Governor's Power Gives Christie Leverage in Pension Battle

Governor Chris Christie has leverage in the dispute with New Jersey Democrats and public-employee unions over pension-payment cuts because of the power of his office and the pace of the courts.

“There really is no way to stop him,” said Assemblyman Declan O’Scanlon, a Republican from Little Silver who is his party’s budget officer in that house. “He has a huge amount of leeway in the line-item veto. It’s all political posturing and message-sending to special interests. A colossal waste of time.”

Christie, a 51-year-old second-term Republican, granted himself permission to ignore a 2010 law he signed and scale back promised contributions into the retirement system. Though Democratic lawmakers have pledged to restore the reductions, New Jersey’s constitution gives the governor broad authority to reject any spending they add to the budget.

Christie also has the benefit of time as his cuts face a legal challenge from more than a dozen unions. While a hearing is scheduled for tomorrow, a ruling likely won’t come by the June 30 budget deadline. The governor won’t consider any tax increase, and says he has no alternate plan for closing a deficit that may top $2.7 billion through June 2015.

Approval Rating

Democrats, who control the Legislature, were emboldened as Christie suffered under criticism of his administration’s role in manufactured traffic jams last year at the George Washington Bridge, along with the state’s fiscal condition and his handling of Hurricane Sandy.

Christie, a possible presidential candidate whose approval reached a high of more than 70 percent among New Jersey voters in early 2013, saw it drop to 49 percent in April, according to Quinnipiac University polls.

The governor said when he introduced a $34.4 billion budget for next fiscal year that pension, health-benefit and debt payments threatened to crowd out spending on services such as schools and public safety. Last month, he cut revenue forecasts for this year and next by a combined $2.75 billion as income-tax receipts fell short.

In response, he said, he would cut this year’s payment to $696 million, less than half the planned $1.58 billion. For fiscal 2015, which begins July 1, the payment will be $681 million, less than one-third of the $2.25 billion he had pledged.

Millionaire’s Tax

Senate President Stephen Sweeney and Assembly Speaker Vincent Prieto, both Democrats, are seeking to restore full contributions and raise taxes on the wealthy and corporations.

“Workers are paying more for their pensions and more for their health care,” Sweeney said June 18 in Trenton. “They’re doing their part, now it’s our responsibility to do our part.”

Raising taxes “drives businesses and citizens out of New Jersey and makes our problems worse,” Kevin Roberts, a Christie spokesman, said in an e-mail. “The sins of the past require very difficult but necessary choices.”

Without an agreement by July 1, some operations may shut down. The last time that happened in New Jersey was in 2006, when Democratic Governor Jon Corzine ordered nonessential services halted for nearly a week after lawmakers in his own party balked at a sales-tax increase.

Four years ago, Sweeney’s support helped the governor win approval for his pension overhaul. The measures boosted employee contributions, raised the minimum retirement age for new workers and froze cost-of-living adjustments.

In 2010, Christie signed a law that required the state to make one-seventh of its pension payment in fiscal 2012, and then raise it each year until it hit the full amount in 2018.

Funding Deficit

New Jersey’s pension deficit, which reached $53.9 billion in 2010 after a decade of skipped payments and expanded benefits, fell to $36.3 billion. It then grew to $47.2 billion in 2012 as Christie made only partial contributions.

The burden, along with a sluggish economic recovery, have led to six credit downgrades under Christie.

Because of the lower payments Christie proposed last month, the state’s share of the pension gap, now $38 billion, will exceed $40 billion by 2016 as its funded ratio drops to 50.8 percent from 53.7 percent, Treasurer Andrew Sidamon-Eristoff told lawmakers in May.

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

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Stacie Sherman

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