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1-15-14 NJ Spotlight on State of the State Message
NJ Spotlight - Christie’s Call For Pension Concessions Sets Up Budget Battle With Sweeney

NJ Spotlight - Christie’s Call For Pension Concessions Sets Up Budget Battle With Sweeney

Mark J. Magyar | January 15, 2014



Gov. Chris Christie yesterday called for a new round of public employee pension concessions, setting the stage for a bitter budget battle with Senate President Stephen Sweeney (D-Gloucester) over changes to their landmark pension legislation -- a confrontation in which Christie holds the ultimate power.

After a brief apology for the "Bridgegate" scandal that is already the subject of five investigations, Christie used his State of the State speech to argue that “further pension changes are needed” because the annual payments required to restore the pension system to solvency prevent the state from increasing the funding for education, crime prevention, infrastructure, and other needed programs or enacting a tax cut.

“For the Fiscal Year 2015 Budget, the increase in pension and debt service costs could amount to as much as nearly $1 billion,” Christie declared. “That’s nearly $1 billion we can’t spend on education. That we can’t invest in infrastructure improvement. That we can’t use to put more cops on the street.”

“If we do not choose to reduce our soaring pension and debt-service costs, we will miss the opportunity to improve the lives of every New Jersey citizen, not just a select few,” he said, once again pitting the interests of the general public against those of public employees and their unions.

In fact, virtually every initiative in Christie’s State of the State speech targeted public employee unions, from his demand for zero payments for unused sick leave and Civil Service changes to reduce union protections in municipal consolidations to his push for extended school hours and an extended school year without any discussion of whether teachers would be paid for the additional work.

“This State of the State speech comes straight out of the Christie playbook we all know: When times are tough, he attacks public-sector workers and their unions,” Milly Silva, the executive vice president of Service Employees International Union Local 1199 who ran against Christie’s ticket as the Democratic candidate for lieutenant governor in November, said last night. “This is going to set up a major battle with the Legislature.”

Broken Promises?

Democrats, who control both the Senate and the Assembly, viewed Christie’s comments as a warning that he planned to renege on his commitment to increase state pension funding by about $600 million annually for seven years from Fiscal Year 2012 to FY2018, when the $5 billion estimated payment would be sufficient to put the underfunded pension system, which currently has an unfunded liability of more than $40 billion, back on a sound fiscal footing.

Sweeney and other Democratic leaders noted that Christie knew that the state’s fourth-year obligation would be $2.4 billion for the upcoming FY2015 budget when he pushed for the controversial legislation, which required teachers, police, firefighters, and state and local government employees to pay more toward both their pensions and their employee health benefits. For some employees, it was the equivalent of a 10 percent pay cut.

Sweeney, Assembly Speaker Vincent Prieto (D-Hudson), Senate Majority Leader Loretta Weinberg (D-Bergen), and Assembly Majority Leader Lou Greenwald (D-Camden) spoke for the Democratic legislative majority in both houses when they declared their unwillingness to either allow the state to renege on its commitment to make full pension payments or to demand further concessions from public employees.

“We’re not going to defund our commitment to the pensions,” Sweeney said emphatically, and Prieto promised there would be “no pension holiday.”

The Real Powerbroker

But Christie, as governor, has the ultimate power over pension payments and the ability to use that power to attempt to force further union concessions on pensions or other issues, such as sick leave and Civil Service, if he chooses to use it, as he clearly signaled a willingness to do yesterday.

While Christie signed the landmark 2011 pension law committing the state to make the increased annual pension payments for the next seven years in a triumphant ceremony at Trenton’s War Memorial with Sweeney by his side, the state’s annual budget law, which must be enacted by July 1, supersedes other laws.

Therefore, it is Christie who gets to decide initially whether to put the estimated $2.4 billion pension contribution required by the 2011 law into the budget for FY2015 he will unveil in his February budget speech or to put in a lesser amount.

If Christie puts in a lesser amount, Democrats and/or the unions would undoubtedly file suit challenging Christie’s right not to make the full pension payment. Christie, however, would welcome the suit, and there is no previous court order governing the issue, as there was when the New Jersey Supreme Court cited its previous Abbott v. Burke school funding decisions to order Christie to restore $500 million in funding he had cut from 31 urban school districts.

By cutting or threatening to cut the required pension payment, Christie could then negotiate with Democratic legislative leaders the new concessions he wanted them to impose on the public employee unions -- including such options as increased pension contributions or changes in retirement age or eligibility, or even unrelated initiatives like zero payments for sick leave.

Christie could lay out a budget, for example, that uses $600 million that would have gone into pensions to provide $250 million to pay for the first year of a phased-in income-tax deduction for property taxes up to $1,000 -- the tax cut he and Sweeney agreed upon two years ago, but abandoned because of insufficient revenues -- and another $350 million in increased school aid or property tax rebates. He could then dare Democrats to eliminate these popular programs to fully fund pensions for “a select few,” as he put it.

Democrats could pass a budget that put the full pension payment back in, but Christie could then use his line-item veto power to eliminate it. Democrats do not have enough votes in either house to override the governor’s veto, and Republicans are unlikely to provide any votes for an override because Christie’s efforts to get further pension concessions will be popular with their constituents.

