Christie Holds Property-Tax Credits Hostage to Union Givebacks in Budget

New Jersey Governor Chris Christie is holding homeowner tax credits hostage until he gets state unions and their legislative allies to give up some benefits as part of his $29.4 billion budget for fiscal 2012.

“We’re not trying to break the unions,” Christie said today on MSNBC television’s “Morning Joe” program. “The unions are trying to break the middle class in New Jersey. I am fighting for middle-class taxpayers.”

If the Democratic-led Legislature doesn’t pass his plan to charge state workers 30 percent of the cost of their health-care benefits by 2014, Christie will skip a planned $190 million boost in residential property-tax credits, he said yesterday.

Christie, 48, a Republican who took office last year, also asked the Democrats who lead the Senate and Assembly to reverse a 9 percent pension-benefit increase that began in 2001 and freeze cost-of-living raises for pension payments to retirees. If lawmakers go along with his plan, Christie said he’ll pay $506 million into state retirement funds.

“The governor is attempting to pit neighbors against neighbors to distract from the fact that he is ignoring his legal obligation to fund the pension system and his campaign promise to deliver property-tax relief,” Assembly Majority Leader Joseph Cryan, a Union Democrat, said in a statement. “Democrats are not going to play into this divisive game.”

Paying More

The governor outlined his budget in Trenton yesterday as government workers prepared to mass outside the Capitol on Feb. 25 following demonstrations in Wisconsin, Ohio and Indiana over attempts to make state employees pay more for benefits and to limit their bargaining power in contract talks.

Christie’s budget counts on $323 million in savings from passing measures to force government employees to pay more than the current 1.5 percent of salary for their health insurance, Treasurer Andrew Sidamon-Eristoff said. The governor has said the current system means a teacher earning $60,000 a year pays $900 annually for a medical plan that costs as much as $22,000.

“It’s a brilliant tactic,” said Assemblyman Declan O’Scanlon, a Republican from Red Bank who is his party’s budget officer. “He’s taking people who might be resistant to some of his reforms because of special interests and he’s holding their feet to the fire. It’s a shame he would have to do that, but it’s brilliant.”

Pension Payment

The spending plan, Christie’s second since taking office, would also cut Medicaid by $300 million and raise aid to public schools by about $250 million. He cut aid to schools by $820 million last year. Real-estate tax credits would rise to $458 million from about $268 million last year, provided lawmakers pass his proposals on state employee benefits and pensions.

Last year, Christie skipped a $3 billion payment to state pensions, saying he wouldn’t put more money in until lawmakers approved his overhaul plan. The state has an unfunded gap of $53.9 billion between what it has promised to current and former workers and projected assets.

Christie in his budget for the current fiscal year that ends June 30 suspended the state’s Homestead Rebate program for most homeowners and reconstituted it in the final quarter as a credit against property-tax bills. His fiscal 2012 plan proposes seniors and the disabled earning as much as $150,000 receive credits averaging $540, and non-seniors making as much as $75,000 get $404, according to a budget summary.

Tax Bills

New Jersey is the second-wealthiest U.S. state after Maryland, with a 2009 median household income of $68,342, according to Census data. Its homeowners paid the nation’s highest real-estate taxes, an average bill of $7,281 in 2009, according to state data. The governor has said the high cost of providing benefits has been a key driver of that spending.

“If you want to do things in New Jersey like I want to do that provide property-tax relief to middle-class taxpayers, you can’t continue to pay for health benefits where the government pays 92 percent,” Christie said on NBC’s Today Show. “We have to make choices and they have to become part of the shared sacrifice.”

The New Jersey Education Association, the state’s largest teachers union, said in a statement the higher health costs would be akin to a 15 percent pay cut for its members.

“He promises to provide property-tax relief to senior citizens, but only if teachers and school employees pay thousands more in higher health-care premiums -- on top of what they already pay,” said Barbara Keshishian, president of the union. “The governor continues to scapegoat public-education employees by pitting senior citizens and all of New Jersey against them.”

$125 Billion

New Jersey is among states that may face as much as $125 billion of collective deficits in the next fiscal year, according to the Washington-based Center on Budget and Policy Priorities, a nonprofit research group focused on issues that affect lower-income Americans. New Jersey will spend $4.3 billion on health insurance this year, and that cost will rise 40 percent within four years, Christie said last month.

Christie’s budget speech -- and the choices between worker benefits and tax relief he offered -- were divisive, according to Charles Wowkanech, president of the state chapter of the AFL- CIO, the nation’s biggest labor organization.

“This truly is politics at its worst,” Wowkanech said in a statement. “Rather than respecting the collective-bargaining process and entering into good-faith negotiations with state- worker representatives, the governor is offering an ‘either or’ scenario -- either trample collective bargaining and legislate health and pension changes, or grant property-tax rebates to senior citizens.”

Union Rallies

In Wisconsin and Ohio, Republican governors sparked a series of rallies with their plans to bring government spending under control. In 17 states, government workers are the subject of efforts to limit union power and curb earnings, said Steve Kreisberg, collective bargaining director of the American Federation of State, County and Municipal Employees in Washington.

Christie, who ousted Democrat Jon Corzine, made reducing property taxes a central theme in his 2009 campaign and last year signed a law capping the annual levy growth at 2 percent.

The governor’s tactics binding tax relief to pension changes are a “tacit admission” that his opponents have an edge heading into budget negotiations, said Patrick Murray, who teaches politics at Monmouth University and directs its polling center in West Long Branch. By focusing so much on the need to lower property taxes, Christie has shifted the issue onto himself and taken some of the onus from lawmakers, Murray said.

“He alone is going to be held responsible for lowering property taxes,” Murray said of Christie. “It’s a tacit admission that right now, Democrats have a bit of the upper hand on this issue because the public is going to hold his feet to the fire.”

To contact the reporter on this story: Terrence Dopp in Nj Statehouse at tdopp@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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