Christie and Labor: Ready for the Next Round

Mark J. Magyar | September 2, 2011 | More Issues
In the coming year, the governor's relationship with public- and private-sector unions will deeply affect New Jersey's politics and its economy

Credit: (Governor's Office/Tim Larsen)
It’s Labor Day — Chris Christie’s second as governor of New Jersey — and a particularly apt time to consider how labor is faring statewide. Christie’s bombastic, highly publicized attacks on public employees are well known — and something of a favorite on YouTube. But the governor is walking a peculiar tightrope. While he brawls and battles with public sector unions, he offers tacit, if not outright, support to construction jobs he hopes will benefit private unions and companies.

The fights have only begun, and this coming year will be a pivotal one for both Christie and public employees. The state workers’ contract has expired. And the teachers’ union, Christie’s favorite foe, will have to square off against the governor on everything from tenure to school vouchers.

While Christie’s attitude toward public unions is clear, his relationship to the building trades is almost murky. Meanwhile, how he treats both has major implications on the state economy. Forcing deep cuts on the public side of the balance takes money out of the economy. Favoring some — though far from all — high profile construction projects may benefit the building trades and the New Jersey economy.

What remains to be seen, however, is if the unions will ultimately act in concert.

United We Stand

Charles Wowkanech, president of the New Jersey State AFL-CIO, which represents both the state’s private and public sector, recently warned, “Now, more than ever, it is important that the labor movement speak with a unified voice on the most important issues facing working families in our state and our nation. Gov. Christie and other enemies of organized labor would like nothing more than to see the house of labor divided into competing factions” – as it was during a State AFL-CIO’s August session, when angry public sector unions blocked the endorsement of ironworker and Senate President Stephen Sweeney (D-Gloucester) and two other legislators from the building trades.

National AFL-CIO President Richard Trumka echoed the same note last spring when he and 10 national union presidents representing unions ranging from the Service Employees International Unions to the United Auto Workers and the United Steel Workers urged Sweeney and other Democratic legislators in New Jersey not to follow the lead of Wisconsin in stripping public employees of their collective bargaining rights.

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Yet Sweeney has done exactly that, working hand in hand with Christie to pass legislation that will require public employees to pay more toward their pension and health benefits – the equivalent of a 6 percent to 8 percent pay cut over three years for most teachers, police, firefighters, state, county and municipal government workers. That bill included a provision banning unions from negotiating on health benefits for four years and followed earlier legislation imposing a strict 2 percent cap on annual school and local government spending increases that will effectively limit future pay hikes to that level or less.

But that’s just the beginning. Christie is in the middle of a contract battle with the state government unions. State employee contracts expired June 30 without a settlement. Christie last spring demanded a 3.5 percent pay cut for all state workers, and state law effectively gives him the power — never before exercised by a governor — to impose a contract settlement if he and the state government unions cannot reach an agreement.

Christie is girding up for all-out battle in the upcoming year with the New Jersey Education Association (NJEA), over legislation to abolish tenure, expand charter schools and pass the Opportunity Scholarship Act (OSA) to provide vouchers to children in selected school districts to attend private and religious schools.

But the governor isn’t simply cutting benefits, he’s cutting public sector jobs as well: 29,100 that Christie qualifies as excess baggage whose jettisoning , he believes, will ultimately lead to more private sector job growth. Meanwhile, the public sector job cuts rank third in the country behind only the much larger states of New York and California. Nevertheless, the state has gained 50,000 private sector jobs since Christie took office 19 months ago.

On balance, however, New Jersey’s unemployment rate remains the 13th highest in the nation heading into this Labor Day.

Building Ties to the Building Trades

The governor’s anti-union actions have made him a hero of the national Republican party. He was elected in 2009 — one year before a wave of Republican governors swept into office with full control of their state legislatures in Wisconsin, Ohio, Michigan, Pennsylvania, Minnesota and other states. Despite having to contend with a Democratic-controlled legislature that could block his initiatives, Christies record battling the public sector unions in a “blue state” is second to none.

