Credit: (Stephen Bayer from Pixabay)

Double-digit investment returns boosted the pension fund covering the retirements of many public workers in New Jersey during the last fiscal year, according to new data released by the state Division of Investment.

While still subject to final auditing, the preliminary performance totals released Wednesday indicate investment returns reached nearly 11% during the 2024 fiscal year, which ended June 30.

That topped the roughly 9% returns earned during the prior fiscal year, as well as the pension fund’s overall 7% assumed rate of return.

Over the last five fiscal years, investment returns have totaled 7.7%, according to the Division of Investment data.

As a result, the market value of the share of pension fund assets managed by the Department of the Treasury’s investment division hit $69.5 billion as of the end of the 2024 fiscal year.

“Needless to say, we’re quite pleased with the fiscal year 2024 results,” said Shoaib Khan, the director of the Division of Investment, during a public meeting of the New Jersey State Investment Council.

$1 billion-plus from Lottery revenues

Over the summer, state Lottery officials shared additional good news for the pension fund, reporting the share of Lottery revenues that are dedicated to funding public-worker pensions in New Jersey topped $1 billion during the 2024 fiscal year. New Jersey began dedicating a portion of the Lottery system’s annual revenues to the pension fund under a policy change enacted in 2017 by then-Gov. Chris Christie.

Meanwhile, Gov. Phil Murphy and lawmakers have also in recent years resumed the practice of putting into the fund what actuaries calculate as state government’s “full” employer pension contributions.

‘I think you’re producing these results, while managing risk well, and I think that is a very important takeaway from these numbers.’ — Deepak Raj, New Jersey State Investment Council chair

That has allowed state pension fund managers to take full advantage of the favorable market conditions that have boosted pension fund investment returns in recent years, easing pressure on taxpayers, who, along with the workers themselves, contribute to public-employee pensions in New Jersey.

During the 2024 fiscal year, total state pension contributions topped $7 billion, counting the dedicated Lottery revenues. The state contributions are projected to top $7 billion once again during the 2025 fiscal year, which began July 1, according to budget documents.

Police-firefighters fund is separate

Earlier this year, pension fund assets  that cover the retirements of police officer and firefighters in New Jersey were formally separated from those managed by the Division of Investment under a law Murphy enacted in 2018.

Comparable investment return data for the share of assets managed by the Police and Firemen’s Retirement System, or PFRS, since the formal separation were not immediately available Wednesday.

While detailing returns for the pension fund assets managed by the Division of Investment, Khan highlighted during Wednesday’s investment council meeting how U.S. public equities emerged as a strong performer during the 2024 fiscal year.

“We were able to generate 23% for fiscal year 2024 from the U.S. domestic equity portfolio,” Khan said.

Risk mitigation strategies and private credit also generated returns of more than 10% during the 2024 fiscal year, while high-yield returns fell just short of 10% during the same period, Khan said.

Meanwhile, cash equivalents nearly hit the pension fund’s assumed rate of return, improving the overall risk profile, Khan said.

High praise

Following Khan’s presentation, Deepak Raj, chair of the investment council, heaped praise on the Division of Investment for achieving strong returns.

“I think you’re producing these results, while managing risk well, and I think that is a very important takeaway from these numbers,” Raj said. “Thank you, to you and your team.”

Still, figures included in the latest state bond documents highlight the damage done to the pension system’s assets by years of state government skipping full actuarially determined pension contributions.

That practice went on for more than two decades before the recent funding decisions made by Murphy and fellow Democrats who control the state Legislature.

In all, the state’s net pension liability, as of the 2024 fiscal year, was nearly $80 billion, according to bond documents issued earlier this month.

Meanwhile, Treasury’s latest long-range projections indicate it will take until the 2050s to restore the pension system’s funded ratio to near 100%, assuming the current funding policies are continued.

Despite surging inflation in recent years, annual cost-of-living adjustments for retired government workers in New Jersey have also been suspended for more than a decade under another reform that was enacted by Christie, in 2011.