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New Jersey Governor Christie calls for pension reform

New Jersey Governor Chris Christie speaks to residents during the 110th Town Hall Meeting in Middletown Township, New Jersey, February 20, 2
New Jersey Governor Chris Christie speaks to residents during the 110th Town Hall Meeting in Middletown Township, New Jersey, February 20, 2

By Hilary Russ

TRENTON, New Jersey (Reuters) - New Jersey Governor Chris Christie called for a new round of public pension reform in his fifth state budget proposal on Tuesday but provided no details, while opposition Democrats rejected the idea.

Christie, a Republican, worked with the Democrat-led legislature in 2011 to make changes to retirement systems for public employees. But the changes did not go far enough to stem the tide of rising costs for pension and health care benefits, Christie said on Tuesday.

New Jersey must make a $2.25 billion payment to its pension system in fiscal 2015, which begins July 1, the largest such payment in the state's history.

Along with debt service costs and health benefits, the pension payment accounts for nearly all of the 3.5 percent increase in Christie's proposed $34.4 billion spending plan for next year. Only 6 percent of the increase - about $70 million - would be spent on discretionary items such as education and public safety.

Christie said heavy pension and debt burdens helped drive Detroit into bankruptcy, adding: "We cannot be part of that problem."

"If we do not confront it boldly and directly soon, you will be left with very difficult choices that no one in this room will want to make," he said during a somber budget presentation to lawmakers. "I will not be a part of that capitulation. This is the goal that I will dedicate myself to in the remaining years of my governorship."

Christie is under political pressure because of allegations that he and his administration use bullying tactics and retribution to get their way.

He has vehemently denied advanced knowledge of lane closures that led to four days of gridlock on a bridge connecting the state to New York City in September.

The traffic jam was allegedly an act of political retaliation against a Democratic New Jersey mayor, carried out by Christie loyalists, and has dented Christie's standing in national polls of likely 2016 Republican presidential contenders.

Asked whether the governor had lost any political good will for policy proposals because of the controversy, Christie spokesman Michael Drewniak told Reuters that pension reform "has nothing to do with a political atmosphere... This is purely about governing New Jersey."

Under previous reforms, the state's pension contributions have been rising by a set amount each year, to culminate at $4.8 billion in fiscal 2018 in an effort to make up for years of underfunding.

DEMOCRATS' DOUBTS

Christie's call for further reforms "sounds to me more of a gimmick to move us out of what the real crisis is, which is that we have failed to grow our economy because the governor has rejected job growth bills," said Democratic Assembly Majority Leader Lou Greenwald.

"If we stay the course, the pension system will be fine," added Senate President Stephen Sweeney. "What we're missing here (is) we haven't grown our economy."

Pressure from rising fixed costs, including pensions, comes as New Jersey's economic recovery lags the rest of the nation. Revenues are likely to fall $250 million short of previous estimates by the end of this year, Christie's administration said. The state legislature's budget officer said the shortfall could be at least $400 million short of projections.

Moody's Investors Service lowered its outlook on New Jersey's Aa3 rating to negative in December, in part because of the pension. The credit rating agency also cited lower-than-expected cash balances and revenues and a persistent structural gap.

Overall, revenues are projected to grow 5.8 percent in fiscal 2015, compared with the lowered revision this year.

Christie's budget would press ahead with previous cuts to business taxes. But it made no mention of the kind of broad income tax or property tax cuts he previously championed but so far has failed to win.

The budget does provide funding for pre-kindergarden and early education programs, as well as drug rehabilitation programs.

Total school aid would increase by $481 million to nearly $12.9 billion, but most of the increase is for teachers' pensions and retiree healthcare.

Some critics have blamed some of the state's slow recovery on Christie's give-aways and tax cuts for businesses.

"That's not fiscal restraint. It's pure trickle-down economics and it's utterly failed to bolster our struggling economy," said Analilia Mejia, executive director of the liberal nonprofit group New Jersey Working Families Alliance.

(Reporting by Hilary Russ in New York and Trenton; Editing by Lisa Shumaker and Dan Grebler)

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