Democratic lawmakers have kick-started their efforts to have voters decide whether to guarantee annual payments into public workers’ pension funds that would eventually top $5.5 billion a year.

Those funds have a little less than half the funding actuaries say is needed, in large part because contributions have been repeatedly shortchanged for nearly two decades. A proposed constitutional amendment would guarantee those payments and, in fact, require contributions every three months.

“Unless forced to, the state will not make these payments,” said Assemblyman Joseph Lagana, D-Bergen. “That’s why we’re at this juncture right now.”

“We are now unfortunately in a position where our elected officials need to save themselves from themselves,” said Eric Richard, legislative affairs coordinator for the New Jersey State AFL-CIO, who called New Jersey “the biggest pension deadline in the entire country.”

The Assembly Judiciary Committee advanced the proposed constitutional amendment in a party-line vote, with Democrats for it and Republicans opposed. Democrats voted in January in favor of putting the idea before voters this year, and if they do so again by early August it will make the ballot.

Business groups warned that would be a huge mistake, requiring either massive budget cuts or a tax increase they fear would be aimed at businesses if the economy doesn’t grow as hoped and revenues for the state don’t grow as needed.

An estimated $650 million more would be needed each year through 2021 to grow the pension contribution from its current level, around $2 billion, to the roughly $5.5 billion it would reach for a number of years before subsiding.

“Passing this proposal to put these pension payments in our constitution could reverse the recovery that we are currently experiencing,” said Thomas Bracken, president and chief executive officer of the New Jersey Chamber of Commerce. “Quite frankly, if certain things aren’t met from an economic standpoint, we could hit a new low from an economic position with such force that it will be very difficult for the state to recover.”

“Think about future legislatures, future governors. You’re tying their hands,” said Tony Russo, executive vice president for government affairs and communications at the Commerce and Industry Association of New Jersey. “This is a fiscal cliff, and we’re going to drive the bus over it.”

Assemblyman John McKeon listens as Tony Russo (left) of the Commerce and Industry Association of New Jersey and Ralph Thomas of the New Jersey Society of CPAs testify on a proposed constitutional amendment on pension funding. (Michael Symons/Townsquare Media NJ)
Assemblyman John McKeon listens as Tony Russo (left) of the Commerce and Industry Association of New Jersey and Ralph Thomas of the New Jersey Society of CPAs testify on a proposed constitutional amendment on pension funding. (Michael Symons/Townsquare Media NJ)

Unions said the $8 billion a year in pension benefits paid to retirees would have to come from the general state budget if the pension funds go insolvent.

But Assemblyman Michael Patrick Carroll, R-Morris, said that if revenues don’t grow as hoped, the locked-in pension contributions could mean cuts to things such as education aid and salaries.

“Let’s say we face another billion dollars’ worth of a shortfall, and we have to cut somewhere. Now we’re not going to be able to cut from pensions. It’s going to be coming from current spending,” said Carroll. “And I just want to make sure that everybody’s clear that when the budget committee sits down and prioritizes, that a lot of the people that presently are working for the state or for the local governments aren’t going to be working for them anymore, because there just simply isn’t going to be the money.”

Assemblyman John McKeon, D-Essex, said the state has paid in $17 billion less than actuaries recommended since 2011 alone.

That year, Gov. Chris Christie signed into law pension reforms that promised ramped-up payments that would reach full payments by 2018, but that plan was abandoned after the third year when state tax collections missed expectations. The state Supreme Court last year ruled against ordering Christie to make the promised contributions, a decision that the proposed amendment would reverse.

Christie now wants to step payments up gradually through 2023, but opposes locking that promise into the constitution.

“I know that the dollars that this would require being paid are daunting. We really don’t have a choice. Not only is there a moral obligation but a legal one,” McKeon said.

However, McKeon also urged unions to return to the negotiating table and make further concessions – indeed, he said “I fully expect” that they will – if voters pass the question in November.

“There’s more work that we need to do. And I say this to the people that I greatly respect that represent the various employee unions: There are more long-term changes that have to be made as we go forward in the future in order to be solvent with the pensions,” McKeon said. “That having been said, you’re all pretty smart people. Until you know that Lucy’s going to keep the ball on the ground, you’re not ready to do that yet, and I don’t blame you.”

Unions weren’t striking such a stance at Monday’s hearing.

“We aren’t interested in any more plans, and we aren’t going to keep letting our members bear the whole burden of fixing a problem they had no part in creating,” said New Jersey Education Association president Wendell Steinhauer.

“The issue here is not the level of the pension. You can’t cut your way out of this anymore. The issue is that New Jersey is the only state in the region that treats its payments as optional,” said Seth Hahn, a staff representatives for the Communications Workers of America.

“We’ve seen cut, cut, cut, cut, cut, and the problem hasn’t gone away,” Hahn said. “The solution here isn’t cut, cut, cut, cut, cut some more.”

The proposed amendment would require the state to make quarterly payments into the fund, each August, November, February and May. Right now, it makes a payment – or doesn’t, if money is short – each year the end of June. Making quarterly payments would require billions in short-term borrowing because the state receives the bulk of its tax revenue in the second half of each fiscal year.

The next action on the pension amendment could come June 16, when it might be voted on by the Senate Budget and Appropriations Committee. A vote in the full Assembly could come June 27 or 30.

Constitutional amendments are placed on a November ballot without a formal role for a governor, so Christie can’t stop the referendum despite his opposition though could campaign against it.

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