With transportation funding up in air, guarantee for pension contributions looks shaky
Prospects are looking shaky for a ballot question this November asking voters whether to guarantee New Jersey makes billions of dollars in contributions to public workers’ pension funds each year, due to the uncertainty over the state’s transportation funding.
For it to appear on the November ballot, the Senate – as the Assembly did three weeks ago – would have to approve the proposed constitutional amendment by early August. It would eventually guarantee around $5.5 billion in annual contributions, broken into quarterly payments, and prevent the state from skipping or reducing contributions, as it has regularly for 20 years.
Senate President Stephen Sweeney is a sponsor – but he’s also become reluctant to post it for a vote, worried that the tax cuts that may ultimately be approved along with a hike in the gas tax to pay for road, bridge and rail projects may be too rich to also lock in the pension payments.
“I just don’t know,” said Sweeney, D-Gloucester. “And until I know, you can’t move forward until you know what you’re dealing with.”
Sweeney thought he knew the tax-cut cost for a 23-cent hike in the gas tax. Under a bipartisan agreement brokered largely by Sens. Steve Oroho and Paul Sarlo, the state would also enact targeted tax cuts aimed mostly at persuading people not to move from New Jersey – phasing out the estate tax, exempting more retirement income from taxes, giving a tax deduction for charitable donations.
To help lower-income residents cope with the higher gas tax, the earned income tax credit for the working poor would also be increased.
In all, those cuts would have cost the state $122 million in foregone revenue in this year’s budget, up to $614 million in next year’s budget and eventually grow to between $962 million and $1.16 billion in tax cuts by 2022. The higher fuel taxes would cost drivers and fliers around $1.3 billion annually.
In a last-minute, late-June surprise, Gov. Chris Christie and Assembly Speaker Vincent Prieto, D-Hudson, agreed instead to gradually cut the sales tax to 6 percent from 7 percent, plus boost the tax exemption for retirement income. That came with a bigger reduction in state revenues -- $376 million this year, over $1.2 billion next year and growing to $1.9 billion by 2022.
Sweeney opposes that bill and is hoping to convince Christie to opt for an alternative. The state would be hard-pressed to guarantee a $3.5 billion increase in pension payments by 2022 while cutting its tax revenues by around $2 billion, which has the amendment’s prospects looking shaky.
“It’s in jeopardy if we can’t fund it,” Sweeney said. “What if I pass the Assembly bill because we get to a point where everything is shut down, everyone’s screaming at everybody? When the economy’s being harmed in a very serious way, where we even come somewhere close to it? How do I fund the pension at that point?”
Without agreement on a funding plan for the Transportation Trust Fund, all state-funded road projects except for emergency work have been shut down since July 8. At least 800 people have been temporarily laid off from jobs in the construction and related industries.
Shelving the pension amendment would exasperate, if not outright anger, public-worker unions, who say the state’s pension problem is rooted in two decades of underfunding, not the benefits paid.
“Listen, he has some decisions to make,” said New Jersey Education Association communications director Steve Baker. “He made a very clear, unambiguous promise to our members that he was going to fix a problem that the state has spent 20 years creating. They’ve failed to fund the pensions. And the reason that we’re in this crisis, the reason that we have this problem, is because politicians again and again have broken their promises.”
Those unions will be very influential in next year’s gubernatorial race, in which Sweeney is likely to be among the Democrats running. He’s likely to face a political problem if the ballot question isn’t posted: In a 3-minute interview, Baker used the word ‘promise’ 12 times.
“Back in February and throughout this process, the Senate president has made an explicit promise to NJEA and its members that he was going to post and pass this resolution,” Baker said. “He didn’t attach any conditions to that. He didn’t have any qualifications to that. That was a clear and explicit promise, and we hold him to that.”
Sweeney acknowledged that he’s hearing about the issue, presumably from unions, but said the state can’t fund the pensions if it blows a hole in the budget in the Transportation Trust Fund negotiation.
“People are getting mad at me now because I haven’t put the constitutional amendment up for the pension yet. How do you do that when they do what they did in the Assembly? You know, you can’t do both. It’s not possible,” Sweeney said. “How do you constitutionally mandate a pension payment and not provide any way of funding it? Look, I’m the prime sponsor of that bill. So I’ve got to get the TTF fixed because I’d like to get the other one done.”
For a constitutional amendment to make this year’s ballot, it must be submitted by Aug. 8, three months before Election Day. But it must be formally published by that state, so the deadline for Senate action is effectively a few days earlier than that.
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