September 12, 2010
Trenton Correspondent John Reitmeyer’s description of former Gov. Christie Whitman’s pension bond issuance deserves clarification (“Legacy of bad deals strains N.J. state finances,” Aug. 22).
When Whitman left office, the state budget was in surplus, the pension funds were in surplus, and the unfunded liability in the pension fund that she inherited had been eliminated. It was the surplus that permitted the state to temporarily skip its annual contribution to the pension fund, with strict instructions that it would need to be reinstated as soon as the funds were not in surplus.
Whitman did not issue bonds for mere revenue-raising purposes; rather, she refinanced the pension fund’s debt to eliminate the unfunded liability of $4.25 billion and save taxpayers billions of dollars in interest payments (refinancing from 8.75 percent to 7.64 percent, and cutting the term of the loan from 60 years to 29).
The current underfunding issues were created by decisions made after Whitman left office, including:
* New unfunded liabilities, created as a result of lowering the retirement age to 55 from 60 for state employees with no increase in the contributions to cover the increased cost.
* The dramatic increase in the number of government employees over the past several years, significantly adding to the fund’s liability. A recent article indicated that public sector employment in New Jersey at all levels has increased by at least 55,000 since Whitman left office.
* Reductions or failures by municipalities and the state to make pension fund payments that would return to previous levels as the surplus of assets into the funds was paid down.
Make no mistake: When Whitman left office, the pension systems were overfunded and the unfunded liabilities had been eliminated. You don’t have to take my word for it — New Jersey’s bond ratings were raised three times after the bonds were issued. It’s time to set the record straight.
The writer served as New Jersey treasurer between 1997 and 1999.