Senate President Stephen Sweeney says the federal government should make low-interest loans to states to restructure their pension debt, such as New Jersey's $51 billion shortfall


TRENTON – New Jersey's pension debt exceeds $51 billion, and Senate President Stephen Sweeney has a new plan for paying it: a low-interest loan from Washington.

Sweeney, D-Gloucester, says the federal government should help states fix their pension shortfalls, which are approaching $1 trillion nationally, by creating a pension debt restructuring program.

Voters in a state would have to approve participating in the plan, and states would have to agree to make required payments into their retirement systems to ensure they won't rack up the same debts again. Loans would be repaid over 30 years. They should have an interest rate of 1 percent to 2 percent, Sweeney suggested.

"This is not a bailout or a handout. It's a loan program, with its biggest winners being the taxpayers because they would pay less in future pension payments and avoid cuts in essential services," Sweeney said at a Statehouse news conference. "If it's in the nation's interest for the federal government to step in and keep Wall Street and General Motors afloat, it should be able to find ways to protect the pensions of middle-class income teachers, police and government employees."

Sweeney says New Jersey's future pension payments would be cut in half, from the $6 billion in yearly payments the state should be making to pay its current debt to the $3 billion to $3.25 billion he says it would cost to make the regular pension payment and pay off the low-interest loan.

Sweeney says the state would come out ahead because its earnings from investments by the pension funds, which his plan presumes would average 5 percent at first and 7 percent later, would far exceed the interest rate set by the Federal Reserve.

But he said the proposal would be nothing like the pension bonds New Jersey sold under Gov. Christie Whitman in 1997, when the state borrowed $2.8 billion from Wall Street to close what was then its unfunded liability. The stock market crash that accompanied the end of the dot-com boom meant that investment earnings didn't keep pace with debt payments, which were backloaded and are now quickly escalating toward $500 million a year. It won't come off the books until 2029.

"It's not even close," Sweeney said. "She borrowed for the budget. They were non-recallable notes. The interest rate was 5-point-something percent. So, that was like highway robbery. And you can't restructure the debt. ... It was a horrible deal. This is much different than that."

DATA UNIVERSE: New Jersey pensions

Gov. Chris Christie's office didn't endorse or reject Sweeney's idea but instead reiterated the governor's call for additional increases in what public workers pay toward their pensions and health benefits.

"The simple fact is that we have a system where an NJEA member retiring in just a few years contributes just $126,000 to their pension and health benefit costs over 30 years and takes out $2.4 million in benefits," said Christie spokeswoman Nicole Sizemore. "The math does not work at all. That is the fundamental problem that needs to be solved."

New Jersey Education Association president Wendell Steinhauer calls those numbers "inaccurate and intentionally misleading."

Sweeney said he plans to write letters to legislative leaders in other states talking up the idea and hopes to drum up support for it with colleagues when the National Conference of State Legislatures meets next week. He said he talked about the idea with U.S. Rep. Donald Norcross, D-Camden.

A study released last week by Pew Charitable Trusts found the cumulative unfunded pension liability nationally was $961 million as of 2013. It had more than doubled in five years.

Michael Symons: 609-984-4336;

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