News of the Day ... In Perspective4/22/2007
Government accounting: New Jersey’s “recycled” pension funds
As documented in various state reports, New Jersey put $551 million, $56 million, or $0 in its employee pension funds in 2005.
The “phantom contribution” is one indication that over the past 15 years, New Jersey has diverted billions of dollars from pension funds into other projects, using unorthodox transactions authorized by the legislature and governors from both political parties.
The fund can pay promised benefits only for a couple years before it could be “caught in a downward spiral that could devastate the state’s fiscal health.” Under its constitution, New Jersey cannot reduce earned pension benefits. Thus it will have to cut other expenditures, raise taxes, or find other sources of income.
Money has been “recycled” in complex transactions over many years. “It would be a really shocking picture, to show it all in one place, all the money that’s been taken out of the retirement system at precisely the times when the benefits were increased,” said Douglas R. Forrester, who ran New Jersey’s pension fund years ago.
If all the unfunded debts of the state retirement system were added to the acknowledged $31 billion in long-term debt, the total would be around $175 billion.
“I don’t see how we’re going to get out of this,” Forrester said (New York Times 4/4/07).