Sweeney Unveils Legislation to Enable Pension Systems to Add Infrastructure Assets to Holdings

Bill aims to diversify and stabilize pensions, spur infrastructure investment, and provide savings for taxpayers

TRENTON – Senate President Steve Sweeney today unveiled legislation that would enable pension systems to add revenue-generating assets like water utilities, toll lanes and parking lots to diversify and strengthen their portfolios.

“Forward-looking pension systems are increasingly looking to invest in revenue-generating infrastructure to diversify their portfolios in the face of high stock market volatility and minimal return on cash and bond funds due to historically low interest rates,” said Senator Sweeney (D-Gloucester/Salem/Cumberland).

“The state and local governments own water systems, reservoirs, real estate and parking lots that could generate stable revenue for pension systems in the same way that the New Jersey Lottery revenues we dedicated to the pension system provided stability amid the market turbulence of 2020. Pension systems could also contract for the construction and maintenance of High Occupancy Toll lanes like those in Maryland and Virginia,” he noted.

The Sweeney bill, S-3637, would create the Retirement Infrastructure Collateralized Holdings Fund – RICH, for short – as an infrastructure trust fund to hold and manage assets transferred to the public corporation by the state and local governments for the benefit of New Jersey’s public employee pension funds. The value of the assets, including their future revenue-generating potential, would be determined by expert third-party evaluators.

“This is ground-breaking legislation that would have multiple benefits,” Senator Sweeney said. “State and local governments, and their taxpayers, would be able to lower their annual pension contributions based on the value of the asset transferred. The assets would be professionally managed in the RICH Fund, with the state’s Infrastructure Bank serving as trust administrator safeguarding the interests of the public, the customers and the pension funds.

“Furthermore, it gives municipalities that don’t want to consider privatization of a key asset, such as a water utility, the option of a public-to-public transfer to an infrastructure trust fund that can make the long-term investments needed to improve the quality of service while realizing a fair return over 30 years and longer,” he said.

Like President Biden’s proposed infrastructure plan, the increased investments in New Jersey infrastructure created through the RICH Fund will generate good-paying jobs that will boost the state’s economic recovery from the Covid-19 pandemic and bolster state revenues needed for future pension payments.

The blue-ribbon Economic and Fiscal Policy Workgroup, co-chaired by Senate Budget Chair Paul Sarlo (D-Bergen) and Senator Steve Oroho (R-Sussex), recommended leveraging assets as a strategy to stabilize New Jersey’s underfunded pension system, which is saddled with a $40 billion unfunded liability, even with the state making its full Actuarially Required Contribution for the first time in two decades in the upcoming budget.

The senator said the RICH Fund could attract investment capital from other pension systems, which is a frequent occurrence with infrastructure assets. Leading pension funds like the California Public Employees Retirement System (CALPERS) have invested billions of dollars in water and wastewater infrastructure, toll roads and forests, and Canada’s Ontario Municipal Employees Retirement System has 20 percent of its holdings in infrastructure assets.

The RICH program was developed in consultation with the New Jersey Infrastructure Bank and with national pension and infrastructure financing experts.

“This is an innovative proposal that promises to simultaneously improve the health and stability of our pension system, generate new infrastructure investment, and save money for taxpayers,” Senator Sweeney said. “It will put New Jersey on the cutting edge of government fiscal reform.”