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Following past governors, Christie reduces
payment to public-employee retirement fund.
GV | ONLY IN NEW JERSEY
support of the judiciary, thanks to Superior Court Judge Mary C. Jacobson, who
ruled June 25 that Christie could use his
emergency powers to reduce pension-fund payments.
So, what now?
“The challenge the entire state faces
is finding a way to pay for the years of neglect,” says Steve Malanga, senior fellow
at the Manhattan Institute for Policy Research, a conservative think tank.
Unfortunately, holding back payments in the short term only makes the
long-term challenge worse. States generally spend less than 5 percent of their
taxes on pensions. For New Jersey to
catch up with our pension obligations,
we would have to endure years of sending an estimated 15 percent of tax revenue to the pension fund, Malanga says.
“Legislators in Trenton need to real-
ize that dealing with this involves budget
priorities that are very different from the
past,” Malanga says. “There simply isn’t
enough money to go around to pay off
this debt and continue spending money
the way the state has previously.”
Christie hopes to deal with the situa-
tion by requiring current public employ-
ees to pay more into the system and by
cutting future benefit payments to re-
tirees. Malanga agrees that these moves
should be part of the solution. But that’s
just the beginning.
“It’s not politics, but math,” Malanga
says. “Trenton needs to focus not merely on its own budget, but on the budgets
of municipalities and school districts.
Jersey—as well as many other states—
have solved their budget problems in
the last few years by cutting aid that
goes back to local government. More
such cuts are likely.”
As for raising taxes, Malanga says:
“New Jersey already has among the
highest tax rates in the country, so the
emphasis should be on growing tax col-
lections through a more vibrant econo-
my, not higher tax rates.”
Christie and the Democratic Legis-
lature agree they can’t keep kicking the
can down the road. But agreeing on how
to solve this crisis is another story. ;
NEW JERSEY’S PENSION SYSTEM IS
a mess. At deadline, Governor Chris
Christie had signed a $32.5 billion state
budget for the coming fiscal year that
reduced the scheduled $2.25 billion
payment to the public-employee pension fund to just $681 million.
In doing so, Christie was following
the lead of multiple governors who for
years opted not to pay into the state’s
pension system, arguing that the money
just wasn’t there. When he ran for gov-
ernor the first time in 2009, Christie
promised to deal with the pension di-
lemma. But the situation has only gotten
messier. Yes, together with the Demo-
cratic legislature, Christie made impor-
tant strides on pension reform by having
public employees contribute more into
the system. At the same time, the state
agreed to kick in billions of dollars to
make up for missed payments.
Now Christie says the state’s expected
revenue growth has fallen short, and even
though he would like to make the promised payments, once again the money is
just not there—unless we want to make
brutally painful cuts to public schools, environmental programs and higher education (to name just a few targets).
The Democrats and, predictably, the
public employee unions, went ballistic on
this latest development. The Democrats
proposed a pair of bills that would raise
taxes on high-income earners and impose
a corporate surcharge in order to fund the
pension payment. Christie stood firm and
vetoed those measures. He even had the