After Debate, NJ Dems Join Sweeney in Supporting Christie’s Pension Reform
(June 16, 2011) — Despite intense opposition from unions, Governor Chris Christie and the Democratic leadership of the New Jersey legislature announced June 15 that they had settled on a deal to implement major cuts to the pensions and benefits of the state’s public employees.
“After months of serious discussions, we are pleased to announce that we have reached agreement on legislation to reform our public pension and health benefits systems in New Jersey,” the joint statement from Christie, Senate President Steve Sweeney, Assembly Speaker Sheila Oliver, Senate Minority Leader Tom Kean, and Assembly Minority Leader Alex DeCroce said.
New Jersey faces a $53.9 billion pension deficit in addition to $66.8 billion in health-care liabilities with nothing set aside. The deficit results from decades of mismanagement, with politicians of both parties making promises to unions without making an effort to pay for them, according to most commentators. Furthermore, the stock market crash in 2008 wracked havoc on New Jersey’s portfolio, the Wall Street Journal reported.
Under the deal, workers would need to pay more of their salaries into the pension system. They would also need to 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 would also mandate 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 pension fund in order to shore up deficits elsewhere in the budget.
Governor Christie and Senate President Stephen Sweeney reached a deal on June 8 about public pensions and benefits reform, aiCIO reported. In the face of spirited opposition from labor unions it was unclear whether the other members of the Democratic leadership would join Sweeney in supporting reform.
New Jersey has attempted to overcome its structural underfunding by moving into riskier investments. In March, in an effort to boost funding levels, the New Jersey State Investment Council approved new investment guidelines, which would allow a higher alternatives allocation totaling 35% of assets from the current cap of 25%.
<p>To contact the <em>aiCIO</em> editor of this story: Benjamin Ruffel at <a href='mailto:bruffel@assetinternational.com'>bruffel@assetinternational.com</a></p>