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Moody's wary of police, firefighter pension powers

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Gov. Phil Murphy, center, at the July 3 bill signing joined, from left, by Bob Gries, New Jersey State Fraternal Order of Police; Pat Colligan, New Jersey State Policemen's Benevolent Association; Ed Donnelly, New Jersey Firefighters Mutual Benevolent Association; and Steve McConlogue, the Professional Firefighters Association of New Jersey.
Gov. Phil Murphy, center, at the July 3 bill signing joined, from left, by Bob Gries, New Jersey State Fraternal Order of Police; Pat Colligan, New Jersey State Policemen's Benevolent Association; Ed Donnelly, New Jersey Firefighters Mutual Benevolent Association; and Steve McConlogue, the Professional Firefighters Association of New Jersey. - ()

New Jersey's decision to relinquish control of the $26 billion police and firemen's retirement system and transfer it to a new board headed by union representatives has drawn a cautionary response on Wall Street.

Moody’s Investors Service, one of the three main Wall Street rating agencies, issued a “credit negative” for New Jersey on Friday, saying the move could hamper the state’s efforts to get its pension costs under control.

Gov. Phil Murphy signed the law on July 3, posing with union representatives in a series of photos accompanying a press advisory. The measure had been backed by public worker unions, who worried the state might otherwise pool the billions in assets with the rest of the public worker unions.

The move doesn’t constitute a credit downgrade for New Jersey, rated the second lowest in the nation, over its $100 billion unfunded pension liability.

But the report indicated that the move could harm the credit of state and local governments down the road, given that they bear 84 percent of the PFRS’ costs, calling it a “credit negative for a state that has weak pension funding and has struggled to make adequate annual contributions.”

Moody’s was also wary that seven of the board’s 12 members will represent the state’s active and retired employees.

“Moving PFRS management to its own board may misalign the state’s interest in improving its pension funding with the new PFRS boards’ interest in maintaining benefits for its members,” the report added.

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Daniel J. Munoz

Daniel J. Munoz


Daniel Munoz covers politics and state government for NJBIZ. You can contact him at dmunoz@njbiz.com.

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