June 18 (Bloomberg) -- New Jersey Senate Democrats proposed a rival to Governor Chris Christie’s budget plan that would make a full pension payment while raising taxes on corporations and the wealthy.
The proposal sets up a showdown between senate President Stephen Sweeney and Christie, a second-term Republican who has proposed cutting $2.5 billion of pension contributions this year and next to make up for a revenue shortfall. Christie, a potential presidential candidate in 2016, has rejected Democrats’ past efforts to increase taxes.
“This is a reasonable way to move forward and present a budget that meets all of our obligations,” Sweeney told reporters in Trenton today.
Under a law Christie signed in 2010, New Jersey was to make higher pension payments each year through fiscal 2018 to make up for a decade of skipped contributions. The funding gap fell to $36.3 billion from as high as $53.9 billion with the changes, then grew to $47.2 billion in 2012 as Christie made only partial contributions.
Because of Christie’s lower payments, 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 May 21.
Sweeney said the higher taxes would raise $1.57 billion. Democrats hold majorities in the senate and assembly.
Lawmakers and Christie must pass a budget by July 1, the start of the fiscal year. Without a spending plan in place, government would cease many functions.
“We don’t have to shut the government down,” Sweeney said. “We’ve presented a budget and we will look at all of our constitutional opportunities to find a solution.”
One of the ideas is to put the higher income taxes to voters in a ballot question, he said.
Kevin Roberts, a spokesman for Christie, said he hasn’t seen Sweeney’s proposal and referred to comments the governor made about the budget this week.
“I am not going to raise taxes on the people of New Jersey to pay for a broken, bloated pension system and a Cadillac health-care system,” Christie, 51, said in a radio interview.
The proposal would raise to 10.75 percent the levy on income above $1 million from the current top rate of 8.97 percent in order to raise an additional $565 million, according to Democratic figures. It would go up to 10.25 percent for those earning between $500,000 and $1 million to bring in an additional $155 million.
Sweeney’s plan also would generate $375 million more through a 15 percent increase in corporate taxes. It would also suspend some business subsidies and make unspecified cuts and one-time adjustments to some tax rates.
Assembly Speaker Vincent Prieto, a Democrat from Secaucus, said in a statement that lawmakers in the lower house will review the budget outlined by Sweeney and Senate Majority Leader Loretta Weinberg.
Unions representing public school teachers and government workers backed Sweeney’s plan.
“We applaud senate President Steve Sweeney for agreeing that the law is the law and that the pension payment must be made,” Hetty Rosenstein, director of the state chapter of the Communications Workers of America, said in a statement. “We are in agreement that everybody has to pay their fair share -- including millionaires and corporations. And we expect the Assembly to follow suit and do the right thing as well.”
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