Gov. Chris Christie on Monday vetoed bipartisan legislation to spin off the management of the pension fund for police officers and firefighters, describing it as a shoddily designed plan that could soak New Jersey taxpayers.
The bill, S3040, would have broken off the Police and Firemen’s Retirement System from the overall $71 billion pension fund for public workers. New Jersey currently pools all the assets from five state-run pension funds and invests all the money through the Treasury Department and the state Investment Council, a board made up of union officials and administration appointees.
The police and fire fund is one of the healthiest in the mix, with $26 billion in assets and $11 billion in unfunded liabilities as of last June. Separating it would have sharply reduced the overall pension system’s assets and funded ratio, potentially dragging down the other funds for teachers, judges, office workers and others at a time when New Jersey is already in a pension crisis.
Police and fire unions argued that they should be able to make their own decisions on where to invest their retirement funds, adding that state officials had played “gimmicks” and shorted pension payments for years, reducing the value of their retirement accounts. Christie said the legislation went much farther, allowing union officials to reduce members’ pension contributions and restore cost-of-living adjustments frozen since 2011. Such moves would undo some of the cost-cutting moves he enacted for the pension system in his first term, jeopardizing retirees’ livelihoods, Christie said.
“I understand that police and firefighters (and, for that matter, all current and future pensioners) have concerns with the fiscal health of the pensions systems. I share them,” Christie wrote in a veto message. “But I refuse to repeat the mistakes of prior governors and legislatures who enacted pension legislation without ensuring appropriate safeguards for taxpayers nor securing significant concessions from labor. I refuse to hand PFRS a blank check, while handing the taxpayers the deposit slip.”
Christie rewrote the bill and sent it back to the Legislature for consideration. His changes would allow the police and fire unions to spin off their pension fund — provided they kept in place the benefit reductions Christie instituted in his first term, assumed more risk for their investment decisions, established a board with equal membership from unions and the administration, and subjected that board to New Jersey’s transparency laws.
Christie in addition recommended that lawmakers cap sick-leave payouts for retiring public workers at $7,500. He previously vetoed a bill capping such payouts at $15,000 because he said the practice should be abolished entirely.
In a joint statement, Robert Fox of the Fraternal Order of Police, Pat Colligan of the Policemen’s Benevolent Association, and Ed Donnelly of the Firefighters’ Mutual Benevolent Association, described Christie’s recommended changes as “poison pills” and said “the veto is the final proof, if proof were needed, that he is intent on destroying the pension system before his term is complete.”
Christie’s office kept moving the goalposts during negotiations before the bill reached his desk, the union leaders said, adding that they will try again after the governor leaves office in January.
“Sadly, he has decided that saying yes to improving PFRS would ruin his record of robbing the hard-working men and women of law enforcement and the fire service of their livelihoods and their future retirements,” they said. “The fact remains that our pension system is worse off since Chris Christie took office. The value of our pensions has dropped.”
Senate President Steve Sweeney (D-Gloucester), the lead sponsor of the legislation, said it’s not uncommon for private-sector and public-worker unions in other states to manage their own funds. Police and fire union officials in New Jersey have a good record of managing their financial affairs and pensions, he said, and deserved more control.
“The governor’s rejection of this legislation is extremely disappointing,” Sweeney said in a statement. “The police and fire unions have responsibly funded their pensions over the years, even as the state withheld payments and as local governments took pension holidays.”
Michael J. Darcy, executive director of the League of Municipalities, welcomed Christie’s veto and noted that under the terms of S3040, taxpayers were on the hook for any shortfalls stemming from missed investment targets.
“It’s not equitable for our property taxpayers to carry all the risk with little control and that’s why putting our taxpayers on equal footing is vital,” he said.
“The governor’s recommendations not only improve the existing proposal, but he has also advanced important sick pay reform to offer further taxpayer protections,” said John Donnadio, executive director of the New Jersey Association of Counties.
Gordon MacInnes, president of the liberal think tank New Jersey Policy Perspective, wrote in a tweet that “Christie’s conditional veto of the police/firefighter pension bill should be applauded for catching risky changes.”