Assembly Minority Budget Officer Declan O’Scanlon said Christie’s implicit suggestion that the state consider further public employee pension reductions “was worthy of pursuing, if our friends on the other side of the aisle are willing to do that. Within reason -- you also have to be fair to the pensioners that are involved. But we do need to have it on the table, because he’s right. This is huge -- until we get up to the full pension (funding), which is the next three years, the additional pension payments are going to suck all the air out of the room, and the revenue out of the vault.”

For the embattled Christie, who is facing months of investigations into the Bridgegate scandal, a public battle with Democrats and the public employee unions over the high cost of pensions for government workers is a fight he would welcome, and it certainly would not hurt his standing as he travels around the country as chairman of the Republican Governors Association and aims to keep alive his hopes of winning the Republican presidential nomination in 2016.

A National Concern

The threat to state and local governments posed by large unfunded pension obligations has drawn increasing national attention. The City of Detroit filed bankruptcy last year in part to attempt to persuade judges to allow it to renegotiate its punishing pension obligations, and new accounting rules adopted last year forced state and local governments to acknowledge higher pension liabilities in their bond offerings. Moody’s lowered the credit ratings of Chicago and a half dozen other major cities in response.

New Jersey’s 2011 pension overhaul, which Sweeney, an Ironworkers Union leader, pushed through over the protests of the state’s public employee unions, was designed to ensure that New Jersey’s pension system would be placed on a sound fiscal footing after almost 15 years in which Democratic and Republican governors and Legislatures had skipped making billions of dollars in required pension payments to pay for other priorities.

“It wasn’t public employees who stopped making pension payments,” Weinberg noted. “It’s the state that didn’t pay its portion.”

New Jersey State AFL-CIO President Charles Wowkanech, who opposed the 2011 pension overhaul, criticized Christie’s inference that the state might reduce its required pension payments or ask public employees to pay more.

“Any efforts to further change pensions must be done in partnership with the men and women who contribute and would be directly impacted,” Wowkanech said in a press statement. “The state must understand its need to live up to its obligations and not require workers to shoulder the burden of returning to solvency by themselves. With all of the ideas and legislation unveiled today, working families must be provided a seat at the table.”

Sen. Linda Greenstein (D-Middlesex), whose 14th District is home to the largest concentration of public employees in the state, also emphasized that the issues Christie raised -- from pensions and sick leave to Civil Service and longer school days -- should be negotiated in collective bargaining with the affected public employee unions, not imposed legislatively.

But Christie is not going to want to negotiate future pension changes with the unions any more than he was willing to collectively bargain the 2011 pension and health benefits overhaul.

It was that bill’s four-year suspension of public employee union rights to collectively bargain on health benefits that was the worst provision of the legislation for organized labor to swallow because it echoed similar anti-labor legislation that was enacted that year in Wisconsin by Republican Gov. Scott Walker, despite the occupation of the Wisconsin Statehouse by union and pro-labor protesters.

Ironically, Christie’s troubles with Bridgegate may make him more likely to push to cut the pension payments or exact further concessions from the unions.

“If his presidential hopes go up in smoke, he’s going to realize that he’s going to be here in Trenton for four years, and he’s the one who will have to make all of those payments, which he’s not going to want to do,” one veteran Statehouse labor observer commented.

A Change in Tone

Christie’s bombshell on pensions came toward the end of a State of the State speech that was more subdued than his usual major speeches, undoubtedly because the ongoing Bridgegate scandal demanded a different tone. Patrick Murray, director of the Monmouth University Polling Institute, said Christie’s speech was “flat because he couldn’t go after his political enemies with one-liners the way he usually does.” Christie was less animated than usual; there was none of his trademark bravado; and while he touted his bipartisan accomplishments working with the Democratic Legislature, this time he did not suggest that partisan Washington had a lot to learn from the way things are done in Trenton.

Further, the initiatives contained in this fourth State of the State speech were more modest than usual, in striking contrast to his first speech in 2011 when he memorably declared, “It’s time to do the big things.” Except for the longer school day and extended school year, most of his initiatives, including a constitutional amendment allowing bail to be denied to violent offenders, were leftover ideas that had failed to gain approval from the Democratic-controlled Legislature in previous sessions.

But Christie knew that most people following his speech were not listening for new initiatives.

The most closely watched lines in Christie’s speech came at the very beginning, when, as expected, he made an apology that undoubtedly was nowhere in his speech before the publication last Wednesday of emails showing that Bridget Anne Kelly, a deputy chief of staff in the Governor’s Office, had ordered the closures of access lanes to the George Washington Bridge for four days in an apparent act of retaliation against Fort Lee Mayor Mark Sokolich for refusing to endorse Christie.

“The last week has certainly tested this administration,” Christie acknowledged. “Mistakes were clearly made. And as a result, we let down the people we are entrusted to serve. I know our citizens deserve better. Much better. I am the governor and I am ultimately responsible for all that happens on my watch -- both good and bad.

“Without a doubt,” Christie promised, “we will cooperate with all appropriate inquiries to ensure this breach of trust does not happen again.”

Christie’s use of the word “appropriate” raised immediate concerns among Democratic legislative leaders, who wondered whether the special investigative committees being equipped with subpoena powers tomorrow under the leadership of Assembly Transportation Committee Chairman John Wisniewski (D-Middlesex) and Weinberg would be deemed “appropriate” by the governor.

“I hope the governor is not trying to send us a message by parsing his words,” Wisniewski said. “We will use our subpoena powers in pursuit of the truth wherever it leads.”


Garden State Coalition of Schools
160 W. State Street, Trenton New Jersey 08608