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Star Ledger - Christie pension plan: Gov to announce breakthrough with teacher union today
By Matt Arco | NJ Advance Media for NJ.com
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on February 24, 2015 at 6:00 AM, updated February 24, 2015 at 8:43 AM
TRENTON — Gov. Chris Christie is expected to announce today he's teaming up with an unlikely ally to tackle New Jersey's pension woes.
The governor and the state's largest teachers union, the New Jersey Education Association, are working on "groundbreaking changes" to fix the state's ailing pension system, Christie's office said Monday.
Christie will also announce plans to make a $1.3 billion pension payment in the state budget that begins July 1. That payment is almost double what he put into the system for the current fiscal year, but far below what the state is supposed to contribute under the 2011 pension reform law.
Details of a working relationship between Christie and the NJEA will be rolled out during the governor's budget address this afternoon. It will come one day after a state judge ruled the governor broke a law he signed by cutting $1.57 billion from a pension payment this year.
The NJEA has been a fierce opponent of the Republican governor since he was first elected in 2009. The teachers union opposed his initial efforts for pension and health care benefit reforms and spent more than $30 million since 2010 to combat Christie.
According to remarks provided by the governor's office ahead of the speech, Christie will call on the Legislature to "act in a bipartisan, constructive way to achieve needed changes to a problem that is so big" that doing nothing "will only ensure our state's fiscal standing will never improve and we will never grow economically."
"I am committed to working with each and every one of you in good faith to make a promise to the people of this state that we will not push this off," Christie will tell lawmakers, according to speech excerpts.
Edward Richardson, executive director of the NJEA, acknowledged that the union and the governor's office are working together.
"We've been communicating over the last few months with the pension and benefits commission that the governor appointed and we indicated with them we are going to continue working ... with them over the next few months," said Richardson.
The governor is also expected to renew calls for implementing additional pension benefit and health care reforms. Details of on the governor's plans were scant Monday evening, but Christie has repeatedly called on lawmakers to force public employees to reach deeper into their pockets after signing reforms early in his first term.
"There are politicians, some of whom may be in this very room, who will tell you that we don't need further pension and health benefit reform," Christie is expected to say.
"They will tell you that this is solvable if we just raise taxes," reads an excerpt. "But we cannot tax our way out of this problem."
The annual budget address comes after Superior Court Judge Mary Jacobson sided with a group of public worker unions who sued to stop the governor from slashing the payment to New Jersey's retirement fund for hundreds of thousands of government workers to balance the budget for the fiscal year that began last July 1.
The decision could blow a massive hole in the current state budget, sending Christie and lawmakers scrambling to come up with the funds by June 30, when the current fiscal year ends.
Christie's office promptly decried the ruling as "liberal judicial activism" and vowed to appeal her decision.
"The governor will continue to work on a practical solution to New Jersey's pension and health benefits problems while he appeals this decision to a higher court where we are confident the judgment of New Jersey's elected officials will be vindicated," Christie spokesman Michael Drewniak said.
The speech is expected to be a call to action for lawmakers of both parties to work together.
Christie, a likely 2016 presidential contender, has routinely burnished his ability to work across party lines as a major selling point to voters across the nation.
NJ Spotlight - Can Christie, Legislature Defuse Judge's $1.6 Billion Pension Bombshell?...Double challenge confronts Dems, GOP: Find funds in current budget -- and even more in next year’s
JOHN REITMEYER | FEBRUARY 24, 2015
Monday’s court ruling that Gov. Chris Christie and the Legislature need to come up with nearly $1.6 billion for the public-employee pension system by the end of June is going to turn a tough budget season into a nightmare.
The ruling effectively means -- unless a promised appeal by Christie is successful -- that Trenton will have to make significant spending cuts with just months left in the state’s fiscal year. Or it will have to find ways to generate new revenue after previous budget shortfalls have already used up most one-shot fixes like delaying property-tax relief payments.
It also means that the Republicans and Democrats will have to hammer out a way to work together, no small feat given what appear to be insurmountable differences.
And complicating matters: Christie running for president.
Christie and other Republicans have sought to address the pension costs by calling for new cuts, while Democrats have faulted the governor for failing to grow the economy, which they argue would make the pension contributions more affordable.
