Nov 25 (Reuters) - Under a new pension accounting method, New Jersey's retirement system for public employees is far more poorly funded than previously measured, the state said in a bond document on Tuesday.
New rules issued by the Government Accounting Standards Board put the system's funding at 44 percent for fiscal 2014, not the 63 percent previously determined by standard actuarial methods. Eighty percent or more is generally considered healthy.
New Jersey is the second-lowest rated U.S. state, behind only Illinois, which is also struggling with massive pension liabilities.
"Regardless of how the liability is measured, the state's record of underfunding its annual contributions to the pension system is at the root of its deterioration," S&P said in statement. "The new pension accounting standards shed further light on what we already understood as a problematic feature of New Jersey's credit profile."
In the face of a budget crisis in May, Governor Chris Christie, a potential 2016 Republican presidential candidate, slashed two years of state pension contributions by about $2.5 billion altogether, prompting lawsuits by organized labor.
Under his watch, the state has been downgraded eight times by Wall Street credit rating agencies.
A spokesman for the Treasury department did not immediately reply to requests for comment.
Only a few pension systems across the country have begun to roll out financial reports that use the new rules from the GASB.
The new measurements are not exactly apples-to-apples comparisons to old standards. Instead of the usual funded ratio that uses smoothing and other actuarial methods, the new GASB rule measures a plan's net position as a percentage of total pension liability.
The net position uses market asset values instead of actuarial ones. In the case of more poorly funded systems such as New Jersey's, it also uses lower discount rates that make the liabilities appear much higher.
This article appeared on Reuters authored by Hilary Russ and edited by Chris Reese.