Gov. Murphy and New Jersey Senate President Stephen Sweeney averted a government shutdown by reaching an eleventh-hour budget deal over the weekend.

But don't confuse the accord for a sign of lasting peace between the highest-ranking elected officials in Trenton, both Democrats.

The fight over the $37.4 billion budget — which Murphy signed into law Sunday — laid bare their competing visions for the Democratic Party in New Jersey. Democrats hold majorities in both houses of the Legislature.

Murphy, the liberal political newcomer who has vowed to reverse the cost-cutting days of Republican Gov. Chris Christie, took aim at "millionaires and billionaires" in his bid to create a "stronger and fairer" economy. In doing so, he rallied support from liberal interest groups and public-employee unions.

Sweeney, a veteran lawmaker from Gloucester County and leader of an ironworkers union local, identified a different crisis he says the state faces: affordability. He's been sounding the alarm about people leaving the state. Going forward, Sweeney said Friday, he wouldn't "bargain any further without a commitment" from Murphy to fix the underfunded retirement system.

"All we've done this year is talk about spending," he told reporters Friday after another round of unsuccessful budget talks. "The 800-pound gorilla in this room is the pension and health-care plans."

Ultimately, Murphy and Sweeney agreed to a budget funded in part by a new marginal tax rate of 10.75 percent on income above $5 million. Murphy wanted the higher rate imposed on income exceeding $1 million, and Sweeney had resisted a new rate altogether. They also agreed to a four-year surcharge to the tax on corporations.

Senate President Stephen Sweeney (right) is pushing to change New Jersey’s retirement system for public workers.
Amy Newman/The Record via AP
Senate President Stephen Sweeney (right) is pushing to change New Jersey’s retirement system for public workers.

But Sweeney is promising a fight on pension and health benefit liabilities.

Standard & Poor's, citing New Jersey's underfunded retirement system, rates the Garden State's credit lower than every other state but Illinois.

Pension and health-benefit costs are expected to consume 26 percent of the state budget by fiscal year 2023, a panel of Christie-appointed experts wrote late last year.

Most Trenton observers doubt Murphy wants to take up the issue. For most of Christie's second term, he battled Sweeney and Jersey City Mayor Steve Fulop in a shadow campaign for the Democratic gubernatorial nomination. Public-sector unions helped propel Murphy to the nomination.

Last week's Supreme Court decision in Janus v. AFSCME, striking down mandatory dues to public unions by nonmembers, dealt a blow to organized labor. But it also created a political opportunity for a progressive like Murphy to portray himself as the unions' protector.

"He doesn't want to be in the face of the public employee unions," said Tom Byrne, a former state Democratic Party chairman and member of Christie's pension and health-benefit study commission. "They're his core constituencies."

The unions resented Sweeney over his collaboration with Christie to overhaul the pension and health-benefits systems. The 2010-11 laws raised the retirement age, suspended cost of living adjustments, and forced public workers to contribute to their health care.

(The state Supreme Court later ruled unconstitutional a core provision that bound the state to ever-increasing pension contributions.)

Those reforms didn't go far enough to save the retirement system, according to Christie's bipartisan panel of experts.

On paper, at least, Murphy and Sweeney might find common ground on the issue.

Years before they were political rivals, each voiced concern over how politicians in Trenton were shortchanging the retirement plans for public workers.

In 2005, Murphy, an outside adviser to then-Gov. Richard J. Codey, wrote a report recommending structural changes.

A year later, Sweeney, as a state senator, called on public workers to take a 15 percent cut in salaries and benefits. The state, he said, was no longer affordable.

The problem has only gotten worse since then.

Murphy arguably has the credibility with unions to strike a grand bargain. They refused to negotiate with Christie, saying he couldn't be trusted.

"I've had lots of conversations with Democrats hoping for a Nixon-goes-to-China approach to this," Byrne said. "I haven't met anyone who's optimistic it's going to happen that way."

Byrne added that he had spoken with senior Democrats who think Murphy is going to try to ride support from unions to the presidential nomination "the same way he rode them to the state nomination."

Murphy has dismissed the speculation.

During the campaign last year, he argued the state must live up to its obligations before it can ask for concessions. For years, he has noted, governors and lawmakers from both parties shorted the pension system.

"There's no question that Murphy does see himself as somebody who's going to block" a pension and health-benefit overhaul, said Patrick Murray, political analyst at Monmouth University. "That plays into his whole persona of being this progressive stalwart."

He added: "The question is: How hard will Sweeney push this?"