The Democrats have also targeted corporate tax incentives and have pushed for tax increases to pay for pension and transportation spending that the governor has rejected, preferring cuts instead.
Still, a compromise solution must be found -- and the Democrats are not short on bargaining power. Christie will need their votes to pass his preferred budget and any new pension reforms.
“No matter what your political party, there is no way to avoid it, this year’s budget has been dealt an extraordinary blow,” said Assembly Budget Committee Chair Gary Schaer (D-Passaic).
The ruling issued Monday by Mercer County Superior Court Judge Mary Jacobsonalso means the state is going to have to find a way to make a pension contribution closer to $3 billion in the next fiscal year, which starts on July 1. Christie is scheduled to present his state budget proposal to a joint session of the Legislature this afternoon.
Lawmakers were already worried about how the state was going to be able to balance that budget amid sluggish state revenues and other spending needs in addition to the pension system, including a Transportation Trust Fund that will lose its primary source of money starting July 1.
“The fiscal challenges confronting the state are exceedingly large,” Schaer said.
Pension reform was supposed to be a signature issue for Christie, a Republican who is preparing for a run for president in 2016. Reform laws passed with bipartisan support and signed by Christie in 2010 and 2011 attempted to bring the state’s $81 billion pension system, which covers the retirements of roughly 773,000 current and retired employees, back onto a path toward solvency after years of underfunding.
The reforms called for increased pension contributions from employees, as well as increased employer contributions by the state, phased in over a seven-year period.
But a $1 billion budget shortfall during the last fiscal year forced Christie to go back on his word, reducing a planned $1.6 billion state contribution to $697 million. Jacobson in an earlier ruling issued in late June allowed that cut, saying it was the only way to resolve a fiscal emergency because there were no other alternatives at the end of the last fiscal year.
Her ruling Monday, however, found no such dire circumstances in the current fiscal year.
“In short, the court cannot allow the State to ‘simply walk away from its financial obligations,’ especially when those obligations were the State’s own creation,” she said.
Jacobson issued her rulings in response to a lawsuit filed by public-employee unions last year challenging Christie’s cuts. In addition to reducing funds for the pension system out of the prior fiscal year budget, Christie also cut the contribution for the current state budget from $2.25 billion to $681 million, again citing budget concerns.
Jacobson, in Monday’s ruling, recognized the pressure the decision would put on the state budget with just months left in the fiscal year, but wrote it wasn’t enough of a factor to change her mind.
“The court cannot conclude that plaintiffs’ requested relief should be delayed further simply because it may be inconvenient for the Legislature and the Governor to go back to the drawing board in the middle of a budget cycle,” Jacobson wrote.
Christie’s press secretary, Michael Drewniak, signaled in a statement that the administration will appeal the ruling, blaming “liberal judicial activism.”
Christie has also impaneled a commission of experts to study the affordability of both public employee pensions and health benefits, and a final report could be released along with the new budget today.
“The governor will continue to work on a practical solution to New Jersey's pension and health-benefits problems while he appeals this decision to a higher court where we are confident the judgment of New Jersey's elected officials will be vindicated,” Drewniak said.
Patrick Murray, director of the Monmouth University Polling Institute, said Monday’s court decision has difficult political implications for Christie as he turns his attention to the Republican presidential primary.
“It’s very hard to play this positively,” Murray said. “He’s really backed into a corner.”
Schaer, the chair of the Assembly budget panel, added, “It is going to be a difficult amount of money to raise. If you’re talking about cuts, those cuts would be radical.”
He continued, “It’s going to be a tremendous challenge. I’m sure the governor’s speechwriters are very busy.”
But Assemblyman Declan O’Scanlon (R-Monmouth) said Christie has been sounding alarms about the crushing cost of public-employee benefits since early on during his tenure, which began in 2010.
“I’m assuming there will be an appeal, but if the ruling stands it only accelerates the truth that the governor has been preaching,” said O’Scanlon, the ranking Republican on the Assembly budget panel.
“This will prove him right, quicker,” O’Scanlon said.
He also expressed confidence in the Christie administration, saying it was forced to close a deeper, more than $2 billion shortfall shortly after taking office during the recession in 2010.
