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Trenton, NJ – Today the American Legislative Exchange Council (ALEC) released their report, “Unaccountable and Unaffordable,” which examined 280 state administered pension plans. The 2017 report details how states continue to fall behind on their pension payments due to exploding pension liabilities. The report found New Jersey has only funded 25.7% of its future pension obligations, and has the fourth-worst liabilities per capita in the nation at $27,806.
“This report underscores the dire need for the incoming governor and legislature to prioritize moving towards private sector style plans,” said AFP-NJ Grassroots Director Tony Howley. “We urge our lawmakers to find the courage to move beyond the defined benefit model and act to protect our state from higher taxes and further economic decline.”
Between the 2016 to 2017 report, unfunded liabilities increased by more than $430 billion, leading to overall unfunded liabilities to increase to over $6 trillion. The main driver of these are defined benefit pension plans, which guarantee payments as a percentage of final salary. This combined with cost of living increases have led to an explosion of unfunded liabilities.
States have been effectively hiding these massive debts through overly optimistic assumptions on investment returns. The robust return in the stock markets, in addition to liabilities still increasing at a rapid pace, shows that fundamental pension reform is needed across the nation.
The study highlights the success Arizona, Pennsylvania, and Michigan have had in implementing pension reform. All three states have enacted pension reform that moves away from the defined-benefit model and towards private-sector style plans. These reforms have helped ensure the solvency of their pension programs and saved taxpayers billions of dollars.
For further information or an interview, reach Lorenz Isidro at LIsidro@afphq.org or (703) 887-7724.
Americans for Prosperity (AFP) exists to recruit, educate, and mobilize citizens in support of the policies and goals of a free society at the local, state, and federal level, helping every American live their dream – especially the least fortunate. AFP has more than 3.2 million activists across the nation, a local infrastructure that includes 36 state chapters, and has received financial support from more than 100,000 Americans in all 50 states. For more information, visit www.americansforprosperity.org
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