TRENTON - New Jersey Senate President Stephen Sweeney on Thursday outlined his proposal to amend the constitution to require the state to make its contributions to the public employee pension system, brushing off criticism from Gov. Christie that he was bowing to the interests of union "bosses" who "own" the senator.
"This isn't about unions," Sweeney (D., Gloucester) said at a Statehouse news conference. "This is about fairness."
Under Sweeney's proposal, which would require legislative and voter approval, the state would be required to contribute about $3 billion to the pension system in fiscal year 2018. New Jersey's total budget is about $34 billion this year.
By 2022, he said, the state would be able to make the full actuarially recommended contribution needed to pay down the unfunded liability over 30 years. Sweeney also wants to make payments in quarterly installments, rather than in one lump sum at the end of the fiscal year, to boost investment income. This would require some short-term borrowing.
New Jersey's unfunded pension liability - the difference between its current assets and its future obligations - is about $40 billion, according to the state Treasury Department. Using a different national accounting standard that factors in the projected depletion of the plans, that figure doubles to about $80 billion.
"If we don't start paying it now, the money will run out," Sweeney said. "Once the money runs out, since the courts said you have to pay it, where's the money going to come from?"
The answer, Sweeney said, is taxpayers. And the cost will only grow if New Jersey doesn't tackle the problem now, he said.
Richard Dreyfuss, an actuary in Pennsylvania and an adjunct fellow at the conservative Manhattan Institute, said Sweeney's idea may be sound in theory but not in practice.
"New Jersey is so far behind that to impose this now, I think, could not be easily accomplished," Dreyfuss said.
If voters were to approve the amendment and the state contributed its share to the pension system, he said, "you would quickly be faced with the question of, 'Well, how do I plug the rest of the budget we've now consumed?' "
That question is particularly relevant in New Jersey, which faces a structural budget deficit and is vulnerable to end-of-year shortfalls because of its heavy reliance on income-tax collections.
"It is a difficult issue, for sure, with long-standing contractually committed obligations vs. the need for budget flexibility and discretion, particularly when faced with deep fiscal constraints and a reluctance to impose new significant taxes," Joseph J. Seneca, professor emeritus at Rutgers University's Edward J. Bloustein School of Planning and Policy, said in an email.
"Both perspectives have merit," he added, "but a compromise remains elusive given the current political conditions."
Christie is running for the 2016 Republican nomination for president. Sweeney is a likely gubernatorial candidate in 2017, when he would want union support.
Sweeney noted that revenue was on track to meet expectations of greater than 3 percent growth this fiscal year, which would bring in $1 billion.
The pension plans for teachers and state workers are at most risk, because for years the state hasn't made its full contributions. Other plans, such as those for police and firefighters, are funded by local governments and are in better fiscal shape.
Sweeney's legislation says it would not preclude the state from changing pension benefits in the future.
Benefits are not negotiated by public-sector unions; they are set by the Legislature and the governor. Thus, at a later date, lawmakers could decide to scale back pension benefits for new state employees, for example.
The Senate Budget Committee on Thursday voted 8-5, along party lines, in favor of Sweeney's legislation to put an amendment on the ballot in November 2016.
"Be clear that as you vote for this, the only way to fund everything else in the state of New Jersey that is of importance will be by raising taxes," said Sen. Jennifer Beck (R., Monmouth), who voted against the measure.
Assembly Speaker Vincent Prieto (D., Hudson) said Wednesday that he supported the concept but was continuing to discuss it with his caucus.
To get the question on the ballot next year, a majority of the Legislature would need to vote in favor of Sweeney's bill before the current legislative session ends in mid-January and again in the next session.
Sweeney said the $3 billion contribution for fiscal 2018 was based on Christie's plan to budget $2.4 billion that year to the pension system. Sweeney said he would make up the difference by raising taxes on income exceeding $1 million.
However, Christie on Wednesday characterized Sweeney's proposal as a "$3 billion tax increase on 90 percent of the state to benefit his political patrons, who amount to 10 percent of the state."
There are about 800,000 active and retired public workers in New Jersey.
Christie wants to scale back health benefits for public employees and use the savings to pay down the pension debt.
Republicans and business groups criticized Sweeney's idea, saying it would stifle economic growth.
"We believe this proposal would severely impact the state's fiscal stability, which would ultimately have a negative effect on our effort to create jobs and grow our economy," Tom Bracken, president of the New Jersey Chamber of Commerce, said in a statement.
He added, "Our state constitution is meant to be an expression of our principles, not a tool of political expedience."
Sweeney said his amendment was a response to a June state Supreme Court decision that struck down a provision of a 2011 law signed by Christie that provided public workers with a contractual right to greater pension funding.
The court said the Legislature and governor could not establish such a contract without voter approval because it created a long-term debt.
The 2011 law required workers to contribute more money toward their pensions and health benefits, raised the retirement age, and suspended cost-of-living adjustments.
The court decision came after unions sued Christie for using his line-item veto authority to cut the state's pension contribution by $1.6 billion for fiscal year 2015, which ended June 30.