At home in New Jersey, Chris Christie is facing a huge fight over pensions that could wreck his political future, but on Thursday night the governor was yukking it up on The Tonight Show with Jimmy Fallon, dancing to “The Evolution of Dad Dancing,” pretending to be outraged at fat jokes and Bridgegate jokes, and—when asked point blank, “hypothetically,” if he could beat Hillary Clinton in 2016—answering, “You bet!” But not so fast.
In addition to lawsuits by the unions whose pension money was grabbed last month by Christie to balance the state budget, a coalition of more than seventy union and labor organizations, community groups, environmental and student organizations are mounting a campaign against looting the pension. On Thursday, hundreds of union members rallied in Trenton over the pension crisis. Their point: that state employees have already been forced to pay substantially to help balance the budget, and that now it’s time for the New Jersey’s millionaires and corporations to pay their fare share.
When Christie announced in May that he was unilaterally canceling more than $2.4 billion in state contributions to the public employee pension fund, he tore up his signature legislative achievement, a pension reform plan that he had hoped would be the basis for his run at the White House.
On the one hand, that law was supposed to show his ability to work across the aisle to enact hard budget choices, since the legislation—which slashed benefits, hiked employee payments and raised the retirement age—had been rammed through with the help of a few Democratic party bosses allied to Christie. But it was also supposed to show Christie’s ability at sound economic stewardship by putting the state pension system on a sound footing.
It might have done that, by 2018—had not Christie decided to take the money to balance the state budget, rather than raising taxes. (Raising taxes is poisonous for the chances for any GOP standard-bearer, in today’s toxic Republican party climate.) But shredding his great legislative achievement may now have also doomed his chances at being president. Even The Washington Post has now editorialized that Christie’s decision to tear up the pension agreement may have ended his chances for the White House:
Pension reform was the signature accomplishment of his first term and one of the keys to his reelection. It presumably would be a cornerstone of Christie’s case for the presidency if he runs. On May 20, however, Christie threw all that into doubt. He announced that New Jersey would have to cut a scheduled payment to the state’s pension fund by $900 million this year; he also requested legislative authority to reduce next year’s payment by $1.5 billion.
The New Jersey Education Association, the Communications Workers of America and many other unions representing firefighters, police and other public sector employees filed suit, as Christie Watch has reported, to stop Christie’s pension grab. A judge has agreed to expedite the lawsuits and a hearing is set for June 25. But even if the unions win their case, the fiscal year expires June 30 and the budget has to be balanced. Christie taunted his opponents this week saying there was no alternative to his plan:
There is no Plan B. This is the plan. And I have continued confidence that this plan will be supported from whatever legal challenge that goes after us, as I’ve said from the beginning.
Christie may say there is no Plan B to his pension grab. But a coalition of over seventy labor, environmental, student and faith-based groups under the banner of Better Choices Campaign disagrees. “Of course there’s a Plan B,” Rob Duffey, policy and communications coordinator for New Jersey Working Families, a leader in the coalition, told Christie Watch. “But really our Plan A should be to raise the revenue we need to meet our obligations today and invest in a strong shared economic recovery. We should start by asking those who have gotten a free ride over the last four years, the wealthy and corporations, to pay their fair share.”
The coalition wants to restore the tax on high-income earners which was in place in 2009 when Christie first was elected. He let it expire and efforts by the legislature to reinstate the “millionaires tax” have been vetoed several times by Christie.
Additional revenue should come from eliminating various corporate loopholes, many created during Christie’s administration, a surcharge on corporate taxes and elimination of the skyrocketing tax subsidies handed out by the governor, the group maintains.
It may be necessary, given the time squeeze, to delay for this year the pension payment increases that were supposed to be implemented but next year a progressive tax plan could get the state back on track.
The coalition has been aggressively pushing back against Christie’s action through rallies, op-eds and lobbying the legislature. A letter sent to legislators signed by the president of the NJ Education Association and more than other groups including local leaders of the CWA, SEIU, UFCW, the state Sierra Club and the state League of Women Voters, stated:
For four years the Governor has balanced the State Budget by shredding the safety net, cutting services on which working families rely, and disinvesting in our state’s greatest assets of education, environment, and infrastructure. At the same time, Governor Christie has protected wasteful and ineffective tax cuts for the state’s wealthiest residents and biggest corporations. He has cut programs that put people to work to implement a plan of welfare for the one percent… This is a pivotal moment for the Legislature to change course. We must embrace a forward looking, sustainable vision for our state and make the necessary investments to protect New Jersey’s most vulnerable and ensure its working families thrive. We therefore respectfully call on the Legislature to incorporate substantive and sustainable revenue streams that are not regressive into the FY2015 budget.
