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Christie to Bond Investors: Don’t Trust My IOUs


New Jersey Governor Chris Christie is sending an unusual message to investors: His state’s bonds may be no good. reports that potential investors have been informed that in the future New Jersey may not make its required pension payments, which are estimated to explode from $1.7 billion next year to about $5.5 billion in 2018:

The disclosure…also casts doubt on one of the key commitments Christie and leading Democrats made to public employees as part of the 2011 health and pension reform: Workers would shoulder a greater share of pension costs in exchange for the state making required payments to the cash-strapped pension fund. […]

“No assurances can be given as to the level of the State’s pension contributions in future fiscal years,” the prospectus reads.

In 2011, Christie spearheaded a bipartisan pension reform that promised to save taxpayers $120 billion over thirty years. It’s often touted as one of his signature achievements, but as of last June New Jersey’s pension fund had just 57 percent of the cash it needs to cover promised benefits. As the report notes, it’s difficult to see how the state could possibly afford $5.5 billion in pension payments in 2018 without taking at least one of the measures the Governor would really like to avoid: tax hikes, deep spending cuts, or further increases in contributions from public employees. New Jersey already spends ten times more money on employee pension and health benefits than on welfare support ($186 million) or economic development ($183 million). Pensions are sucking the state dry and diverting large sums of much-needed money from social services.

A handful of up-and-coming Republican governors like Christie have enjoyed fawning praise from commentators who have crowned them as innovative and revolutionary reformers ready to sweep away all our financial troubles. But these assessments understate just how bad our blue model problems really are. States like New Jersey have been digging themselves into this hole for fifty years, and decades of imprudent and unaffordable policies won’t be fixed in one fell swoop. Governor Christie’s 2011 reform was only the first bite of one apple, not the whole orchard. Incremental, purposeful reform over many, many years is what this country really needs.

[Gov. Chris Christie image courtesy of Shutterstock]

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  • Jim Luebke

    Well, that’s one way to fight deficits — be honest about whether they’ll actually be paid back, and let the bond markets enforce fiscal discipline.

    • Marty Keller


  • BrianFrankie

    Give Governor Christie points for honesty.
    In Illinois, they are still selling bonds without acknowledging what should be obvious to everyone – there is 0% chance they will be paid back. In effect, those purchasing Illinois bonds are submitting to voluntary taxation, which is certainly one way to balance budgets. But in my mind, it is simply fraud. Similar to making pension promises that have 0% chance of being kept.

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