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Guaranteed Funding for State Pensions Probably Won't Make Ballot

Sweeney continues to tie the amendment to getting a veto-proof majority for his plan to renew the Transportation Trust Fund

Sweeney press conference 08-04-2016
Senate President Stephen Sweeney (D-Gloucester) was supported by advocates for seniors and the disabled as well as union and construction representatives.

With the deadline for final legislative approval of a proposed constitutional amendment to boost public-employee pension funding now just days away, it appears more likely than ever that it will not be put before voters this fall.

Senate President Stephen Sweeney (D-Gloucester) continues to say he won’t allow the issue to go on the ballot if the state can’t afford to make the series of ramped-up pension contributions the amendment calls for. With Democrats still at odds with Gov. Chris Christie over renewing the state Transportation Trust Fund, that remains an open question.

Funding the pension system and paying for transportation projects seem to be completely unrelated issues, and many have been confused that they’re now linked so closely together, especially as an Aug. 8 deadline for approving ballot questions has drawn so close. But years of only modest state revenue growth and Christie’s insistence that a significant tax cut has to be part of any deal to renew the TTF has now effectively put public workers and transportation advocates in a battle for the same limited budget resources.

Advocates for the disabled, seniors, and others who rely on state-funded safety net programs were among those who came to the State House yesterday to support Sweeney and to call for a resolution to the TTF impasse that doesn’t destroy the state budget. But leaders of public-worker unions, still smarting from bribery accusations that Sweeney leveled at them earlier in the week, countered by openly questioning his commitment to fixing a pension system that is at least $44 billion in debt after years of underfunding.

Financial projections prepared by the nonpartisan Office of Legislative Services that were obtained by NJ Spotlight show just how close the budget margin is projected to be under the TTF renewal plan that’s being backed by Sweeney and other top Democrats.

Under that plan, New Jersey’s estate tax would be phased out over several years while several other targeted tax cuts would go into effect along with a 23-cent gas-tax hike to renew the off-budget TTF. Adopting those cuts while also paying for the increasing pension contributions that are called for in the proposed amendment leaves a surplus of less than $100 million by the 2020 fiscal year, assuming modest annual revenue growth, according to the OLS estimates.

Christie wants to balance the gas-tax increase by cutting the state sales tax from 7 percent to 6 percent. The OLS estimates that would leave the state with a $1 billion budget hole in the 2020 fiscal year if the same pension payments are locked in by voters and the same modest growth occurs.

Saying their plan is the more responsible one, Sweeney and other Democrats have tried to secure enough votes in both houses of the Democratic-controlled Legislature to ensure they could override a veto from Christie if he continues to insist on cutting the sales tax. But so far those efforts have failed. That makes it more likely that Sweeney and Assembly Speaker Vince Prieto (D-Hudson) will soon have to negotiate a compromise with Christie, one that could increase the size of the proposed tax cuts and eat into the already narrow margin estimated by OLS.

Christie, citing affordability concerns, just cut nearly $300 million in increased funding for charity care hospital aid, senior-citizen property tax relief, and other safety net programs from the budget approved by the Legislature. That’s left many wondering what a sizable tax cut would do to the budget even without the increased pension contributions.

“It’s important for us not to put the balancing of our budget on the backs of those individuals who very much need the supports that we provide,” said Daniel Keating, executive director of the Alliance for the Betterment of Citizens with Disabilities, during a news conference in the State House yesterday.

But union officials maintained the very debate that’s playing out over funding the pension system versus cutting taxes to strike a deal to renew the TTF proves why the annual state pension contributions should have constitutional protection as soon as possible. They’re also very angry with Sweeney, an official with the International Association of Iron Workers, who had previously promised to make sure the amendment went before voters this year.

“The fact that Senate President Sweeney -- at the 11th hour -- will not post it for a vote is the exact reason we’re demanding a constitutional amendment,” said Hetty Rosenstein, state director of the Communications Workers of America. “There is no reason the pension should be a casualty of the Legislature’s inability to secure votes for the Transportation Trust Fund.”

“Senate President Steve Sweeney has betrayed every New Jersey public employee,” said Wendell Steinhauer, president of the New Jersey Education Association.

In many ways, New Jersey faced a similar scenario several years ago after Christie started implementing a multibillion-dollar business-tax cut while at the same time promising revenue growth would allow the state to both increase pension contributions and ramp up pay-as-you-go transportation spending.

When that growth in revenue failed to materialize over the next few years, Christie largely abandoned the pay-as-you-go portion of his transportation plan and also walked away from his pension-funding promise. But the business-tax cuts have remained in place, costing an estimated $3 billion in lost revenue since they kicked in during the 2012 fiscal year.

Without knowing the exact cost of the new tax cuts that are now up for debate, Sweeney said it makes no sense to send the ballot question to voters. The proposed amendment calls for state pension contributions to grow over time to more than double the $1.86 billion payment that’s budgeted for the current fiscal year.

“I’ve got to face reality with what we’re dealing with,” Sweeney told reporters yesterday. “It’s not sound fiscal policy to not know what a major cost is.”

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