Chris Christie is still battling the fallout from the bridge scandal, but if this Bloomberg report is any indication, the bridge scandal may not even be the biggest problem for the Governor’s national political prospects. Christie is cutting $94 million from the state’s pension contribution as part of nearly $700 million in spending cuts to balance the budget. Moody’s is concerned about this move:
The change will use employee contribution requirements that were enacted in a 2011 benefits overhaul, a move that results in a reduction of the state’s recommended payment for this fiscal year, which ends June 30, and next. Christie’s need to “retroactively recalculate the amounts indicates that the state’s financial position is weaker than expected and that more typical budget-balancing solutions have already been exhausted,” [Moody’s vice president and senior analyst Baye] Larsen wrote. […]While the fix will help balance budgets through fiscal 2018, pension costs will be higher in later years as a result, according to Moody’s. The company reduced its outlook on New Jersey’s debt to negative from stable in December, citing a “sluggish economic recovery” and a growing pension burden. […]“The state continues to use one-time fixes that indicate above-average financial weakness,” Larsen wrote yesterday.
Every credit-rating agency has demoted New Jersey by one level since the start of Christie’s tenure in 2010, bringing the state to the third-lowest rating nationwide (only Illinois and California are lower).To be fair to Christie, many of these problems are not his fault. He inherited a government whose finances and pension programs were already in deep trouble, and his administration has done far more to address the problem than those of his predecessors. Unfortunately, minor cost-cutting and employee contribution increases alone won’t bring the system back to full funding, and barring even larger benefit cuts or contribution increases, both of which are extremely unlikely, the state will need to kick in some more money to keep the system solvent.Rather than doing that, however, New Jersey seems to be moving the opposite direction, cutting its contributions to fix a hole elsewhere in the budget, punting the problem further into the future. This isn’t fiscal prudence; it’s exactly the sort of short-term thinking that has put so many pension plans into hot water in the first place.