New Jersey is quickly becoming the latest victim of the pension crisis. A new report from the State Budget Crisis Task Force estimates that pension costs will continue to increase beyond the state’s ability to pay, despite Governor Chris Christie’s reforms aimed at bringing pension costs in line. The New York Times reports:
This year, the state contributed $1 billion toward pension costs, but by 2018, it will have to come up with about $5.5 billion a year—roughly 40 percent of what it now spends on public education. There is no apparent source of that much money in the state’s $31 billion annual budget.
“The growth in pension requirements, plus the ever-increasing cost for current and retiree health benefits will crowd out other budgetary needs,” said the task force, a project led by the former Federal Reserve chairman, Paul A. Volcker, and the former New York lieutenant governor, Richard Ravitch.
If this report is accurate, New Jersey is headed down the same path as deep-blue states like Illinois and California. The Garden State may have a leg up on its competition, given that it is helmed by a governor who clearly understands the need for reform and may have the political savvy to get it done, but Christie is learning the hard way that decades of poor decisions cannot be undone in a day.
This should serve as a warning to other states: better to turn back from blue as soon as possible. The longer you wait, the more painful the inevitable reckoning.