Management & Labor

New Jersey Teachers Union Breaks Off Pension Talks With Christie

by | April 22, 2015

By Andrew Seidman

In a setback to Gov. Christie's proposal to overhaul New Jersey's pension and health benefit systems, the state's largest teachers' union on Tuesday said it would no longer participate in talks with a panel he appointed to tackle the funding crisis.

The announcement came two weeks before the state Supreme Court is scheduled to hear oral arguments in a lawsuit brought by public-sector unions seeking a full contribution to the pension system for the fiscal year that ends June 30.

Christie's office on Tuesday mounted a social media campaign to rally support for the governor's plan and criticize Democrats who are backing the unions in court. In his February budget address, Christie, a potential GOP presidential candidate in 2016, declared that he had reached an "unprecedented accord" with the New Jersey Education Association (NJEA) on a "road map to reform" public-employee retiree benefits.

But the union quickly backtracked, accusing Christie of mischaracterizing its agreement for political gain, and on Tuesday, it formally abandoned talks with the governor's commission.

The union also called on Christie to fully fund the pension system. Christie shorted the system about $1.6 billion for the current fiscal year, and his proposed $1.3 billion contribution for the fiscal year that begins July 1 is $1.8 billion short of what is required by a law he signed in 2011.

That law helped fuel Christie's rise to prominence.

NJEA President Wendall Steinhauer said Tuesday that the union had initially reached an understanding with the commission that "there had to be a mechanism for guaranteed responsible pension funding."

"However, as those discussions went on, it became obvious the commission was going to make recommendations to which we could not agree: forcing employees to pay to repair their pensions with even deeper cuts in their health benefits; expanding the current statutory premium costs for employees; and undermining their collective bargaining rights," Steinhauer said in a statement.

"Ultimately, there was no consensus reached on any of the broad concepts we discussed with the commission, and there are serious concerns about some of those concepts," he said.

Broadly, the "road map" called for freezing the current pension plan and replacing it with a less generous one. Both plans would be transferred to a trust controlled by the union; the state would scale back health-care benefits to align them with those offered in the private sector and use the savings to pay down the pension's $83 billion unfunded liability over time.

"It is unfortunate that the NJEA is unwilling to continue to work with the independent, nonpartisan commission," Christie spokesman Kevin Roberts said in a statement. "This unwillingness does not change the numbers. We will continue to work to solve this crisis with the commission."

Christie has held town hall-style meetings across the state in recent weeks to make his case for an overhaul.

Speaking in New Hampshire last week, where he courted Republican primary voters and announced a plan to overhaul federal entitlements, Christie dismissed the idea that his inability to enact more pension changes in New Jersey would be a political blow. "If I succeed, that'll be great," Christie said. "But if the Legislature decides they'd rather cave to special interests that line their pocket with campaign money rather than do what's better for the people of New Jersey, I don't know how I'm a loser there."

Without further changes, Christie has warned that the pension system will go bankrupt. Moody's Investors Service last week downgraded New Jersey's general obligation bonds to A2 from A1, citing the state's large pension obligations. The state Supreme Court has agreed to weigh in on pension funding; arguments are scheduled for May 6. At issue is Christie's decision last June to slash the state's contribution by $1.6 billion, citing a revenue shortfall.

A Superior Court judge ruled in February that Christie's cut violated the 2011 law the governor signed.

That law, which required workers to contribute more toward their pensions, established a constitutionally protected contractual right to a full state payment, Mercer County Superior Court Judge Mary C. Jacobson ruled.

She ruled that Christie had substantially impaired that right and ordered him to work with the Legislature to find revenue to restore what he cut. Christie appealed, arguing that Jacobson "fabricated a constitutional right" to pension funding.

On Tuesday, Christie lashed out at Senate President Stephen Sweeney (D., Gloucester) and Assembly Speaker Vincent Prieto (D., Hudson) after they filed an amicus brief supporting the unions' lawsuit.

Christie's office accused the Democrats of using "fairy tale rhetoric" in calling for bigger payments, and the governor took his message to Twitter: "Call and ask @NJSenatePres and @VincentPrieto #WheresTheMoney," he wrote, posting the lawmakers' phone numbers. The governor says making the full payment would require massive tax hikes.

Sweeney has said the state should raise the income tax on its highest earners to help fund the pension system as part of a "good-faith effort" to comply with Jacobson's order.

In response to GOP attacks, Prieto said Tuesday: "It's easy to resort to hyperbole and partisan attacks in difficult times. But Democrats have instead chosen to lead responsibly, presenting the governor last year with a balanced budget that met the state's obligations, only to see it vetoed, burying the state deeper into fiscal crisis."

Yet Democrats have acknowledged that finding $1.6 billion to add to the pension system this late in the fiscal year, which ends June 30, may be impossible. Hetty Rosenstein, state director of the Communications Workers of America, recognized that possibility Tuesday.

"We're hoping for the Supreme Court to uphold the key issue in Judge Jacobson's decision, which is there is a contractual right here and that the payments have to be made," Rosenstein said in a briefing with reporters.

Even if there isn't enough money left to make the full payment this fiscal year, such a ruling would set "a very different stage going out," Rosenstein said.

Staff writer Maddie Hanna contributed to this article.

(c)2015 The Philadelphia Inquirer

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