broke in 2027. After a fund zeros-out, New Jersey will have no investment income to sustain pension payouts and will have to rely on contributions from active workers, localities, and regular operating revenue to meet pension obligations. As of now, if the state used regular operating revenue to pay pensions it

would cost at least $4 billion a year. $4 billion is equal to half of K-12 operating aid or 90% of all state operations.

New Jersey’s debts might be payable if the economy were robust, but New Jersey’s economy is barely growing. In 2014 New Jersey’s growth rate was 0.4% compared to a national average of 1.9%. This means that the state’s economy cannot sustain the tax increases that would be necessary to pay the full pensions, let alone pensions with COLAs.

Lest anyone simply think the economic lethargy would end if we had a Democratic governor, New Jersey’s economy has been a national laggard for the last 15 years. Since 2000, New Jersey’s economy has only grown by 0.8% a year, only half the national average and fifth from the bottom. In those fifteen years, New Jersey’s economy only outperformed the national economy twice, in 2008 and 2012.