The U.S. government should rescue troubled state pension plans with billions of dollars in long-term, low-interest loans, New Jersey Senate President Steve Sweeney proposedon Wednesday.
The trillion-dollar question is whether it would save pensions or sink states deeper in debt. That’s the amount of underfunding public retirement plans collectively face in the 50 states, according to a Pew Foundation study.
“A federal plan to restructure the pension debts would cut annual payments and save the taxpayers money,” said Sen. Sweeney, D-West Deptford.
Sweeney said New Jersey now needs to pay $6 billion a year for the next 30 years to erase its $51 billion in unfunded pension liabilities. He calculated the annual payment would be cut in half to $3 billion with a $50 billion loan from the Federal Reserve at an interest rate of 1-percent a year.