New Jersey Governor Chris Christie is once again taking aim at the pensions of state workers and teachers. He issued an executive order May 20 unilaterally slashing the state’s contribution to the public pension fund by $900 million in order to plug a sudden shortfall in this year’s budget. He also said he wants cuts of a billion and half dollars more next year, but he has to get the legislature’s okay for that. He also promised he would come out soon with a plan for more pension and benefit changes.
Tom Moran, chief of the Newark Star-Ledger’s editorial board—perhaps making amends for the fact that he and his newspaper endorsed Christie for re-election in 2013 and then, embarrassingly, retracted it after the fact when Bridgegate erupted—calls the governor’s actions the “final straw” in putting an end to Christie’s presidential ambitions:
Mark this week on your calendar as a turning point in the drama of Chris Christie, the moment when his presidential ambitions were finally snuffed out, once and for all. … Because this was this governor’s landmark achievement, the heart of his appeal. He was supposed to be the magician who came to Trenton, knocked some heads together and cleaned up the fiscal mess.
Moran goes on to say:
As it turns out, he did only the easy part. He made public workers pay more for skimpier benefits, and froze cost-of-living adjustments for current retirees. That tough medicine was justified to deal with the emergency.
But the other half of the deal was just as important. For his part, Christie promised to ramp up state payments into the pension funds gradually, over seven years, to make up for the scofflaw governors in both parties who shorted these funds over two decades.
The point is that both sides had to absorb their share of pain. Public workers did their part. Now Christie is saying he will not do his, that he will short the funds by a whopping $2.4 billion through next year.
A “sudden” budget crisis erupted over the last several weeks when state income tax revenues in April came in way under projection, primarily because of maneuvers in 2012 by wealthy residents to avoid anticipated higher federal tax rates in 2013, according to NJ Spotlight.
Christie, like some of his fellow Republican presidential hopefuls, including Wisconsin Governor Scott Walker, has been touting his ability to rein in public pensions and benefits. Two years ago Christie worked out a budget deal with two Democratic Party bosses to slash pensions and health benefits and increase out-of-pocket payments from state employees. He agreed then to make significant contributions in upcoming years to the pension fund, in order to reduce its long-term deficits. Now Christie’s budget balancing sleight of hand rips that agreement to shreds.
Public sector and teacher unions, along with key Democratic legislators attacked Christie’s pension fund cuts and the New Jersey Education Association promised legal action. Even State Senate President Steve Sweeney, a key player in the South Jersey political machine run by Democratic boss George Norcross, has gone on the warpath. It was Sweeney, in particular, who was instrumental in helping Christie pass the 2011 deal, getting several of his key legislative minions to fall in behind it. If Sweeney and some of the other Democrats who embraced Christie in 2011 now go on the offensive, it could seriously undercut Christie’s claim as the Republican best able to deliver Democrats in support of budget cuts, an argument he has made since his 2012 speech to the Republican national convention.
In January, Sweeney promised to shut down state government if Christie reneged on the agreed payments to the public employee pension fund. Sweeney recently called for a tax on the richest one percent as one answer to the budget problems. But in announcing the pension cuts, Christie reiterated his long-standing refusal to consider raising income, gas or other taxes, something that would kill his chances of being the GOP standard-bearer.
Sweeney called the governor’s unilateral pension cut “callous” saying:
And while they have asked the middle class and the working poor to suffer, they have rewarded the state’s wealthiest. As we have done in the past, Democrats in the Legislature will work to resolve this issue in a manner that is fair to the hard working, middle class people of this state.
Other Democratic leaders echoed Sweeney’s attack on the rich. New Jersey Assembly majority leader Lou Greenwald declared:
It’s notable that Gov. Christie is once again targeting the middle-class by delaying pension payments, while continuing to protect millionaires. It’s time for Gov. Christie to put his catchphrases aside and get a grasp on reality.
State Assembly Speaker Vincent Prieto also called for a tax on millionaires, according to the Newark Star-Ledger:
I think it’s something that should be on the table. And I’ve advocated for it. Our house has passed it on numerous occasions. And I think that it’s the right thing to do.
New Jersey Education Association President Wendell Steinhauer warned that
Gov. Christie’s illegal, irresponsible and reckless proposal to further delay a return to sound pension funding practices will irreparably harm New Jersey and cannot be allowed. In addition to the damage this will do to the pension system and to the employees and retirees who rely on it, this will further damage New Jersey’s fiscal reputation, to the detriment of every taxpayer. NJEA will pursue every legal avenue to stop this reckless and illegal attack on working-class New Jersey residents.
Gov. Christie’s refusal to pursue reasonable revenue increases to meet the state’s obligations and priorities has led to downgrades in New Jersey’s bond rating, costing taxpayers dearly as the state’s borrowing costs have increased. It’s time to restore the popularly supported millionaires’ tax, to levy a corporate surcharge, and raise the gas tax to cover costs that need to be moved back to the transportation trust fund.
Communications Workers of America’s NJ State Director Hetty Rosenstein called for the legislature to take Christie on:
It’s time Christie realizes what everyone else knows: cutting taxes for the super-wealthy, while stealing money from pensions hasn’t worked yet. And it won’t work this time. At every turn, Governor Christie has chosen the path of economic instability, due to his wrong priorities and callous actions towards New Jersey’s working families. Since Christie is clearly unwilling to be a responsible actor, we call on the state legislature to step up and be the adults in the room.
Last week Moody’s downgraded the state’s bond rating and in April, Standard and Poor’s did the same, which increases borrowing costs, and according to the latest reports, Fitch Ratings plans to follow suit. Christie’s budget maneuvering does nothing to help the state with the credit rating agencies, according to NJ Spotlight:
“The decision to reduce the pension contribution solved today’s problem, but it adds to next year’s gap, increases future costs, and increases the unfunded pension liability,” said Baye Larsen, the Moody’s vice president and senior analyst who monitors New Jersey’s finances. “The state is already in a very high debt position, both in bonded debt and pension debt, and this will increase it.” Moody’s kept the state’s credit outlook at “negative” when it downgraded New Jersey’s bond rating last week because the rating agency assumed that Christie’s solution for the latest budget gap “would push off the state’s fiscal challenges into the future,” Larsen said.
Perhaps Christie will argue, if indeed he launches a presidential bid for 2016, that he’s forcing New Jerseyans to take the bitter medicine that they need in order to swallow Christie’s small-government, low-tax, spending-cuts regimen. At least, that’s how Christie sees it, according to the Star-Ledger:
His dreams of the White House are another matter. Weighed down by this economic record, he’ll have a tough time convincing his family that he would be an effective steward of the national economy.
“I’ll make that case if I decide to run,” he said yesterday.
Translation: He has no idea how he’ll spin this mess. And the challenge will only grow tougher as the hole gets deeper.