Although the New Jersey legislature overwhelming approved letting police and firefighters control their pension fund by removing it from state government management, Gov. Phil Murphy could veto bill.
Democrats control both the legislature and the governor’s chair, but they are not of one mind on this issue. Former Goldman Sachs financier Murphy has questions about the bill’s financial ramifications. He worries about how an independently run police-firefighter pension plan would affect other pension programs that the state government continues to run. The entire state pension system, which is well short of being able to meet its obligations, is one reason New Jersey’s credit rating is so low.
Murphy is concerned with potential penalties that all of the Garden State’s pension funds could suffer should the police-firefighter plan be forced to deplete its hedge fund holdings. Some hedge funds lock up clients’ money for years and charge big fees for early withdrawal. According to NJ.com, acting state Treasurer Elizabeth Muoio said that Murphy was “supportive” of the bill’s basic premise, but still is troubled by its possible downsides.
“The fact that we may have to liquidate them could end up costing all of the funds a significant amount of money, and we have a fiduciary duty to look after all of our pension funds,” Muoio said.
The fund is currently managed by the New Jersey Division of Pensions and Benefits, while investments are controlled by the State Investment Council.
The police and firefighters say they would rather put the fate of their retirement benefits in their own hands than leave it to state management. The fund, due to insufficient contributions and expensive investment decisions, has gone from fully funded to 65% funded in roughly 20 years.
Under the bill, a board of active and retired policemen and firefighters, plus state and local government representatives, would manage the fund. This could potentially overrule a current freeze on cost-of-living-adjustments put in place by former Gov. Chris Christie, a Republican, who opposes the measure. Current law states that COLAs cannot continue until a fund is at least 80% funded and can prove that those payouts would not drop it below the mark.
The legislation passed Monday with a 34-2 vote in the Senate and 67-2 in the state Assembly with seven abstentions. It is currently sitting on Murphy’s desk as anxious pension members wait for the governor’s call.
“We passed both houses almost unanimously, overwhelmingly, and it’s on the governor’s desk and we hope he’s going to sign it,” Eddie Donnelly, president of the New Jersey State Firefighter’s Mutual Benevolent Association, told NJ.com.