(January 29, 2014) – New Jersey is facing a political showdown over its $72 billion public pension deficit.
State Senate President Stephen Sweeney told the Star-Ledger newspaper he was prepared to shut down state government if Republican Governor Chris Christie did not support the payment into the public employee pension fund they had both promised when approving a major overhaul of the programme three years ago.
His outburst was in response to Christie’s suggestion that he was open to conversations on where the next budget’s money should be spent—even if that’s at the expense of the public sector plan.
“If we do not choose to reduce our soaring pension and debt service costs, we will miss the opportunity to improve the lives of every New Jersey citizen, not just a select few,” Christie said in his annual address to the legislature on January 14.
“I am ready to engage in those conversations and help, with you, to truly create an attitude of choice.”
Sweeney, who is a democrat, reacted angrily to the statement, telling reporters at the time: “He talks about having an honest conversation. That did not happen today. It was a bait and switch. The pension payment is an obligation to hundreds of thousands of people who worked here.”
Speaking to the Star-Ledger on January 28, he reaffirmed: “If we have to shut the government down, we would. I stand by that, and I mean it. I made a commitment, and I’ve got to keep it.”
Governors from both the Democrats and the Republicans failed to contribute to the pension plan for years, contributing to its $86 billion deficit. In 2011, a revision was agreed, which called for the state to phase in added payments to the fund until 2018, when the state’s contribution would reach what is needed to preserve its long-term health.
But the Christie administration is enduring a tough spell economically: the state’s economy remains sluggish, and in November, Moody’s Investors Service lowered its outlook for New Jersey’s debt from stable to negative, citing the state’s huge debt obligations.
The state constitution requires a budget to be approved on or before June 30.
A report, prepared by the nonpartisan Common Sense Institute of New Jersey, claimed that if plans were closed tomorrow, there would be approximately $128 billion in obligations but assets with market value of only about $56 billion, resulting in a $72 billion deficit.
The report’s authors praised Christie for making “large strides’’, adding: “They’ve probably done some of the toughest work in the country, but part of the problem was the hill was so hard to climb. They did what was politically feasible (in 2011). They’ve been far more responsive than any other legislature and governor in the past 15 years. But the hole is so enormous.”
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