New Jersey Governor Phil Murphy’s latest plan to legalize recreational marijuana has until May to pass the legislature. If it doesn’t pass, Murphy will focus on expanding medical marijuana.
In an exclusive interview with Yahoo Finance, the governor said members of his administration are working with lawmakers to tweak the legislation that would legalize recreational weed, which up until now appeared dead. Expanding access to marijuana was one of Murphy’s 2017 gubernatorial campaign promises.
“We have a good working relationship with the legislative leadership and our teams are still coordinating how we can deal with this,” said Murphy, adding that what he hears from his team looks good. Murphy said the legislation must include provisions to erase previous convictions, end parole, and release people convicted of minor marijuana offenses from jail. But if it fails, Murphy vows to instead expand the states medicinal pot program.
“We would have to because I have no choice,” he said. “Our medical marijuana regime is exploding.”
Revenue generated from medical pot in 2018 hit $53 million, more than double the amount in 2017, according to New Jersey’s Division of Medicinal Marijuana Biennial Report released April 1. The report recommends raising the monthly 2 ounce cap on marijuana purchases for all qualifying patients and eliminating the limit for terminally ill patients. It also said that high prices for medical marijuana in New Jersey are suppressing demand. The report concludes that ”the best way to reduce prices is to expand supply and increase competition and choice for patients.”
Tackling New Jersey’s public pension crisis
In addition to expanding access to marijuana in New Jersey, Murphy also promised to tackle the state’s multibillion-dollar unfunded public pension crisis. New Jersey ranks No. 42 among the 50 states for unfunded public pension liabilities per capita at $26,174 for each citizen of the Garden State, according to a recently released study by the American Legislative Exchange Council (ALEC). One example is the New Jersey Teachers Pension Annuity Fund, just one of nine administered by the state, which has a $96 billion dollar unfunded liability, the ALEC study said. Murphy promises to improve the funding levels for all nine pensions.
“This is a state that basically walked away from its obligations for more than two decades on both sides of the aisle,” he said.
But Murphy appears to be “walking” down the same path as his predecessors. His proposed 2020 budget provides $3.8 billion dollars, only 70% of the annual funding that state actuaries estimate that the public pension system needs.
New Jersey pensions fell billions of dollars behind because previous governors made smaller contributions than the actuaries suggested. The governors expected the return on investment would cover the shortfall. But they were wrong. ALEC Chief Economist Jonathan Williams said pensions or defined benefit plans in the private sector, on average, have a return of around 4.5% each year on their investments. New Jersey has consistently expected returns greater than 7% and year after year the state falls short. The teachers pension, for instance, fell short four out of the past six years.
Murphy, however, expects this year’s return to be 7.5%, a projection that Williams called foolish. “It’s going to take a whole lot more than 7.5% return in one year on investment for New Jersey’s pension system to recover from numerous errors committed over several years,” Williams said. “They will have to exceed that for many many many years to get back to a healthy level of pension funding.” Murphy disagrees, “7.5% is not heroic. It is reasonable,” he said. “We are on the long path to fully funding this. You can’t build Rome overnight.”
Adam Shapiro is the co-anchor of Yahoo Finance’s On the Move.