The Great Recession of 2007 to 2009 hit the building trades unions particularly hard, as construction of office and industrial space ground to a virtual halt. President Obama’s $787 billion stimulus package was a two-year Band-Aid aimed more at filling potholes and keeping state and local governments and school districts afloat than at providing money to create major construction projects that would keep people employed for years.

Christie took office in January 2010 after campaigning on a platform that called for the state to add no new taxes and no new debt, insisting that he would fund transportation capital projects on a pay-as-you-go basis out of cuts elsewhere in the budget. He said New Jersey would have to “tighten its belt” and that it might not be able to afford the “robust” transportation capital program it had funded in past years. Like most Republican conservatives across the country in recent years, he had also promised to roll back the prevailing wage law that required contractors to pay union wages on all government work.

If Christie stuck to his tax and debt pledges, it would be virtually impossible to fully replenish the Transportation Trust Fund that was scheduled to run out of money for new projects as of July 1, 2011, after five years of putting up $1.6 billion of mostly borrowed state money to draw down $1.6 billion in federal funding each year for the road, bridge and mass transit projects that are the mainstay of the building trades.

And this is how he did it. Christie shocked mass transit advocates by cancelling the $8.7 billion ARC (Access to the Region’s Core) rail tunnel under the Hudson River last October because of fear of cost overruns. The governor’s decision came on the eve of the 2010 elections in which GOP gubernatorial candidates in California, Florida, Ohio and Wisconsin were campaigning on a promise to cancel federally funded mass transit projects in their own states.

Christie’s decision cost the state a $3 billion federal New Starts grant and led the Obama administration to demand repayment of $250 million it had already spent on the tunnel, and it should have infuriated the building trades unions who had held rallies to demand continuation of the project. Christie administration sources noted at the time, however, that most of the construction jobs associated with the ARC tunnel would be in New York, and that the $3.1 billion in Port Authority and New Jersey Turnpike toll money earmarked for the tunnel could be diverted to projects throughout the state instead.

Sure enough, just over two months later, that $3.1 billion in Port Authority and New Jersey Turnpike money provided the bedrock for an $8 billion five-year extension of the Transportation Trust Fund that would draw down $8 billion in federal funds — the same level of spending that former Democratic Governor Jon Corzine had authorized. Christie stuck to his pledge not to increase the gas tax or any other tax, but he decided to abandon his promise not to increase state debt. Christie agreed to issue $4 billion in new debt in order to fully fund the capital program by issuing $4 billion in new debt, to the delight of the building trades unions.

The Campaign for the Port Authority Tolls

Seven months after Christie announced his Transportation Trust Fund plan, the Port Authority said it would need record bridge and tunnel toll increases and PATH rail fare hikes to keep up its aggressive construction schedule.

The toll and fare hikes were needed primarily because of cost overruns on the World Trade Center, and declining bridge and tunnel tolls, airline passenger fees and cargo ship levies in the wake of the recession. But the Port Authority warned that the most important construction jobs in New Jersey would be jeopardized by failure to approve toll hikes that would bring in $9.6 billion over the next 10 years. At risk were projects to raise the Bayonne Bridge to allow deepwater cargo ships into the port, the replacement of the helix roadway entrance into the Lincoln Tunnel and replacement of the cables on the George Washington Bridge.

The Port Authority announcement came just one day after the building trades unions theatrically walked out of the New Jersey State AFL-CIO conference in protest over the failure to endorse Sweeney, Senator Donald Norcross (D-Camden), then the head of the South Jersey Central Labor Council, and Assemblyman John Amodeo (R-Atlantic), an electrician facing a tough reelection battle. Now the building trades mobilized their members to pack the Port Authority hearings to testify in favor of the toll and fare hikes.

