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Analysis: Christie Offers No Tax Cut, But $205 Million In Veiled Tax Hikes

Sidamon-Eristoff’s 8.2 percent projected increase in state income taxes actually is less ambitious than it sounds: The increase in the top federal income tax bracket as part of the federal fiscal cliff negotiations in late 2012 led wealthy individuals to shift hundreds of millions of dollars of income into the 2012 tax year, causing a one-time spike in FY2013 income tax collections and a corresponding reduction in the FY14 receipts against which the FY15 increase is calculated.

The treasurer is anticipating a 6.7 percent increase in corporate income taxes, which he acknowledged are the hardest to project, a 6.1 percent hike in sales tax collections, and only 1.5 percent in the various other taxes that make up approximately a quarter of the budget.

Christie yesterday built on the warning he issued in his State of the State speech in January about the corrosive impact of growing pension and debt payments on the state’s ability to afford the investments in schools, higher education, tax relief, job creation programs, transportation infrastructure funding, healthcare, and crime prevention initiatives.

Christie reminded the Legislature -- and the pension bill’s chief sponsor, Sweeney, who was seated just behind him -- that they had worked together to pass legislation requiring the state to ramp up its contributions, public employees to work longer and pay more into the pension system, and retirees to forgo cost-of-living increases until their pension funds were solvent.

The $2.25 billion payment Christie announced yesterday was by far the largest in state history, bringing the Christie administration’s total pension contributions to $5.3 billion -- more than twice as much as the $2.4 billion put in over 10 years by five previous governors. Of this year’s payment, Christie noted, 78 percent went to help pay off the unfunded liability left by past governors.

“Though the historic 2011 reforms we enacted together immediately reduced New Jersey’s state and local unfunded pension liabilities by 32 percent, it doesn’t go far enough,” Christie warned. “Without additional reforms, New Jersey taxpayers still owe $52 billion to fully fund the pension system.”

Detroit, NJ

Comparing New Jersey’s situation to Detroit, Christie warned that Detroit went bankrupt because it owed $6.5 billion in debt for retiree health benefits and $3 billion for pensions -- a result of “promises made by politicians that they knew they could not keep when they made them.”

However, Democratic leaders and union officials dismissed Christie’s doomsday scenario and rejected his implicit call for Sweeney and other leaders to renegotiate the terms of the pension reform to get further concession from public employee unions and their members.

“We’re not doing it,” Sweeney said emphatically. “We made a commitment. We’re not breaking the commitment. If we stay the course, the pension system will be fine -- it’s not going to bankrupt us. What’s missing here is we haven’t grown our economy. That’s the issue.”

Sweeney said Christie should not be “trying to renegotiate” when he and everyone else involved in the pension legislation understood that it would take seven tough budgets to put the pension system back on track.

Prieto noted that it was the state government -- not public employees -- who failed to make the required payments to the pension system and put it on the verge of collapse, a point made by Wendell Steinhauer, president of the New Jersey Education Association, and other union leaders.

“Gov. Christie is doing the right thing by making the full, legally required pension payment this year. But he is doing the wrong thing by misleading New Jersey residents about the state of the pension system,” Steinhauer said. “Pension costs are not ‘exploding.’ As a result of deep, painful cuts absorbed by public employees and retirees in 2011, pension costs going forward have been curtailed, and the state is finally on the road to responsible, sustainable pension funding practices. It’s not easy, but it’s necessary and it’s legally required."

Milly Silva, the executive vice president of Service Employees International Union Local 1199, United Healthcare Workers East, who ran for lieutenant governor on the Democratic ticket against Christie last November, said “Christie’s attack on public employees is the same old song” – one he always returns to when he is in political trouble.

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