On the same day Gov. Chris Christie lost a key ally for his latest plan to fix New Jersey’s pension problems, Democratic legislative leaders received a boost from a new poll that suggests voters here believe the state should honor its obligations to public workers — even if it means hiking taxes.
The new developments yesterday were the latest on the pension issue, an area that Christie has emphasized since taking office in early 2010 but nonetheless remains a trouble spot and now appears to be once again at the center of another looming budget clash with lawmakers.
It was Democrats who last year proposed raising the income-tax rate on earnings over $1 million and increasing taxes on corporations to help ensure the state lived up to a commitment to make a $2.25 billion contribution into the public-employee pension system.
But Christie, citing overall budget problems and fears that tax hikes would cripple the state’s economy, reduced the payment to $681 million in the spending plan he signed into law last June. He then turned his attention to new reforms to follow up on an earlier effort that included signing laws to mandate increased state pension payments and require workers to contribute more toward their pensions.
This year, a commission of experts Christie impaneled to study ways to make it easier for the state to cover the overall costs of public-employee benefits had been working with the New Jersey Education Association in an effort to strike a deal on new reforms. The panel had proposed freezing the current pension system and moving employees into a new retirement plan with some features of a 401(k), a plan fully embraced by the governor.
But the union’s president said in a lengthy statement yesterday that a deal hasn’t been struck and there will be “no further discussion.”
Instead, Wendell Steinhauer, the union’s leader, said it will focus on the ongoing litigation between the Christie administration and the unions representing teachers and other public workers that was filed last year in the wake of Christie’s decision to cut the pension contribution.
The unions won an initial ruling in court in February, upholding a 2011 reform law known as Chapter 78, and
Christie is appealing that decision to the state Supreme Court. Oral arguments are scheduled for May 6.
“We look forward to the New Jersey Supreme Court’s ruling on the governor’s appeal,” Steinhauer said. “Chapter 78 is not a buffet table, and Gov. Christie cannot be allowed to pick and choose which portions of the law apply to him.”
The union’s willingness to at least discuss the framework of Christie’s reform effort, which also involves taking savings from less generous healthcare plans to help pay down the current pension system’s debt, was considered important because the teachers have the most to gain by striking a deal.
[related]Their slice of the state $80 billion pension system is among the largest but also the most poorly funded because it’s the state and not individual school boards that cover the employer contribution into the pension system, which has suffered from years of underfunding at the state level by Christie, a Republican, and prior governors from both parties. The pension system’s current debt measures between $37 billion and $83 billion depending on which accounting standard is applied.
Christie press secretary Kevin Roberts responded to Steinhauer’s statement yesterday by saying “it is unfortunate that the NJEA is unwilling to continue to work with the independent, nonpartisan commission.”
“This unwillingness does not change the numbers,” Roberts said. “We will continue to work to solve this crisis with the commission.”
He also challenged Democratic legislative leaders in the wake of an amicus brief they’re filing with the Supreme Court that largely echoes the unions’ position on pension funding to detail their plan to fund an additional $1.57 billion for the pension system during the current fiscal year, which ends June 30, and another $3.1 billion required by Chapter 78 for the next fiscal year.
Christie’s proposed $33.8 billion budget includes a $1.3 billion pension contribution, which is the most he said the state can afford to pay.
Assembly Republican Leader Jon Bramnick (R-Union) issued a challenge similar to Roberts’ during a news conference held at Kean University yesterday afternoon. He said Democrats need to go a step further than calling for more robust pension contributions and also identify specifically how the state will come up with the funding needed to satisfy the full obligation to employees.
“Let’s see your plan,” said Bramnick, whose full house is up for reelection this November. “It’s as simple as that.”
But Assembly Speaker Vince Prieto (D-Hudson) said last year Democrats did come forward with a plan to make the pension payment only to see it vetoed by the governor, setting the stage for the ongoing litigation.
“It’s easy to resort to hyperbole and partisan attacks in difficult times,” Prieto said.
As for the fiscal year that begins July 1, Prieto said the budget process is still underway and that lawmakers will again “be working to provide a balanced budget that meets the state’s obligations, all while protecting the middleclass and the poor.”
And both Prieto and Senate President Stephen Sweeney (D-Gloucester) have said that they are considering sending Christie another version of a tax hike on income over $1 million to help pay for a bigger pension contribution.
The results of a poll released yesterday by Quinnipiac University suggested that’s the course New Jersey voters seem to prefer right now.
When asked whether the state has an obligation to fix the pension system even if it means raising taxes, voters replied “yes” by a 51 percent to 40 percent margin. The gap widened to 64 percent to 33 percent when asked specifically whether voters approve of increasing taxes on those earning over $1 million to help cover the pension contributions.
But Roberts, the Christie spokesman, said that alone wouldn’t be enough to satisfy the requirements of Chapter 78, either this fiscal year or the next. A millionaire’s tax would raise an estimated $580 million to $615 million in the first year, according to the latest legislative estimates.
“Is that their only solution to this problem? Because massive tax increases to pay for sins of the past in the entitlement program aren’t acceptable to us,” he said.