Christie touts pension fix; Democrats, unions dubious

TRENTON - Gov. Christie on Tuesday asserted a political victory in the battle over state pension funding, promoting an "unprecedented accord" with the state teachers' union on a reform proposal - even as the union insisted no deal had been reached.

The Republican governor, a potential 2016 presidential candidate, devoted the bulk of his annual budget address to pension changes, a topic that helped him gain national prominence during his first term, when he won Democratic support to require concessions from workers.

"By putting forward new solutions to age-old problems like this, we are creating a national model," Christie said as he proposed a $33.8 billion budget to the Legislature.

More recently, however, pensions have posed a political liability for Christie, who last year backtracked on the terms of his deal by cutting the state's scheduled payments into the system to fill a revenue shortfall.

On Monday, a state judge ruled that Christie's move violated the contractual rights of public workers, and ordered him to work with the Legislature to find an extra $1.6 billion by June to restore the pension cut.

Christie's office said it would appeal the ruling, and Democrats on Tuesday acknowledged that making the payment would be difficult this deep into the fiscal year.

On Tuesday, the governor said, "We don't need any court to tell us we have a serious problem."

Instead, he focused on the future, proposing to freeze pension plans of current public workers and put less costly plans in place. And he said the New Jersey Education Association had participated in discussions with a commission he appointed to recommend changes to the pension system.

"We have proven time and again that even when we look like we're not going to make it work and that politics and partisan interests have won out, we flip the script," Christie said.

But no sooner had Christie finished speaking than the NJEA accused him of overstating its level of partnership. "Unfortunately, today, politics trumped policy," the union's president, Wendell Steinhauer, said in a statement after the speech.

To a reporter, Steinhauer said, "There is not a deal."

Christie's emphasis on a partnership - real or not - with a public sector union stood in contrast to a potential rival for the Republican presidential nomination: Wisconsin Gov. Scott Walker, whose push to limit the collective bargaining rights of workers prompted a recall election that he won.

Patrick Murray, director of the Monmouth University Polling Institute, summed up Christie's speech in a tweet: "I'm not going to let @ScottWalker steal my mojo."

Christie said in his speech that he hoped other unions would support the plan. The state firefighters' union assailed the teachers' union for flirting with Christie and said it would not join them. "We cannot allow the rules impacting people's lives to change midstream once again," president Eddie Donnelly said.

While the NJEA signed a "road map" outlining broad proposals - including a freeze of old plans, new plans overseen by the union that would receive annual contributions from school districts, and a recognition that health-care costs need to be reduced - Steinhauer said it did not agree with a number of recommendations put forward by the Christie-appointed pension commission, which released a report Tuesday.

The proposal calls for a constitutional amendment that would ensure state funding. An amendment would need to pass each house of the Legislature with a three-fifths vote and be approved by voters in November.

New Jersey's unfunded liability, previously estimated at $37 billion, is now pegged at $83 billion, based on new accounting standards that assume a lower rate of return than what the state had been projecting.

Freezing the plan does not reduce the unfunded liability and would still require substantial payments going forward, the commission said.

Rick Dreyfuss, an actuary and adjunct fellow at the conservative Manhattan Institute, said the proposed switch to what the commission called a "cash-balance" plan was no panacea for New Jersey's pension system.

"Fundamentally, the problems New Jersey and other states have that got them into the fiscal abyss, called an unfunded liability, they can exist in a cash balance plan just like they can in any other plan," said Dreyfuss, who was interviewed by Christie's commission.

Democrats criticized Christie as focusing exclusively on public employees' pensions and health benefits, and for offering few details on how he plans to rein in those costs.

Senate President Stephen Sweeney (D., Gloucester) called the address an "admission [Christie] has no plan to fix the economy of this state." He lamented that the state's bond rating had been downgraded repeatedly under Christie's watch and said the governor offered no plan to reverse course.

Even as Democrats conceded it would be difficult to fully fund the pension system for fiscal year 2015, they committed to pushing for a greater payment than Christie outlined on Tuesday for 2016.

As part of a "good faith effort" to comply with the judge's order, Sweeney suggested the Legislature would propose a tax hike on the state's highest earners to help fund the pension payment.

Christie's $33.8 billion budget proposal - a 3.1 percent increase over this year that assumes annual revenue growth of 3.8 percent - includes a $1.3 billion payment into the pension system, described by Christie as the largest-ever payment.

Under the law signed by Christie during his first term, the payment was supposed to be more than $3 billion, Treasurer Andrew P. Sidamon-Eristoff told reporters.

Under Christie's proposal, aid to schools, municipalities, and higher education remain mostly flat year over year.

The proposed budget, which Christie said represented fiscal discipline, does not include any new revenue for the state's main transportation funding mechanism.

Sidamon-Eristoff told reporters that he expected the Transportation Department would issue about $600 million in authorized bonds to pay for road, bridge, and rail projects. But Democrats said the Legislature would not approve such borrowing and are pressing for a comprehensive deal to replenish the fund.

All revenue from the state's 14.5-cent tax on gasoline already goes toward debt service.

Tom Bracken, president of the New Jersey Chamber of Commerce and chair of the Forward New Jersey coalition, said he was disappointed Christie did not offer a solution for infrastructure, "the single most pressing issue facing New Jerseyans today."