In a rare moment of agreement, analysts for Governor Christie and the Legislature’s independent budget office said Tuesday that no matter how the state Supreme Court rules in a dispute over funding New Jersey’s pension system, there is no more money left this year to restore more than $1 billion that Christie cut from a payment to the retirement plans.
Using his veto powers at the start of the fiscal year, Christie reduced a $2.25 billion payment to $681 million, defying pension-reform laws he signed in his first term requiring the higher payment for the strapped retirement system. Public-worker unions promptly sued, arguing that a 2011 law Christie signed gave them a constitutionally protected right to the full amount.
As the case made its way through the courts, the state kept making payments to schools, hospitals, universities and hundreds of other programs. Now with only weeks left before the end of the fiscal year, almost all of the $33.1 billion in the state budget has been paid out, said David Rosen, the budget chief at the independent Office of Legislative Services.
“If the Supreme Court were to direct the state to make the full pension payment before June 30, I’m not sure that that’s fiscally or physically possible,” Rosen testified before the state Senate Budget and Appropriations Committee, citing “the constraints that we have on how we could come up with that money.”
State Treasurer Andrew Sidamon-Eristoff said New Jersey is on track to end the fiscal year with $212 million more than expected due to healthy tax collections in April. Although Christie intends to send those funds into the pension system, they would make up less than 14 percent of the $1.57 billion the governor cut.
“I think, frankly, that ship has sailed,” Sidamon-Eristoff told the senators on the committee when asked about the chance of making a full payment. “Just being realistic, it seems somewhat remote that we would have enough uncommitted balances to meet that obligation.”
It was an uncharacteristic agreement between the administration and Rosen, whom Christie has called the “Dr. Kevorkian of the numbers” for his state budget revenue projections. Rosen has repeatedly differed with the administration on revenue forecasts, painting less-optimistic views than the governor’s office. He also differs with Sidamon-Eristoff on how the pension system should be funded and on the health of the Transportation Trust Fund.
In March, before an Assembly budget hearing, Sidamon-Eristoff said he was satisfied with the Transportation Trust Fund, which pays for road and bridge projects. It was expected to go broke at the end of June, but Christie shored up its remaining balance of $281 million by borrowing about $627 million, and a loan repayment added about $241.5 million.
“Regardless of how the court rules, difficult decisions will have to be made,” said Sen. Paul Sarlo, D-Wood-Ridge, chairman of the budget committee. “On the pension payment, on the Transportation Trust Fund, the day of reckoning is here.”
What to do about it is less clear. Senate President Stephen Sweeney, D-Gloucester, has introduced a multiyear tax increase on income above $1 million to generate revenue for the pension system. Christie, a Republican, says he will veto that bill if it gets to his desk because taxes in New Jersey are high enough already. He says there is simply not enough economic growth in the state to meet current pension-funding requirements, and he has proposed cutting health benefits for public workers and dedicating the savings to the pension system.
Without money in the bank, the Supreme Court has a much more limited array of options, and it does not have the luxury of time. The justices, who heard arguments earlier this month, are expected to rule before the June 30 deadline for a new state budget. The high court agreed to hear the case on an emergency appeal by Christie, who lost the first round in Superior Court in February.
Around one-third of New Jersey’s budget goes toward school funding, and Sidamon-Eristoff said the last payment is scheduled to go out this week. Municipal aid has been paid out in full, Rosen said. And the state could not raise the $1.57 billion even if it furloughed all its workers through the end of the fiscal year, he added.
The Supreme Court could issue a ruling requiring part of the payment, experts have said, or it could allow Christie’s funding cuts to stand this fiscal year but order full payments in future years. In his budget plan for the next fiscal year, Christie is planning to reduce a $3.1 billion pension payment he had promised to $1.3 billion.
New Jersey’s state pension system is 51 percent funded, according to the latest actuarial report, and has $40 billion in unfunded liabilities. Financial experts say it is one of the worst-funded systems in the country, with enough money to pay only half of the retirement benefits that workers and retirees have accrued. The state pension plans have 770,000 beneficiaries.
Source: North Jersey