Peter J. McDonough, the senior vice president for external affairs at Rutgers.


Peter J. McDonough is the senior vice president for external affairs at Rutgers.

Benoit Cortet

The future of higher education funding in New Jersey depends more than anything on the state’s ability to fund its contractual and statutory obligations to public employee pensions and health benefits.

New Jersey is in a pension-funding crisis. The Securities and Exchange Commission found that the last time the pension funds were fully funded was in 2000. Today, they are underfunded by an estimated $80 billion.

Next year’s contribution to the pension system and health benefits programs is estimated at $8 billion, or roughly one-quarter of all state government spending next year.

A debate is raging over whether the state must make the contributions that were established in a 2011 bipartisan agreement to reform the pension system. The governor says the state can’t afford those payments right now and adds that his administration has made more contributions to the pension systems than all of the recent New Jersey governors combined. Legislative leadership and public employee unions say a deal is a deal and the state must abide by it. The New Jersey Supreme Court is deciding that question now.

Putting aside the question that is before the justices, the bigger and longer-range question is how the state will go forward in funding pensions and how, or even if, the system should be redesigned to lessen the pressure on the budget while at the same time being fair to public employees who have worked, in some cases for decades, on the rightful expectation that their agreed-to compensation packages would be honored.

Clearly something must be done. The proposed budget appropriation for higher education generally, and for Rutgers specifically, is virtually identical to what was appropriated in the mid-1990s. Since that time, much has changed at Rutgers. Most strikingly, we are educating about 14,000 more students today than we did at that time. 

Reversing that negative funding trend for higher education could depend upon a significant redesign of the state’s pension and health benefits programs. When one out of four state tax dollars must be spent to fund pensions and health benefits, precious little will remain available to fund programs like higher education.     

— Peter J. McDonough


Peter J. McDonough, the senior vice president for external affairs at Rutgers, is the author of The State We’re In, a feature of On the Banks that highlights political developments in New Jersey that affect Rutgers.