Republican Gov. Chris Christie, who has long warned about dire fiscal consequences of growing pension obligations for the state government, on Tuesday announced a plan to slash public-worker pension fund contributions over the next 13 months to fill an unexpected $2.75 billion state budget gap.
Christie, a possible 2016 presidential candidate, said he would use an executive order to reduce the pension payment due next month by nearly $1 billion, to a bit less than $700 million.
He would need the Democrat-controlled Legislature to agree to his plan for the fiscal year beginning July 1, and Democrats are already showing reluctance. Instead of increasing the state's pension contribution to $2.25 billion, as he proposed earlier this year, he wants to reduce it to $681 million.
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He said both years' payments would be enough to cover the state's current obligation but wouldn't continue the plan he hashed out with lawmakers three years ago to make up for years of skipped or skimped state contributions over the course of seven years, something he described Tuesday in a news conference as "the sins of the past." He said he expects to present a full plan next month to try to rein in the state's costs for pension and health benefits for public workers.
"I have been talking over and over and over since January about the fact that we need to deal with this problem," Christie said. "I never expected that it was going to come this quickly."
Christie's administration discovered a budget gap last month as income tax revenues fell short of projections. He said Tuesday that it is now expected that they will be off by about $1 billion in this fiscal year and about $1.75 billion less than originally expected for fiscal 2015. The state now expects a total budget for next year of $32.7 billion, about 5 percent less than the $34.4 billion budget plan announced earlier in the year.
Christie said that because the revenue is expected to be down next year, too, he could not simply push back payments until after July 1.
Bond rating agencies have repeatedly nicked New Jersey for that sort of one-time fix. All three major agencies have lowered the state's bond rating since April.
Christie, who long ago retired his slogan "the New Jersey comeback" as a way to describe the state's fiscal condition, said he isn't worried about seeing the state's creditworthiness lowered further.
Since the current-year budget gap was diagnosed, Democratic lawmakers have been warning the governor not to take it out of pension payments. They said they would prefer raising the income tax rate on high earners, which could not be implemented quickly enough to help with the current budget year's shortfall.
On Tuesday, legislative leaders criticized the governor for trying to save money on pensions rather than raising those top tax rates.
"It's notable that Gov. Christie is once again targeting the middle-class by delaying pension payments, while continuing to protect millionaires," Assembly Majority Leader Lou Greenwald said in a statement.
The governor's critics also accuse him of blaming others for something that's his fault, too.
"In blaming his predecessors for shorting the system and creating the situation we're in today, he's only continuing that exact same type of irresponsible budgeting," New Jersey AFL-CIO President Charles Wowkanech said in a statement.
But Christie said he is not open to raising taxes, partly out of fear it would drive the state's wealthiest people away. He said the top 10 income tax filers in the state pay collectively as much as the bottom 2 million. About 4 million people file income taxes in New Jersey.
Christie said he rejected cutting state aid for schools, colleges and universities, hospitals and drug rehabilitation programs and services for the poor and developmentally disabled.
He said he found some savings, nearly $300 million over the next 13 months, in lapsed accounts.
Christie said he would listen to lawmakers' alternative ideas for dealing with next year's budget gap.
"I don't think they're going to find a lot of appealing options," he said.
A spending plan for the year must be in place by June 30.