New Jersey's most pressing fiscal problem in 2011 is the same as it was in 2010: Its debt to public-sector retirees.
That debt is rapidly worsening. Recently released figures show the state's unfunded pension liability for state and local workers rose a staggering 18 percent in 2010, from $45.8 billion to $53.9 billion. Even that eye-glazing figure may be grossly understated. Using a more conservative and realistic calculation of return on investment, some analysts believe the state's real unfunded pension liability is $173 billion.
The new figures underscore the need for swift action. The Legislature must pass Gov. Chris Christie's package of pension reforms - and Christie must make at least a minimal payment into the pension account this year.
Christie's reforms are tough but necessary. They include rolling back a 9 percent raise in pensions granted in 2001, increasing the pension payment for most public employees, increasing the retirement age and the years required for early retirement, and ending cost-of-living adjustments for retirees.
State Sen. Stephen Sweeney, D-Gloucester, Salem, Cumberland, says those reforms won't happen unless Christie makes at least a minimal payment into the fund. That $500 million payment is just a fraction of what the state ought to be paying - and is required by a state law Christie himself signed less than a year ago. Still, the governor has hedged on whether he will make that mandatory payment this year because of the state's ongoing budget shortfalls.
Here's one suggestion: Politicians should think long and hard about enacting laws that cost money and make that budget shortfall worse. For example, the Legislature is advancing jobs-creation bills that would give hundreds of millions of dollars in tax breaks to various businesses. And it is also considering a bill that would reduce state tax revenues by another $62 million by exempting retirement income from senior citizens earning up to $100,000.
The tax breaks to industry are meant to jump-start the economy - theoretically increasing revenue in the long run. That's the rationale, although New Jersey Policy Perspective is among those questioning whether the tax breaks would be all that effective. And we're not sure how an income-tax break for well-off seniors does much except score political points among a constituency that votes regularly.
But in any event, Christie and lawmakers must weigh those kinds of decisions against the state's looming deficit and the need to confront - now - the rapidly worsening pension-fund crisis.