Pension Obligations and Reform Options

Pension Obligations and Reform Options, March 2010

Presentation to the New Jersey Council of Economic Advisors
David L. Crawford, Ph.D., President – Econsult Corporation and Adjunct Professor of Management – The Wharton School

On March 2, Econsult President Dr. David Crawford addressed the first meeting of the New Jersey Council of Economic Advisors at the Woodrow Wilson School of Public Policy (Princeton University). The Council, newly formed to advise the Governor of New Jersey, asked Dr. Crawford to make a presentation on economic issues related to the New Jersey public employee pension system. The meeting was also attended by the New Jersey Governor, Lieutenant Governor, and several members of the Governor’s cabinet.It has been estimated that New Jersey needs to make a $2.5 billion in the coming year. Dr. Crawford told the Council that failure to make the full contribution this year would in effect borrow from future taxpayers under terms that would be extremely unfavorable and unfair to those taxpayers.

Dr. Crawford also told the Council that they will not be able reduce future pension contributions by moving toward a defined contribution plan, issuing pension obligation bonds, or instituting a deferred retirement option plan (DROP). According to Dr. Crawford, the only way to lower future costs significantly would be to reduce the generosity of pension benefits, a move that would be very difficult and highly controversial.

The Presentation and related materials are presented in the following links and downloadable documents:

• Presentation (PowerPoint PDF)
• State Explores Solutions to NJ Pension Problem (Asbury Park Press PDF)
• New Jersey Newsroom (PDF)