“We’ll figure it out,” he said. “I do have confidence they’re the right people at the helm.”
Still, this time around a solution everyone can live with could be harder to find. Lawmakers in the Democratic-controlled Legislature passed their own budget bill last year that would have funded the larger pension contribution. It relied on legislation that would have increased income taxes on those earning over $1 million and implemented a corporate-tax surcharge to raise more than $1 billion.
Christie vetoed the tax hikes and used the line-item veto to lower the spending bill to $32.5 billion, saying the increases would ruin the state’s economy.
A coalition of organizations held a news conference yesterday in the Statehouse to call for an overhaul of the state’s economic-incentive programs, arguing those tax breaks are taking too much money out of the annual budget, making it harder for the state to afford things like the pension contribution and spending on transportation improvements.
Right now, the Transportation Trust Fund is being supported by the state’s 14.5-cent gas tax, but starting July 1 nearly all the revenue raised from the tax will go to paying down the fund’s existing debt. Christie and lawmakers have been negotiating a new source of revenue for the trust fund, but have yet to come to an agreement.
The members of the Better Choices for New Jersey Campaign said the tax-incentive programs, which offer tax breaks to businesses to either locate in New Jersey or keep them from leaving, need to be refined, adding that by its calculations about $5 billion in revenue has been sacrificed since 2010 even as the state’s jobless rate has trailed the national average.
“It’s clear that New Jersey needs to start charting a new course,” said Jon Whiten, deputy director of New Jersey Policy Perspective, a liberal-leaning think tank.
“We’re sowing the seeds for another surge in income inequality,” said William Rodgers, a public policy professor and chief economist for Rutgers University’s Heldrich Center for Workforce Development.
But, Michele Siekerka, president of the New Jersey Business and Industry Association, said the tax incentives administered through the state Economic Development Authority have been a success. The incentive programs were overhauled in 2013, and anecdotal evidence is thus far very promising, she said.
“You don’t get to see the benefits very quickly,” Siekerka said. “We know that it makes a difference through attraction, as well as retention.”
Virginia Pellerin, a spokeswoman for the Trenton-based development authority, took issue with the $5 billion figure put forward by the coalition, and also preached patience in evaluating the effectiveness of the incentive programs.
“It is important to assess the results of these programs over time, and the ripple effect the presence of a corporation can have in a community,” she said.
The Record - Christie to announce deal with teachers on pensions day after judge's ruling deepens crisis
FEBRUARY 23, 2015, 4:13 PM LAST UPDATED: TUESDAY, FEBRUARY 24, 2015, 8:09 AM
BY MELISSA HAYES AND DUSTIN RACIOPPI
STATE HOUSE BUREAU |
THE RECORD
When Governor Christie unveils his next state budget this afternoon, he'll also announce a months-long partnership with one of his biggest political foes — the New Jersey Education Association — to address a pension crisis that grew even bigger yesterday when a Superior Court judge ruled the governor is constitutionally obligated to make larger payments into the funds.
It was not immediately clear what impact the judge’s decision – which Christie’s office said it would appeal – would have on state finances or whether it would trigger budget cuts before June 30, the end of the fiscal year and the deadline for any pension payment. Christie cut nearly $1.6 billion from the contribution citing a troubled state economy last year. The judge ruled the payment is required by a law the governor signed in 2011.
Christie is scheduled to deliver a budget address at 2 p.m. today to a joint session of the Legislature to outline spending for the next fiscal year, which begins July 1. He is set to detail the work of the Pension & Health Benefit Study Commission, which he appointed last year, with the NJEA, a union that has tangled with the governor since he first ran in 2009 and that opposed his initial round of pension reforms in 2010 and 2011. The unlikely partnership began months ago when the union, like others, was brought before the commission to offer feedback on the pension and health benefits issue.
"We understand that this is a very pervasive problem," said Ed Richardson, NJEA's executive director. "We want to be involved in crafting a long-term solution."
In her 130-page ruling in Mercer County, Superior Court Assignment Judge Mary C. Jacobson cited Christie’s own endorsement of the bipartisan pension legislation, noting that he touted it as his “biggest governmental victory” and one that would “save” the pension system.
Jacobson, ruling in a lawsuit brought by public employee unions, dismissed
the administration’s argument that scaling back the payment for the current budget year – after doing so in the previous budget – would not have a negative impact on the funds in the long term.
