TRENTON — Gov. Chris Christie used his budget address Tuesday to take a final stab at saving government worker pensions, proposing to dedicate revenues from lottery ticket sales to the distressed fund.
Christie suggested the state transfer the lottery to public pensions to provide a dedicated source of revenue and dramatically reduce the amount actuaries say the state owes.
Christie said pledging the lottery as an asset to the pension fund would have “the same effect as a cash infusion,” slashing $13 billion from the pension fund’s $66.2 billion in unfunded liabilities.
“This would also significantly reduce the amount we have to pay into the system every year out of the general fund,” he said. “If implemented correctly, this action would not only increase the value and stability of our pension funds immediately, but it would also please bond investors and credit rating agencies.”
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The governor’s proposal lacked key details Tuesday, but was met with curiosity from lawmakers who said it was worth considering.
“We need to get more details on it,” Assembly Speaker Vincent Prieto (D-Hudson) said. “I’m going to be blunt: I see a little bit of smoke and mirrors to try to lower a payment. I would have to see the details of any plan before I would say this is OK to do.”
The lottery, which is expected to bring in $965 million this year, helps fund higher education programs, psychiatric hospitals, centers for people with developmental disabilities and homes for disabled soldiers.
Under the state Constitution, lottery proceeds must be spent on state institutions and state aid for education. The state pays a number of costs on behalf of local school districts that can be categorized as aid, including the employer share of the Teachers’ Pension and Annuity Fund.
It’s unclear where that leaves the programs currently funded by the lottery, though the governor’s office said they will be covered by the state budget. But without the dedicated funding source from the lottery, these programs may have to jockey for dollars in a budget that has little ability to absorb hundreds of millions of dollars in additional spending.
“It is worth a discussion,” Senate President Stephen Sweeney (D-Gloucester) said. “But I know our residents, our constituents will have concern about how we handle the other side of ledger.”
Tom Healey, the chairman of the governor’s special pension and health benefits commission, said that panel considered drawing on lottery revenues early in its work, but decided it was technically and legally complicated.
The lottery’s value as an asset is its ability to generate about a billion dollars a year, Healey said. Actuaries determining how much the state owes the pension funds each year will assume the $1 billion in cash flow from the lottery, much like it assumes certain returns on investments.
“It’s a great start. But it’s just a start,” he said. “My absolute hope would be that the people who expect to be the next governor would get behind this.”
Christie’s previous efforts to right the pension system haven’t delivered. He didn’t keep his promises to increase contributions in a once-ballyhooed bipartisan public pension overhaul, and the recommendations of the pension and benefits commission never got off the ground.
Christie replaced the promise to ramp up contributions by one-seventh of what’s recommended by actuaries every year with one that increases by one-tenth. Christie’s proposed budget for the fiscal year that begins in July includes a $2.5 billion payment — half of the actuarial recommended contribution.
The state contributed $1.3 billion in the fiscal year that ended in June. And it is scheduled to pay in $1.86 billion during the current fiscal year.
Hetty Rosenstein, state director of the Communications Workers of America, which has fought for pension funding, said there are too many questions to form an opinion.
“A stable funding source into the pensions is not a bad thing. And if there is a way that you can take this as an asset so that it lowers the unfunded liability, I don’t know that’s a bad thing. I just don’t know,” she said. “We are asking our actuaries to evaluate it.”
NJ Advance Media staff writer Susan K. Livio contributed to this report.
Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.
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