Study: Garden State leads U.S. in future health costs
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Gov Chris Christie, foreground, and Senate President Stephen Sweeney, back right, Gov. Chris Christie and state Senate President Stephen Sweeney (D-Gloucester) are working on changes to the public-employee medical system that would push some of costs to current workers and future retirees in the form of increased contributions.TRENTON — New Jersey’s price tag for public-worker retirement health benefits is higher than any state in the nation, according to a study to be released today by the Pew Center on the States.
New Jersey has promised $66.7 billion in medical benefits to future and current retirees, but has not set aside a single penny to pay for it, according to the study, which looked at 2009 financial data from all states.
New Jersey’s unfunded liability — the gap between what is owed and what’s been saved — is higher than the nation’s most populated states of California ($66.5 billion), New York ($56.2 billion) and Texas ($53.8 billion).
In fact, New Jersey’s unfunded liability accounts for 11 percent of the combined $604 billion accrued by all 50 states, the study shows.
With no money set aside, New Jersey is operating without a safety net and its annual medical costs will continue to rise even more as baby boomers retire.
“The question is whether these costs are sustainable,” said Kil Huh, director of research at the Pew Center. “The more you pay, the less you’ll have for other services, such as education and health.”
In order to better control retiree health costs, states should treat them like pensions, tucking away money each year to pay for future costs, said Huh. The money can then be invested and will eventually lower annual costs, said Huh.
As of 2009, 19 states have set aside no funds for future medical costs, while the others have mostly tucked away a small fraction of what they owe retirees, according to the study.
Gov. Chris Christie and state Senate President Stephen Sweeney (D-Gloucester) are working on changes to the public-employee medical system that would push some of costs to current workers and future retirees in the form of increased contributions. But neither have proposed establishing a pension-style fund.
Christie spokesman Kevin Roberts yesterday said the governor is not currently considering a pension-style plan for health benefits. “Our focus is on getting the Legislature to enact our reform plan to ease the unsustainable burden it places on taxpayers, who on average fund 92 percent of the cost of public employee health benefits in the state,” he said.
With enough in the bank to cover 66 percent of what’s owed in benefits, New Jersey’s pension system is also among the most poorly funded in the nation, according the study.
Based on the percentage funding, New Jersey has the 12th poorest pension plan in the country, according to the study. The state had the seventh poorest pension plan when Pew released a similar report last year.
Many states, including New Jersey, have skipped or reduced pension contributions so they could divert money to other areas. Overall, states were supposed to contribute $115 billion to their pensions, but only kicked up $73 billion in 2009, the study shows.
Roberts said the study is troubling and highlights the need for reform in the state’s pension system.
The study looked at the effect of the Great Recession on retirement benefits and covers the latest data available from the 50 states on pension, health care and other benefits promised to current and future retirees.
The gap between the promises states have made for public employees’ retirement benefits and the money they have set aside grew to at least $1.26 trillion in fiscal 2009, resulting in a 26 percent increase in one year, according to the study.