As Pension Payment Bill Advances, Both Sides of Debate Predict Catastrophe

Democrats like Assembly Speaker Vince Prieto (D-32) are betting on voters to approve constitutionally required pension payments

Democrats like Assembly Speaker Vince Prieto (D-32) are betting on voters to approve constitutionally required pension payments

As a bill to mandate that the state make quarterly pension payments advanced in committee Monday, business groups are following Governor Chris Christie’s lead in predicting fallout for the state budget. If it passes for a second time before the end of this session, the Democratic-led measure would put a ballot question to voters on adding the requirement to the state constitution.

The amendment would bypass Christie and make it so that the state would have to make 25 percent payments toward its pension obligation every quarter, rather than in one lump sum once a year. A high court ruled earlier this month that public workers are not entitled to a cost of living adjustment after seeing the states’ contributions to their pension fund freeze in recent years.

If the bill succeeds, the state would be required to pay off its full nearly $5 billion obligation by 2021. A recent poll found that 71 percent of respondents would vote in favor of the measure.

Assembly Speaker Vince Prieto (D-32) said the amendment would go a long way toward improving public workers’ trust in the state’s ability to pay back the $43.8 billion it owes in pension contributions.

“The discussion regarding public employee pension funding in this state is littered with broken promises and irresponsibility,” Prieto said. “This is a pragmatic solution to a two-fold problem – fulfilling our commitment to public employees and re-establishing financial stability and long-term solvency for our state.”

But business groups are calling the proposed amendment dangerous, echoing predictions from Christie and Assemblyman Declan O’Scanlon (R-13) that mandatory payments could divert funds from schools and other essential services.

NJBIA President Michele Siekerka said that pensions should not get first priority ahead of other budgetary line items.

“Under this amendment the state would be required to make pension payments before anything else,” Siekerka said. “The pension payment would become a super priority taking precedence over education, healthcare and public safety.”

“We would be facing significant income and sales tax increases on all New Jersey residents to make the payment,” Siekerka continued. “New Jersey already has the highest taxes in the nation. Our cost of living is already untenable and is driving significant tax revenue from the state.”

The NJEA, which represents the state’s public school teachers, is supporting the amendment. President Wendell Steinhauer called the pensions an important piece of the state economy in and of themselves.

“If the state is allowed to simply walk away from its obligations, it could leave hundreds of thousands of New Jersey retirees destitute and cripple the state’s economy. We refuse to allow that to happen.”