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Analysis: Christie, Sweeney, and the Limits of Pension Reform

Through that 1997 law, New Jersey essentially established pension benefits as contractual rights. That extended the provisions in the United States and New Jersey Constitutions prohibiting the impairment of a contract to prevent any reduction in pension benefits for retirees or current employees vested in the pension system, as Corzine’s Attorney General’s Office and the nonpartisan Office of Legislative Services warned when lawmakers asked in 2006 if they had the right to roll back current benefits.

It is that law that forms the basis of the lawsuit by the CWA, the New Jersey Education Association, and the Patrolmen’s Benevolent Association challenging the provision of the 2011 pension bill that eliminated cost-of-living adjustment allowances for retirees -- and that provides the bulk of the long-term savings from the initiative.

While the unions lost at the Superior Court level in 2012, an Appellate Division panel is expected to issue its decision later this spring -- a decision that Bramnick, the Assembly Republican leader, said would be critical not only to future reforms, but also to the stability of the pension system itself.

Faced with a similar lawsuit, Rhode Island earlier this month negotiated a settlement with its unions that restored some of the cost-of-living adjustment it had cut.

Third, while Christie and Sweeney shared similar policy and political goals when they pushed through the 2011 pension overhaul, their policy and political needs have clearly diverged three years later.

Christie’s hopes for the Republican presidential nomination in 2016 have taken a major hit over the past seven weeks as a result of Bridgegate and other potential scandals that are currently under investigation by the U.S. Attorney’s Office and the Legislature’s Joint Select Committee on Investigation.

The GOP governor is starting to face the increasing likelihood that instead of running from primary state to primary state next year setting up a White House bid, he could very well spend the next four years in New Jersey hamstrung by the requirements of the pension bill that was the proudest bipartisan accomplishment of his first term.

But while Christie might want to renegotiate a tougher deal with the unions or extend the current seven-year phase-in to full pension funding beyond FY18 to give him the opportunity to put money into other priorities during his governorship -- as he suggested during his budget speech Tuesday -- Sweeney has other priorities, Democratic insiders noted.

Standing up to Christie against any further changes in the pension bill gives the Senate president the opportunity to rebuild a working relationship with the public employee unions with whom he has been feuding off-and-on since his original 2005 call for them to pay more toward their pension plans.

Just as important, Sweeney wants the pension phase-in completed with passage of the FY18 budget in June 2017, so that if he is able to win the governorship in November 2017, he can take office that spring with the pension burden off his back.

With an extra $600 million or so a year in hand once the pension phase-in is completed, Sweeney will have plenty of money to fully restore property tax rebates and the Earned Income Tax Credit for the working poor and/or the four-year property tax credit on income tax bills he proposed as an alternative to Christie’s 10 percent across the board income tax cut.

That’s the tax cut that Christie wanted so badly to take to the Republican National Convention in 2012, but Sweeney wouldn’t give it to him because revenues were coming up short and there was a $600 million pension payment to be made.

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