Sweeney touts plan to allow state to borrow from itself

Senate President Stephen Sweeney on Thursday announced a plan to allow the state’s pension fund to buy bonds directly from the Transportation Trust Fund as it embarks on a borrowing spree to finance up to $16 billion worth of new infrastructure projects over the next eight years.

The proposed legislation would allow the pension fund to accrue annual interest on the state’s debt rather than having the state pay that interest to Wall Street, Sweeney said. The state would also avoid paying bond underwriting fees.

For example, if the pension fund bought $1.2 billion in bonds issued by the Transportation Trust Fund at a 5 percent interest rate, Sweeney said, the pension would gain $60 million a year.

“Why are we letting other people make interest off of us when we have a pension fund that is woefully underfunded?” he said. “This is a safe bet. This is not a risk.”

Sweeney was joined at a news conference announcing the plan by Sen. Dawn Addiego, R-Burlington, and Assemblyman Adam Taliaferro, D-Gloucester. The legislation, which Sweeney said he had not yet discussed with Governor Chris Christie and which hasn’t been formally introduced in the Legislature, would remove a restriction on the State Investment Council that limits pension investments to no more than 10 percent of any single bond sale.

The plan would lift the restriction only for bonds issued by the Transportation Trust Fund.

“This is presenting an opportunity for the Investment Council,” Addiego said. “They still have the responsibility to make sure it is the right opportunity.”

Sweeney conceded that saving a few million dollars a year for a pension system facing upward of $80 billion in liabilities won’t make a huge impact. “But every penny you can squeeze is a lot of money to put the pension back into fiscal health,” he said.

Sweeney also fast-tracked a bill last month that would mandate that the state make quarterly payments into the pension as opposed to one lump-sum payment at the end of the fiscal year.

The bill passed both the Senate and the Assembly and now awaits a signature or veto by Christie.

That bill, similarly, would help but not solve the budding fiscal crisis in the pension system. Although the bill changes the timing of the state’s pension payments, it does not affect the amount of those contributions or address the system’s skyrocketing costs.

Email: pugliese@northjersey.com