Its leaders are optimistic that the stranglehold Christie has had on state politics the last four years is weakening. Democratic and Republican political leaders are already jockeying to run for governor in the next election, and Christie, a lame duck governor with his eye on Washington, has been weakened by Bridgegate and exposés of the business deals heaped on his political allies.
An influential state legislator, Senator Raymond Lesniak, who chairs the Senate Economic Growth Committee, announced this week he planned to introduce a bill to tax the wealthy that would ensure the pension fund was actuarially sound by 2019, only a year later than originally planned. Lesniak offered a sweetener to Republicans, according to the Bergen Record, by including the elimination of the estate tax:
Sen. Ray Lesniak, D-Union, said Wednesday that his proposal would increase state income tax rates for those making $350,000 and higher, but also eliminate New Jersey’s estate tax. Lesniak is billing the tax policy changes as a compromise because Democratic legislative leaders have favored higher tax rates for higher-income residents and their Republican counterparts have long sought to repeal the estate tax. If enacted, Lesniak said, his bill would net $850 million in new revenue while protecting the pension payments Christie is cutting.
In addition to taxing the wealthy, there are many business tax loopholes and corporate tax subsidies that could provide the money to keep the state’s budget balanced, without looting the pension fund.
A new report this week by the liberal research group New Jersey Policy Perspective revealed that during Christie’s administration business tax subsidies have surged. A whopping $4 billion has been given out in the past four years alone, compared to a little over $1 billion in the decade before and the money went to only one percent of the state’s companies. Ostensibly to bring in new jobs, much of the money in fact was handed to companies already in the state, as the report states:
Some of New Jersey’s highest-profile subsidy “wins” this decade are hollow victories, as the state increasingly uses public tax dollars to merely shift private economic activity and jobs around the state—consider the $210.8 million tax break for Prudential to vacate its office space in Newark’s Gateway Center and build a new tower a few blocks away; the $102.4 million subsidy to Panasonic to move its headquarters one train stop, from Secaucus to Newark; the $81.9 million award to Goya Foods to move one mile from Secaucus to Jersey City; or the $40 million grant for Burlington Coat Factory to build a new facility (on land it already owned) less than half a mile away from its current location on Route 130.
And the report went on, the $4 billion has done little to help the state economy:
The unprecedented growth in subsidies, however, has so far done little to significantly improve the state’s economy. Four and a half years into the surge, New Jersey’s economic recovery remains far behind that of its neighboring states and the nation. Just 40 percent of the jobs New Jersey lost in the recession have been recovered (including only 48 percent of private-sector jobs); the state has the highest share of workers who have been unemployed for more than six months; and New Jersey continues to lead the nation in the percentage of homeowners (one in twelve) who are in foreclosure. The lack of economic payoff thus far for New Jersey isn’t surprising, since state taxes—whether actual rates or, in this case, tax breaks – are not the primary or even tertiary factor influencing business location and job creation decisions.
“New Jersey has bet the ranch that handing out tax breaks to mostly large corporations alone will somehow improve our economic future,” says Gordon MacInnes, president of the NJPP, in an interview with Christie Watch. “So far, it’s clear that the bet isn’t paying off.”
Interestingly, the largest subsidy, $390 million, went to resuscitate the megamall at the Meadowlands, a project awarded to a client of David Samson’s law firm. Samson, a close confidant of Christie, was appointed chairman of the Port Authority until a series of conflict of interest scandals along with Bridgegate caused him to resign in March.
The latest tax subsidy was announced this week, a $82 million tax break to the Philadelphia 76ers basketball team to move its practice center across the river from Philadelphia to Camden, New Jersey. With the facility only expected to employ 250 people, the tax break amounts to a subsidy of hundreds of thousands of dollars per job and its not even clear that New Jersey will gain new jobs. With Camden so close to Philadelphia, some of the current practice facility staff may just travel to the new site.
MacInnes called the subsidy “among the worst we’ve seen under the Economic Opportunity Act. The net benefit to the state is incredibly low…”
Even the Koch brothers–funded Americans for Prosperity could not stomach this tax break. “This amounts to nothing more than a ‘free gift’ to a politically connected billionaire,” said AFP state director Daryn Iwicki, “and it’s one we can ill afford given the enormity of the State’s fiscal problems. How many failures do we have to see? How many times must taxpayers be left on the hook before we realize this kind of corporate welfare just doesn’t work? It’s regrettable that Gov. Christie and others in the Legislature continue to buy into the idea that these kinds of corporate welfare handouts will bring jobs and economic growth. If they were right, Atlantic City would be a bastion of prosperity today but it’s far from it.”