Teachers' pension fund reveals $11.5B shortfall Trustees urge Corzine to stop underpaying benefits Friday, March 07, 2008 • BY DUNSTAN McNICHOL • Star-Ledger Staff The gap between what New Jersey has set aside to pay retirement benefits for more than 200,000 teachers and what those benefits are likely to cost widened by $1.5 billion last year, even as the retirement account enjoyed a robust rate of investment return, an actuary reported to state officials yesterday. In what has become a gloomy rite of spring in Trenton, the ex perts who monitor the fiscal health of the largest of New Jersey's pub lic pension funds, the Teachers Pension and Annuity Fund, reported it is ailing. At a total value of $36.6 billion, the teacher's pension fund has plenty of cash to cover the $2.3 billion in benefits it pays out each year. But over time, actuaries reported yesterday, the fund will have to cover a total of $48 billion in benefit payments, meaning it is underfunded by a total of $11.5 billion. That's $1.5 billion larger than the gap between assets and pension promises that the actuaries reported last year. Across all seven of the state's pension funds last year the state reported a funding gap of about $16.6 billion last year. Yesterday's report means that gap now exceeds $18 billion, despite efforts by Gov. Jon Corzine to step up payments into the retirement ac counts. Scott Porter, the actuary who examined the fund, said the primary reason for the growing shortfall is that the state keeps underfunding it. Last year, the state was scheduled to deposit $1.29 billion into the teacher's pension fund, but included only half that amount in the state budget. The budget Corzine proposed last month for the coming year includes the same amount for the teacher's fund -- $663 million -- while the amount Porter said is needed to keep pace with rising retirement expenses has grown to $1.4 billion. Last year's underfunding alone added $38 million to this year's tab, Porter said. Since 2004, the state has shorted the teacher's fund by more than $2.6 billion, according to the report. The continued underfunding riled trustees of the retirement fund, who adopted a formal statement urging Corzine to pay the bill in full. "It's becoming increasingly diffi cult, if not impossible, to meet the obligation to ensure the security of this fund," said Dennis Testa, sponsor of the motion that called for full funding. "It will become, in time, near impossible for the state to meet its full obligation to the fund." The growing shortfall comes despite a year in which the pension fund racked up an investment re turn of 15.95 percent generating $4.87 billion in market gains. It was the fund's best return since 1999, and stands in sharp contrast to the current fiscal year, in which the investments have so far lost money. The growing pension debt is one problem Corzine hoped to address by raising $38 billion through a program of toll hikes and borrow ing. In background material presented for his budget proposal, Corzine notes that the state's budget payments to all seven pension funds, currently at $1.1 billion, is on track to exceed $3 billion within five years. Dunstan McNichol may be reached at (609) 989-0341 or dmcnichol@starledger.com. © 2008 The Star-Ledger. Used by NJ.com with permission.