Governor Vetoes Two Proposals to Inject Some Funds into Pension Plans
Democrats called using unexpected revenues for one-time cash infusion and making quarterly payments that could boost return on state’s investments
Gov. Chris Christie yesterday rejected two public-employee pension-funding bills that Democrats who control the Legislature had advanced in response to the state’s practice of underfunding or not funding employer contributions to those retirement plans.
Christie vetoed a measure that would have required the state to make, and he also vetoed a bill that called for a special $300 million infusion of funds this year.
The vetoes, announced yesterday afternoon, were not unexpected, since Christie and legislative leaders have been feuding for more than a year over what to do about the pension system and its $40 billion.
While the Republican Christie wants to follow up a series of benefits changes enacted in 2011 with more reforms, Democrats have maintained the state should instead find ways to increase employer contributions into the pension system, which covers an estimated 770,000 current and retired workers.
Traditionally, governors make the state’s annual pension contribution in late June, coinciding with the end of the fiscal year. But that practice has effectively made the pension contribution a de facto rainy day fund for the budget, which the state constitution requires to be balanced each year.For example, when Christie faced a $1 billion budget deficit last year after tax collections failed to live up to his lofty forecasts, from the budgeted state pension payment to help keep spending in line with revenues.
And that was just the latest underfunding by Christie and his predecessors over the last two decades. Democrats, with the backing of public-worker union leaders, pitched making quarterly payments as a way to ensure at least some funds get into the $80 billion pension system during the course of the fiscal year. Since the pension system is professionally managed, they argued, the quarterly payments would also translate into increased investment earnings.
But Christie’s veto message for the quarterly payment bill called the proposal “an improper and unwarranted intrusion upon the longstanding executive prerogative.”
“Enacting new laws to compel specific payments on specific dates does nothing at all to repair or reform the fundamentally unsustainable pension and health benefits systems currently in place,” Christie said.
The Democrats sought the $300 million state pension payment after it became clear that tax collections during the fiscal year that ended June 30 were going to outpace forecasts. But Christie, in his veto message, called that idea “accounting gimmickry.”
“The legislative majority should embrace reality and join with my Administration in a realistic discussion of necessary reforms to the pension and health benefits systems,” he said.
Democratic legislative leaders criticized Christie’s actions.
“Every dollar we put in now saves three dollars in the future. Making this payment upfront would generate millions in additional investment income at the same time it helps to reduce debt and protect against another downgrade in the state’s credit rating,” said Senate President Stephen Sweeney (D-Gloucester).
“Ignoring ready-to-enact solutions to New Jersey’s pension and fiscal woes is an insult to the hardworking New Jerseyans whose jobs keep this state running, educate our children and help to fuel the state economy,” said Assemblyman Benjie Wimberly (D-Passaic).
Public-worker union leaders also lined up to criticize Christie’s vetoes.
“Gov. Christie owes New Jersey's taxpayers an explanation for why he refuses to take even the smallest steps to stabilize the system and lower the long-term cost of fixing the problem the state has created for itself,” said Wendell Steinhauer, president of the New Jersey Education Association.
“Even when the State has the money -- or when it wouldn’t cost a penny -- Governor Christie acts to deliberately harm the pension systems that 1 in 10 New Jerseyans depend upon,” said Hetty Rosenstein, state director of the Communications Workers of America.