March 22 (Bloomberg) -- Former Pennsylvania Governor Edward G. Rendell praised New Jersey Governor Chris Christie for efforts to reduce government-employee benefits, saying pensions “are not supportable in their current state.”
“If Governor Christie is going after them, it’s the right thing to do,” Rendell, a Democrat who left office in January after two terms, said today at the State and Municipal Finance Briefing hosted by BloombergLink in New York.
Christie, a first-term Republican, said March 15 he won’t “play nice” with lawmakers or employee unions to get his pension proposals approved. The funding deficit in New Jersey’s pension system increased 18 percent to $53.9 billion as of June 30 from a year earlier as the state failed to make contributions for most of the past decade.
In his budget for the year that begins in July, Christie proposed expanding property-tax credits if lawmakers pass his plan to make workers pay 30 percent of their health-insurance premiums by 2014. He also proposed a $506 million payment into the pension system, the minimum required by a new state law, if lawmakers roll back a 2001 benefits increase, freeze cost-of-living adjustments and raise the retirement age to 65 from 62.
Christie, 48, who took office in January 2010, skipped a $3 billion pension payment to help balance his first budget, saying he wouldn’t put money into a “broken system” until his overhaul is approved. Democrats control both houses of New Jersey’s Legislature; all 120 members face re-election in November.
Moody’s Investors Service in September lowered its outlook to negative on $31.6 billion in bonds sold by New Jersey, citing underfunded pensions, budget gaps and a slow economic recovery. Christie’s pension proposal would be a “credit positive” for the state in the long term, Baye Larsen, a Moody’s analyst, wrote in a February report.
Recovery from the U.S. recession and the withdrawal of federal economic-stimulus spending are the key elements for closing unprecedented deficits in many state budgets, Rendell said. The ability of unions to bargain collectively isn’t a major cause of those shortfalls, he said.
“The idea that unions always win is ludicrous,” said Rendell, 67. “If the public is willing to take a strike and suck it up, you will win that collective bargaining every time.”
Rendell, Pennsylvania’s governor from 2003 to 2011, is a partner at the Philadelphia law firm of Ballard Spahr LLP and a senior adviser at Greenhill & Co. He was succeeded by Republican Tom Corbett.
Pennsylvania last year approved measures that Rendell estimated would save the state $16 billion in pension payments over the next 25 years. The law signed by Rendell in November raises the retirement age to 65 from 60 for newly hired state workers and 62 for school employees and cuts the formula used to calculate benefits.
To contact the editor responsible for this story: Mark Tannenbaum at firstname.lastname@example.org