New Jersey's teachers' pension fund has less than 46 cents set aside for every dollar it owes retired teachers, and its liabilities grow by roughly $2 billion a year no matter what the state contributes, according to the state's own actuarial valuation as of July 1, 2024. Governor Mikie Sherrill's response, in the FY2027 budget she signed on June 30, was to fully fund the pension system at $7.3 billion — 12% of a record $60.7 billion spending plan — while leaving every structural driver of the shortfall untouched. That's not a recovery plan. That's a treadmill.
In the world of pensions, a fund below 50% funded doesn't get called recovering. It gets called impaired. New Jersey's Teachers' Pension and Annuity Fund qualifies on both counts, and the trajectory hasn't meaningfully changed.
Illinois gets the headlines, and it earns them: its unfunded pension liability equals 197.2% of the state's own-source revenue, worst in the nation, according to the Pew Charitable Trusts' fiscal 2022 analysis. New Jersey ranks second at 162.4%, ahead of Mississippi's 149.5%. The national pension conversation treats New Jersey as a supporting character in Illinois's story. The arithmetic disagrees.
The political history is bipartisan, which is exactly why the problem has survived three decades of governors. In 2011, Chris Christie signed Chapter 78, a reform that raised employee contributions and wrote a funding guarantee into law. Three years later, Christie's own line-item veto stripped $1.57 billion from the required payment, and the unions sued to enforce the guarantee he had signed. The New Jersey Supreme Court ruled against them, 5-2, in Burgos v. State (2015), holding that Chapter 78's promise wasn't a legally enforceable contract under the state's Debt Limitation Clause. The court let the underfunding continue. Phil Murphy then reversed course, making five consecutive full payments totaling more than $47 billion — without ever reforming the benefit structure that produced the shortfall. Sherrill just made number six.
The Sunlight Policy Center, using a stricter measure that excludes the state's lottery-asset contribution, puts the same fund's funded ratio lower still: 34.7% as of fiscal 2023, actually down from 35.5% in fiscal 2021 despite a record 28.6% investment return that year. Whichever number you use, contributions plus returns aren't closing the gap. The New Jersey Education Association, meanwhile, spent decades steering reform pain toward prospective teachers through tier reductions, while its own leadership's pension plan stayed comparatively well-funded. Even Gordon Gekko would wince.
Sherrill's FY2027 budget cuts the structural deficit to $1.35 billion, down from more than $3 billion when she took office in January. That's real progress on the operating side. It does nothing for TPAF. The budget doesn't touch benefit formulas, doesn't revisit actuarial assumptions, and doesn't migrate new hires into a hybrid or defined-contribution design. Reason Foundation puts New Jersey's total unfunded pension liability at $92 billion as of the end of 2024, the fourth largest in the country in dollar terms. Truth in Accounting ranks New Jersey dead last among the fifty states in its 2025 fiscal-condition report, with a per-taxpayer burden of $44,500.
Compare that to what structural reform actually looks like. Wisconsin's public pension system is 96% funded, per Reason Foundation's 2025 rankings — the product of decades of conservative assumption-setting, not a single legislative act. Rhode Island took the harder path: the 2011 Rhode Island Retirement Security Act, championed by then-Treasurer Gina Raimondo, suspended cost-of-living adjustments until the fund reached 80% funding and moved workers into a hybrid defined-benefit/defined-contribution design. Rhode Island's combined funded ratio rose from 48.4% to 62.8% over the following eleven years, according to the state's own 2024 Pension Advisory Working Group report. Neither state got there by writing a bigger check. They changed the system.
A pension fund is a mathematical contract, not a social services agency. Contributions plus investment returns must equal or exceed future payouts — full stop. New Jersey has spent three decades making politically convenient payments into a structurally defective system and calling it fiscal responsibility. Servicing an accelerating debt without fixing the structure doesn't close the gap. It slows the rate at which the gap widens and calls that progress.
The accountability vacuum here is bipartisan by construction. Republicans skipped payments to avoid raising taxes. Democrats made payments to satisfy union allies while declining the reform that would have cost those same allies. Both spent thirty years treating a fiduciary obligation as a political instrument. Teachers, police officers, and public employees were promised a mathematical certainty. They got a political IOU, and Trenton's newest budget just wrote another one.
