Emboldened Christie Sees Pension Reforms Passed

(June 24, 2011) – Following on the heels of the State Senate, the New Jersey State Assembly passed a public pension overhaul bill Thursday that has been championed by Governor Chris Christie and will see teachers pay more into their defined benefit pension plan, among other changes.

The vote was not close. Governor Christie is expected to sign the bill into law on Monday.

The bill is the result of a bipartisan agreement between Governor Christie, a Republican, and State Senate President Steve Sweeny, a Democrat. Under the bill, workers will be required to pay more of their salaries into the pension system. They would also give up annual cost-of-living increases, while also paying a percentage of their health care premiums in a tiered system based on their salary. The bill also mandates that the state make its payments to the pension fund—a requirement that would end New Jersey’s decade-long practice of skipping payments into the fund in order to shore up deficits elsewhere in the budget.

Unions, as expected, have reacted with anger to the deal. Earlier this week, one union – the Local 1033 of the Communications Workers of America (CWA) – filed a lawsuit claiming that Governor Christie and his predecessors’ failure to make payments to the state’s pension funds violated a constitutional prohibition against the “impairment of contracts.” The suit, brought in US District Court in New Jersey, states that since 1998 the state has made only three partial payments to the pension, skipping the remaining ones.

New Jersey faces a $53.9 billion pension deficit, in addition to $66.8 billion in health-care liabilities – for which nothing has been set aside. According to many commentators, the deficits result from decades of mismanagement, with politicians of both parties making promises to unions without making an effort to pay for them. Furthermore, the stock market crash in 2008 wreaked havoc on New Jersey’s portfolio.