This story was updated with comment from Charles Wowkanech at 5:29 p.m.
Republican gubernatorial candidate Jack Ciattarelli wants New Jersey to skip this year’s pension payment.
“Because we have a long-term solvency problem with the pension, not a short-term liquidity problem with the pension, I would skip one year’s pension payment,” the former assemblyman said in an interview with the New Jersey Globe. “This budget has the largest pension payment in the history of the state, and some might say it’s bad public policy to skip a pension payment. I’ll tell you it’s worse public policy to borrow to make a pension payment.”
In his revised budget address, Gov. Phil Murphy announced the state would make a $4.9 billion pension contribution in the coming fiscal year. The state is also set to borrow $4 billion to make up for COVID-19-fueled revenue shortfalls.
Ciattarelli’s call for a skipped pension payment has some of Murphy’s allies in something of a frenzy.
“In the private sector, if you don’t make the required pension payment, they put you in jail,” Communications Workers of America NJ President Hetty Rosenstein said. “I hear Jack Ciattarelli says the State should forgo low-interest borrowing and instead not pay for the public pension plan yet again. It is the height of dishonesty to act as if this isn’t borrowing. Of course, it is — and in this case it is borrowing from previously borrowed money.”
Rosenstein said skipping this year’s pension payment would cost more in the long run than making this year’s contribution with borrowed money.
“That money, when not paid, costs over 7% interest a year and grows exponentially,” she said. “The borrowing that the Governor is doing is much, much less costly — and its fairly paid for by the entire state, not by a small group of retirees and future retirees who have always paid their own way, and have done nothing wrong other than devote their careers to public service.”
It’s not clear that’s the case. The state has not finalized repayment terms for Murphy’s planned $4 billion in borrowing.
Ciattarelli still thinks skipping the pension payment, and the borrowing, is the smart move.
“Every single person in this state on both sides of the aisle agrees it was a bad idea for Christie Todd Whitman to propose a borrowing scheme to make a pension payment,” Ciattarelli said. “That’s exactly what we’re doing here.”
Another labor leader stepped up to defend Murphy.
“Governor Murphy understands that in order to get out of our pension hole, you need to stop digging,” said New Jersey State AFL-CIO President Charles Wowkanech. “Governor Murphy is the first governor since Jim Florio to pay what is owed to the pension system each and every year according to the law. He is doing the hard work that other governors avoided by kicking the can down the road, which created the pension mess Murphy is now working so diligently to clean up.”
The pension has not been fully funded for decades, and that hasn’t changed under Murphy, though the governor has made larger contributions to the fund than his predecessors.
“Leave it to Jack Ciattarelli to kick the can down the road by urging New Jersey to return to the failed budgetary maneuvers of the past. That not leadership, it’s the easy way out typical of irresponsible political candidates saying anything to get elected,” Wowkanech said.
Former state budget director Richard F. Keevey told NJ Spotlight that he also believed the state could defer about $2 billion in pension fund payments until state government works its way through the pandemic.