For Christie, the Port Authority toll hikes posed a political dilemma because both the toll and fare hikes would be paid primarily by New Jersey drivers and rail passengers, while a majority of the money raised would be going into New York projects because the World Trade Center redevelopment was eating up one-third of the Port Authority’s capital budget. Both Christie and New York Democratic Gov. Andrew Cuomo questioned the cost overruns, but in the end, the two governors gave the Port Authority most of what it wanted.

All of the toll and fare hikes would be phased in, but the Port Authority would get $4.50 of the $6 increase in bridge and tunnel tolls it had requested, bringing the cost of a Hudson River crossing from $8 to $12.50, with a $2.50 surcharge for cash-paying motorists. PATH fares would rise 25 cents per year until they reached the full $1 increase to $2.75 that the Port Authority had requested,

Christie insisted that the huge toll hikes — which would cost regular bridge and tunnel commuters more than $1,000 a year — did not constitute a tax increase. William Mullen, president of the New Jersey Building and Construction Trades Council, a strong ally of Sweeney, praised Christie for coming through again for the building trades, as he had with his approval of $350 million in financing for the New America Meadowlands project to replace the failed Xanadu project and $2 billion in financing for the new Revel casino in Atlantic City.

As for Christie’s campaign pledge to repeal the prevailing wage law that guarantees the payment of union wages on all government projects, the governor has been largely silent. One legislator, who is also a building trades union official, suggested that “Christie is too smart a politician to take on a fight he can’t win, and he knows Sweeney would never post the bill.” Other union leaders have suggested privately that Christie needs the tacit support of the building trades to win reelection in 2013, and that’s why he has ignored that campaign plank.

Priming the Pump

Public policy experts agree that the renewal of the Transportation Trust Fund and the Port Authority toll hikes will pay for vital transportation projects that are critical to New Jersey’s future economic competitiveness, and grudgingly support both the TTF borrowing and the Port Authority toll and fare hikes, even though most feel that an increase in New Jersey’s 14.5 cent per gallon gas tax — the third lowest in the nation — would be a better way to pay for those programs. But a gas tax would clearly have violated Christie’s no-new-taxes pledge. And would have aroused a public furor because it would have affected all taxpayers, not just the minority who use the New Jersey Turnpike, the Port Authority crossings and PATH.

It also is a prime example of the use of stimulus spending to provide good-paying jobs in a state with an unemployment rate stuck stubbornly above 9 percent and thus to encourage increased consumer spending to jump-start the stagnant economy — and Christie defended these benefits in announcing his approval of both the TTF and Port Authority plans.

President Obama, whose original $787 billion stimulus package was attacked as wasteful by conservatives and too little by liberals, will be announcing another, more modest jobs stimulus package this Labor Day weekend.

But while construction spending has traditionally been the favored way for government to prime the pump for economic growth, there is nothing magic about construction jobs as opposed to any other jobs, including public sector jobs.

Car dealers, restaurant owners and retail shopkeepers don’t ask customers whether their paychecks come from the private or public sectors, and the elimination of a thousand public sector jobs slows economic growth just as much as the addition of a thousand private sector jobs increases it.

And when it comes to trying to jump-start the economy, it isn’t just job loss, it’s income loss that counts.

Dr. Raphael Caprio, a veteran professor of public policy at Rutgers University’s Edward J. Bloustein School of Public Policy at Rutgers University, noted that the increases in pension and health benefit contributions that will be phased in over the next years will ultimately represent a 6 percent to 8 percent pay cut for 400,000 teachers, police, firefighters, and state, county and municipal government workers.

Coupled with Chriistie’s demand for a pay cut for state workers and a 2 percent cap for school districts and county and municipal governments that will limit annual salary increases for their employees to that level or less, most of the 400,000 public sector employees will be making less money in 2015 than they are today.

“The real question is how does this affect the economy?” Caprio said. “Lowering property taxes by $75 isn’t going to change consumer behavior much or inspire the consumer confidence that is going to send them out to spend. But taking $4,000 or $5,000 or $6,000 out of someone’s salary will have a real effect on whether they go out to spend.”

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