By Ted Ballantine, Pension360:
Barring a successful appeal, New Jersey will be forced by the courts to make its full pension contribution this year, which will total $1.6 billion.
But that payment hasn’t been budgeted for – and since Gov. Chris Christie has vowed not to raise taxes, the bulk of the money must come from spending cuts.
But budget and treasury officials testified on Tuesday that it might be “fiscally and physically” impossible for the state to come up with the money required to make the full payment.
David Rosen, legislative budget and finance officer for the nonpartisan Office of Legislative Services, told the Senate Budget and Appropriations Committee it would be nearly impossible for the state to scrape together $1.57 billion before the end of the fiscal year in June if that’s what the Supreme Court rules in a heated legal battle over pension funding.
“If the Supreme Court were to direct the state to make the additional payment before June 30, I’m not sure that that’s fiscally or physically possible in terms of the amount of money that is still left to be expended and the constraints that we have on how we could come up with that money,” Rosen said.
Rosen told the key Senate committee that with just six weeks left in the fiscal year, little money remains in state coffers.[…]
State Treasurer Andrew Sidamon-Eristoff reinforced Rosen’s remarks later Tuesday, when he said told the lawmakers that if the high court orders the full pension payment, “frankly, that ship has sailed.”
The administration could not pool the modest, unspent balances to amass nearly $1.6 billion without “visiting just havoc” on programs and services, he said.
On the bright side: the state said tax revenues exceeded projections by $200 million recently, and all that money will be going to pensions. Of course, that constitutes just 12 percent of the payment New Jersey needs to make. By Ted Ballantine, Pension360
New York Fed President Dudley has been warning that risks of municipal bankruptcies are “more widespread” than implied by bond ratings. Bondholders and public employees with pensions beware: The Fed is now doing workshops on municipal bankruptcies. Read… Fed’s Dudley Warns about Wave of Municipal Bankruptcies