“Unsurprisingly, the governor does not make any promises that the budget for FY 2016 will include a full payment for the pension systems,” Jacobson wrote about the budget Christie is set to introduce today. “The court is unwilling to rely on what has now become a succession of empty promises.”
Jacobson said the state also must reimburse the unions for legal costs.
“The word for me is not ‘vindication,’ it’s hope that in fact hundreds of thousands of workers will not have their pensions taken away from them,” said Hetty Rosenstein, state director of the Communications Workers of America, one of the unions in the lawsuit.
Christie’s office pledged to appeal, a move that will likely end at the state Supreme Court.
“Once again liberal judicial activism rears its head, with the court trying to replace its own judgment for the judgment of the people who were elected to make these decisions. This budget was passed by the Legislature and signed by the governor with a pension payment,” spokesman Michael Drewniak said in a statement. Jacobson, whose political affiliation could not be verified Monday night, had been appointed by a Republican governor, Christie Whitman.
During his budget address last year, Governor Christie warned that New Jersey could be on the same path as Detroit, which filed for bankruptcy with much of its debt attributed to unfunded pension liabilities.
But in her decision, Jacobson warned that New Jersey’s pensions are in worse shape.
“The city of Detroit’s pension systems for its employees are in better health than New Jersey’s pension systems because Detroit continued to make contributions despite being faced with bankruptcy,” she wrote.
Christie’s office said the governor will propose making a $1.3 billion pension contribution in his budget, the largest single pension payment to date. But under the seven year phase-in of increased payments that
Christie agreed to before signing the pension overhaul law in 2011, the state should be putting $2.9 billion into the fund in the next fiscal year.
And Christie — who took office in 2010 with a pledge to shrink government, slash spending, resist tax increases and overhaul the state’s pension system — faces other challenges when he presents his spending plan today. The state’s Transportation Trust Fund is bringing in only enough money to pay off its debt, leaving no funds for needed infrastructure repairs. And Christie must balance the increased pension payments with the need to fund education and continue phasing in corporate business tax cuts that he has argued will boost the state’s economy and create jobs.
When he unveiled a $34.45 billion budget plan last year, the largest in state history, Christie complained about being hamstrung by the phasing in of increased state pension contributions — stepped-up payments he pledged to make in 2010. He included a $2.25 billion payment that he described as “keeping our promise to the people.” He later cut that payment to $681 million, citing a revenue shortfall in the $32.5 billion budget he signed into law.
The public employee unions filed a lawsuit against Christie challenging that cut, arguing that the stepped-up payments were a contractual obligation. In exchange for those increased payments, public employees agreed to pay more toward their pensions and health benefits. But attorneys for Christie countered that the governor has a constitutional obligation to balance the state budget and that takes precedence.
In her decision, Jacobson also noted that the Democrats, who control the state Legislature, proposed a budget last year that offered alternatives for funding the pension. Part of that funding would have come through an income tax surcharge on millionaires, something Democrats have repeatedly sent to Christie’s desk and he has vetoed every time.
Senate President Stephen Sweeney, D-Gloucester, who sponsored the 2011 pension-overhaul legislation Christie signed into law, said that had the governor adopted that budget, the state wouldn’t be facing a “massive fiscal crisis.”
Jacobson considered a similar pension case last year, when Christie cut the planned $1.58 billion pension contribution to $697 million to offset a $1 billion revenue shortfall in the final weeks of the fiscal year. Jacobson allowed for the reduced payment because of the looming budget gap and the lack of time to come up with the funds by the end of the budget cycle.
The unions filed a new lawsuit at the start of the current fiscal year, arguing Christie’s nearly $1.6 billion cut was not made under the same looming deadline. They argued that the 2011 law included the contractual obligation that the larger payments would be made, something Jacobson agreed with.
The NJEA praised the judge’s Monday ruling as “a real victory for public employees” and said it has been working collaboratively with the pension study commission.
“We understand that they will propose some rather groundbreaking solutions, and we’ve indicated a willingness to continue working on those solutions,” said Ed Richardson of the NJEA.
Email: hayes@northjersey.com and racioppi@northjersey.com
