Governor Christie and the state’s largest teachers union have locked horns for years. Now Governor Christie says they’re linking arms to enact further reforms to New Jersey’s underfunded pension and health benefits system for public workers.
As part of his $34 billion budget, the governor touted an "unprecedented accord" with the state's largest teachers union, the New Jersey Education Association on a "Roadmap for Reform."
But the teachers union said there is no formal agreement yet, just discussions with many details to be worked out. Teachers union president Wendell Steinhauer said the governor "embellished" to win political points. "We have not agreed to any changes to pensions or health benefits," he said.
The union and the commission have issued some recommendations. They call for all benefits earned by public employees so far to be frozen and paid in full. Then the union would take over running the retirement funds, probably with some changes to benefits going forward. The state would pay what it currently owes, after that local school districts would cut the check, which could take the debt off the state's books. Voters would be asked to approve an amendment that promises pension funds won’t be cut again. And there would be some savings on health care -- though it’s not clear yet how much, or how the benefits would be paid for.
The state faces $90 billion in unfunded liabilities for public workers, a number that will grow even higher under new accounting rules.
Meanwhile, the pension commission released its full report, which includes the recommendations in the roadmap, but goes further, advising changes to all public workers' benefits so that they "align" with the benefits provided by private companies. It says pensions should shift from the current defined benefit plan to a "cash-balance" plan based on contributions from the employer (state or local governments), employee and interest.
But the day before the Governor's speech, New Jersey judge Mary Jacobson said the Governor must pay the $1.6 billion he cut from the past year's pension payment, and affirmed the state's obligations set forth in the 2011 law. Christie did not allocate the additional $1.6 billion in his new budget, and has said he will appeal her decision. It's unclear how the state will come up with the money.
Christie did propose paying $1.3 billion into the system this year, the state's largest pension payment so far, but less than half what he promised in 2011.
Democrats said it's possible to find revenue to cover the state's pension costs, and fund new programs. They suggested reviving the millionaire's tax and called on Christie to revitalize the economy so that there's more money to spend on important priorities, like replenishing New Jersey's nearly broke Transportation Trust Fund. They assailed Christie for failing to come up with a broader vision to fix the state's fiscal problems.
The governor said there was an "unprecedented accord" with the teachers union on reforms to retirement and health benefits. The union said there wasn't.