Senate President’s Failure to Act On Pension Amendment Enrages Public Unions

John Reitmeyer | August 9, 2016 | Budget, Politics
Sweeney says voters will be more likely to approve the question once the dispute about transportation funding is resolved

NJEA pension rally
New Jersey’s teachers are promising to have a long memory after Senate President Stephen Sweeney didn’t clear the way yesterday to put a proposed constitutional amendment to boost the public-employee pension before voters this fall.

Yesterday was the final deadline to get the issue on the ballot this year. The lack of action by the Senate leader means pension funding, which has dogged Gov. Chris Christie throughout his two terms in office, will now play a leading role in next year’s gubernatorial contest.

The teachers made it clear during a rally held outside the State House that they are angry with Sweeney, who is expected to run for governor in 2017, for going back on a promise to put the pension-funding issue before voters this year. They chanted “We’ll remember in November” and “Bye, Bye Sweeney” during the rally, and Wendell Steinhauer, the leader of the New Jersey Education Association, said the union will now be looking to “find leaders who lead instead of lie.”

But Sweeney (D-Gloucester) later yesterday made the case that he’s holding back the pension-funding amendment until he can be sure it has the best chance of passing. That’s because, he said, the ongoing political gridlock over renewing the state Transportation Trust Fund now threatens to embolden opponents of the amendment like Christie, who has promised to work hard to make sure the ballot question fails. Though Sweeney didn’t allow the measure to advance yesterday, he said it will take only one more vote before the end of the year to put it on the ballot in 2017, and by then the TTF impasse is expected to be resolved.

Sweeney’s hesitancy, meanwhile, also won him support from some unlikely allies, including the New Jersey Business & Industry Association, one of the state’s leading business-lobbying groups.

New Jersey’s pension system is at least $44 billion in debt, and unions have been calling for passage of the constitutional amendment for the better part of the past year. Their activism started after the state Supreme Court ruled in 2015 that state government did not have to follow a pension-contribution schedule that was a major feature of a 2011 benefits-reform law. The same law also required teachers and other public workers in New Jersey to pay more toward their pensions, something they are still doing even as the state has been allowed to walk away from its commitment.

In addition to establishing a new contribution schedule and giving it constitutional protection, the proposed pension-funding amendment would also require the state’s payments to be made on a quarterly basis instead of all at once at the end of the fiscal year, which is the current practice.

The pension-funding amendment, with Sweeney as a prime sponsor, has already passed the Senate on one occasion this year. But to get on the ballot this fall the proposed amendment needed to be passed twice in each house before yesterday’s deadline. The Assembly has already approved it twice.

Democrats back the adoption of a 23-cent gas-tax hike to renew the TTF and are willing to trade a series of tax cuts, including a phase out of New Jersey’s estate tax, to lure votes from Republicans for the gas-tax increase. But the Republican Christie has insisted that the gas-tax hike be swapped for a cut in the state sales tax from 7 percent to 6 percent, which is something Sweeney and other Democrats have firmly opposed.

The disagreement has fed concerns among members of both parties that the state would not be able to afford both the stepped-up payments required under the pension-funding amendment and the loss of revenue from the sales-tax cut sought by Christie, an estimated $1.6 billion according to the nonpartisan Office of Legislative Services. With the state budget extremely tight in recent years, there’s little margin for error in any potential compromise.

“Without a resolution to the Transportation Trust Fund crisis — and a full accounting of how much future tax cuts will cost — it would have been too easy for opponents to argue that the state could not afford to pass the pension amendment,” Sweeney said yesterday. “The pension amendment would have been doomed to defeat, and that would have given carte blanche to current and future governors to slash pension payments.”

He also said the current state budget calls for the pension contribution to increase from $1.3 billion to $1.86 billion, meaning no harm will be done by waiting another year to put the ballot question before voters. Under the ballot question, the state would start making the full contributions calculated by actuaries by the 2022 fiscal year with payments that will likely surpass $5 billion.

“Contrary to what some union leaders have been saying, the pension amendment does not die because it was not voted on by today,” Sweeney said. “The Senate can still approve it with a simple majority vote any time before the legislative session expires in January, putting it on the November 2017 ballot.”

Sweeney’s decision drew praise yesterday from the New Jersey Business & Industry Association, a group that has been pushing for the elimination of the estate tax and for a resolution to the transportation-funding impasse. Right now, state-funded road, bridge, and rail projects throughout the state have been shut down to preserve the TTF’s remaining dollars for necessary work and emergencies.

“This amendment would have tied the hands of future governors and legislatures by giving them no flexibility in the budget process, and that would have ultimately led to shortfalls and higher taxes on New Jersey businesses and taxpayers in order to balance the budget,” said NJBIA President Michele Siekerka.

But during the union rally, Hetty Rosenstein, state director of the Communications Workers of America, said properly funding the pension system is a moral requirement for state government and that union members would continue to press for full state contributions.

“Our cause is just, it’s moral, and it is good government,” Rosenstein said.

Afterward, Steinhauer, the NJEA president, wasn’t ready to rule out Sweeney as a gubernatorial candidate, citing a formal endorsement process that has yet to play out. But it seemed clear potential Democratic rivals who have supported the pension-funding amendment with no caveats, including Jersey City Mayor Steven Fulop and former Ambassador to Germany Phil Murphy, will have a leg up heading into the June primary.

“The problem still continues to grow at $250 million each year,” Steinhauer said.