Mark Magyar at NJSpotlight has a piece detailing the implications of GASB's changes to pension valuation on New Jersey's pension liability. Indeed, the new guidance to be adopted on June 25 will lead states to report higher liability figures on the books and that implies that higher contributions will be necessary to fully fund the system. GASB's guidance however does not impose funding requirements. It only provides guidelines for reporting purposes. What the state contributes to the system is a matter for the Treasurer to determine and the Governor and legislature to act upon.
As the article describes in detail, New Jersey has undercontributed for years and is only now phasing in its contributions at a rate of one-seventh increments. If it were to fully fund the system by GASB's new guidance it could easily mean a jump to contributions of $5 billion a year. On a fully risk-adjusted basis it's likely closer to $10 billion a year. The problem here is the state is used to putting in almost nothing.
To move from a world of zero pension contributions to between one-sixth and one-third of the annual budget is sure to shock politicians as they think about future state budgets. New Jersey is of course not the only government that will be looking at a very different set of pension numbers soon. It will be worth watching how these states and municipalities adjust their funding strategies as the new rule takes effect.