A statewide ballot question that would require increasing payments into New Jersey’s grossly underfunded public-employee pension system has now been dragged into the debate over renewing the state Transportation Trust Fund. Senate President Stephen Sweeney fears the state won’t be able to fund the bigger payments if the sales tax is also cut this year, which is part of Gov. Chris Christie’s solution for the TTF.
Public-worker unions enthusiastically back the proposal to amend the state constitution, which calls for more robust state pension contributions, and they remain confident it will pass the Senate one more time, which is the last step needed to put the ballot question before voters this fall. In fact, ads backed by the New Jersey Education Association in support of funding the pension system are already airing on television as a state deadline for getting questions on the ballot is now less than three weeks away.
With renewal of the TTF still largely up in the air, and the budget implications of any potential deal with Christie still unknown, Sweeney (D-Gloucester) has not yet committed to putting the proposed amendment up for final approval. Sweeney said he’s still waiting to see exactly how the TTF issue will play out, since any deal to fund transportation projects could drain funds that would be needed to ensure the state can afford the pension amendment’s new payment schedule.
The issue will come to a head when the Senate meets next on August 1 – just a week before the deadline. “It’s in jeopardy if we can’t fund it,” Sweeney stressed while speaking to a group of reporters in the State House last week.
The proposed constitutional amendment, sponsored by both Sweeney and Assembly Speaker Vince Prieto (D-Hudson), is designed to help restore the pension system after the state for years under governors of both parties has skipped or made only partial pension payments. That’s left the pension system, which pays for the retirements of nearly 800,000 current and former public workers, underfunded by nearly $44 billion.
The amendment calls for voters to write into the state constitution a series of escalating pension contributions that would bring the state up to the full payments calculated by actuaries by the end of the 2022 fiscal year. The current state budget sets aside $1.86 billion for the pension system, but the annual contribution would eventually rise to over $5 billion if the amendment wins voter approval. The amendment also calls for state contributions to be made on a quarterly basis instead of all at once at the end of the fiscal year, which is the current practice.
Sweeney and other supporters of the amendment have argued that the state will be able to afford the ramped-up pension payments largely through normal growth in tax collections. They also hoped an economic boost would come from a renewed TTF and the possible opening of casinos in north Jersey, two items that are anything but certain. Voters will be asked this fall whether casino gambling should be expanded outside of Atlantic City, but recent public opinion polls suggest they are happy with maintaining the status quo.
Christie and Sweeney remain at odds over renewing the TTF after the last five-year finance plan ran out on June 30. The sticking point is a series of tax cuts that Christie and other Republicans want to enact along with a 23-cent increase of the gas tax.
Sweeney entertained the calls for tax reductions by supporting a bipartisan plan to phase out the estate tax and adopt some other modest cuts. But Christie swooped in at the last minute with a proposal to instead cut the sales tax by one percentage point, and Prieto got his house to pass Christie’s plan in an after-midnight vote held in late June.
Sweeney said his problem with the sales-tax cut is the $1.6 billion that nonpartisan legislative analysts say it would take out of the state budget starting in fiscal year 2019, the same year the proposed amendment calls for a pension payment of $3.15 billion. By contrast, the estimated cost of the plan that features the phase-out of the estate tax is a more modest $890 million.
Sweeney said he remains committed to the pension-funding amendment and recognizes he has to reach a deal with Christie on the TTF in time to keep the amendment on schedule. He’s waiting for a counteroffer from Christie after putting a set of proposals before the governor during private meetings last week. “It’s important that we get this fixed, and we can fix the pensions too,” Sweeney said.
For his part, Prieto, the Assembly leader, has said that if Sweeney is not going to support the TTF bill that was passed by the Assembly he should be able to move forward with final approval of the pension amendment. “The Assembly has — again — acted on this issue, so it’s up to the Senate to take the next step,” Prieto said.
The New Jersey Education Association has also determined it has no reason to hold back a public push to rally support for the amendment even though it has yet to win final passage in the Senate. The union has already launched a website and social-media campaign based on the slogan #VoteNJPension, and an ad featuring retired teachers calling for funding of the pension system has also been airing on television. “Our members expect the Senate to vote to pass the resolution on August 1,” NJEA spokesman Steve Baker said yesterday. “They have been communicating that very clearly to their senators.” He noted, “We expect that many of our members will be in Trenton that day to watch that vote be taken.”