Sept. 10 (Bloomberg) -- New Jersey Governor Chris Christie will unveil legislation that aims to trim a $46 billion pension deficit by scaling back benefits and suspending cost-of-living increases, said a person familiar with details of the proposals.
The measures would roll back a 9 percent increase in pension benefits that was enacted through legislation in 2001, and suspend cost-of-living increases for at least three years, said the person, who declined to be identified because he isn’t authorized to speak ahead of Christie’s announcement next week.
Kevin Roberts, a spokesman for Christie, said the governor will propose pension measures “early next week” and declined to confirm details of the plan.
“It will be a plan to bring solvency to a system that is dangerously on the brink,” Roberts said today in an interview. Any changes Christie will outline are designed to “ensure the system is going to be there in the long-term for those employees that are already here,” Roberts said.
Christie, 48, the first Republican elected New Jersey governor since 1997, began holding town-hall meetings this month to outline “The Christie Reform Agenda,” a plan to cut government spending, create jobs and overhaul ethics regulations. Christie skipped a scheduled $3 billion state pension payment this fiscal year, saying he wouldn’t put money into a “broken” system.
‘Headed Toward Disaster’
Legislators in 2001 changed the formula used to calculate pensions for new retirees by dividing the number of years worked by 55, rather than 60, which in effect resulted in a 9 percent benefit enhancement. Christie is seeking to reverse that legislation and return to at least 60 for current workers, the person said. Legislators previously rolled back the higher benefits for workers hired after May 22, according to state bond documents.
“Trenton politicians have consistently expanded pension benefits without paying for them,” Christie’s office said in statements outlining the governor’s Reform Agenda.
Assemblyman Declan O’Scanlon, a Republican from Red Bank, said the rollback would save the state $300 million annually. O’Scanlon has previously sponsored a bill that would return benefits to the earlier level, starting in January 2011.
“If we don’t do this our pension system is going to fall apart,” he said today in a telephone interview. “We’re headed toward disaster if we don’t all come together and solve this.”
The funding deficit in New Jersey’s pension system climbed by more than a third to $46 billion last year, from $34 billion in June 2008, because of investment declines and a failure to make full contributions, according to annual financial reports. The system now pays out benefits to about 250,000 retirees, according to state bond documents.
The system was more than 100 percent funded in 1998, until the Legislature began reducing annual contributions. From 2000 to 2006, the state never exceeded 30 percent of the required contribution, and by 2008, the total funding level had fallen below 73 percent, according to a February report by the Pew Center on the States.
Assembly Budget Chairman Louis Greenwald, a Democrat from Cherry Hill, in August said he’ll seek to link any benefits changes to making full state contributions. He said the Legislature needs to hold full hearings into both plans that include “everyone involved” before moving ahead with Christie’s plan.
He said he hasn’t discussed the plan with the governor or his office.
“In exchange for all of this the state is going to have to live up to its commitments,” Greenwald said in an interview. “If we don’t make contributions into that system, it will collapse under its own weight.”
The New Jersey Education Association, the state’s largest teachers’ union, hasn’t been briefed on the proposals, spokesman Steve Baker said
“We don’t believe that the governor can take away earned benefits,” he said. “And we certainly don’t support his efforts to reduce the pension our members have worked for and paid for.”
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