Gov. Chris Christie is proposing nearly $34 billion in spending during the next fiscal year, but it’s his plans for the public-employee pension system that came under fire yesterday during the Assembly Budget Committee’s final public hearing on the governor’s spending plan.
Christie wants to freeze the current pension system and shift employees to a new retirement plan with features of a 401(k). He also wants to provide employees with less-generous health coverage and use the savings to help pay off the current pension system’s heavy debt.
His plan, based on recommendations included in a report released last month by a commission of experts Christie impaneled last year to study the affordability of employee benefits, would also ask local governments to direct savings realized from making their employees pay more for health coverage to help pay off the state’s pension debt.
That’s a concern, said Piscataway Mayor Brian Wahler during the hearing held in the State House in Trenton.
The local portion of the public-employee pension system is in much better shape than the state’s, Wahler said. He also raised a fairness issue if local property taxpayers are in essence going to be asked to help bail out the state for skipping its own pension contributions.
“We are very concerned about this commission (report),” said Wahler, who also serves as president of the New Jersey League of Municipalities.
“Something’s wrong,” he said. “Don’t steal, hijack our funds.”
For Christie, a Republican considering a run for U.S. president in 2016, public-employee benefits reform has been a signature issue.
The governor worked with Democratic legislative leaders in 2011 to make a series of changes to public employee benefits, including making workers pay more for their pensions and health coverage. He then went out and promoted those efforts in speeches throughout the country as he became a leading figure in the Republican Party.
But last year, with state tax revenues coming in lower than expected, he said the costs of both employee pensions and health insurance are still rising and that new changes are in order. Christie laid out a new plan last month, along with his proposed $33.8 billion budget for the fiscal year that begins July 1, and he has since held a series of town hall-style events and gone on social media to make the case for the new changes.
Yet little mentioned by Christie is his administration’s failure to live up to another component of the benefits-reform effort, which was the state’s pledge to get back to full funding of the employer contribution into the pension system.
A prior study commission impaneled in 2005 recommended ending the state’s record of taking pension-payment holidays. Instead of heeding that warning, prior governors have consistently failed to make the full state contribution, and Christie has been no different, even after signing the 2011 reform legislation. The skipped or reduced contributions have had a compounding effect, similar to the way an individual’s credit card debt is affected by making only minimum payments.
The pension system’s debt now ranges between $37 billion and $83 billion depending on which accounting standards are applied.
[related]A state judge last month ordered Christie and the Legislature to restore nearly $1.6 billion in funding for the pension system during the current fiscal year, which ends June 30. Christie’s administration is in the process of appealing that ruling.
The governor was asked about the reduced contributions by a public worker during his latest town hall-style event, which was held in Whippany yesterday afternoon. He said the state doesn’t have the resources to make the full payment required by the reform effort, which would be roughly $3 billion in the next fiscal year.
“We don’t have the money,” Christie told Brian McClain of Teamsters Local 97. “Listen, we simply don’t have the money.”
He went on to say the state has made $4.2 billion of the roughly $6.5 billion in pension payments he said would be required under the 2011 law, though that counts payments planned for the current fiscal year and for the next fiscal year — payments that have yet to be made.
During the budget hearing in Trenton, Wendell Steinhauer, president of the New Jersey Education Association, said the teachers in his union are “fully committed” to making sure Christie abides by the 2011 law. The unions that sued Christie over prior reduced funding for the pension system are also challenging his plan to make a $1.3 billion payment during the next fiscal year, not the full $3 billion.
“We believe the governor should live up to the law he promoted and signed,” Steinhauer said.
And though Christie seemed to indicate during his February 24 budget address that the New Jersey Education Association’s leaders had signed on to at least the framework of his new reform proposal, Steinhauer made no pitch for those changes while appearing before the panel yesterday.
He also said that teachers themselves understand the challenge that lawmakers are facing as they try to balance a budget in tight economic times while costs are rising.
“Our members have had to make the same kind of tough choices when it come their own budgets,” he said.
Also raising the pension issue during the hearing was Charles Ouslander, a Hopewell lawyer and retired deputy attorney general involved in litigation over cost-of-living adjustments that were frozen as part of the 2011 reform effort. He warned that case could bring on additional budget implications.
“I’m here to urge the Legislature to get ahead of the problem now,” Ouslander said.
That drew a quick response from Committee Chair Gary Schaer (D-Passaic).
“This is an issue which obviously looms over all of our heads,” he said.
The seven-hour hearing was the last of three held by the Assembly Committee as its members continue to evaluate Christie’s budget proposal in advance of a July 1 deadline for a balanced spending plan set by the state constitution.
The Senate Budget and Appropriations Committee has also been holding public hearings on Christie’s budget proposal, with the last scheduled to be held this morning at 10 a.m. at Rowan College at Gloucester County in Sewell.