Christie Wins on Pension, Health Benefits Reform

New Jersey Gov. Chris Christie won another major victory for his agenda last week, announcing a deal with the Democratic leadership of the legislature on a sweeping reform of public employee pensions and benefits.  The deal, which was passed by the state senate on Monday and awaits a vote in the assembly, raises public employees’ pension contributions, mandates that the state make annual payments into the system, increases public employee contributions toward health insurance premiums, and ends collective bargaining for heath benefits.  Should the bill eventually become law, it is projected to save the state $120 billion over 30 years.

Christie, senate President Steve Sweeney and assembly Speaker Sheila Oliver released a joint statement pledging to pass the bill into law by the end of the legislative session.  “After months of serious discussions, we are pleased to announce that we have reached agreement on legislation to reform our public pension and health benefits systems in New Jersey.  The legislation to be considered … saves the public pension system for current and future retirees, and enhances fairness and choice in our health benefits system,” the statement read.

Speaking to a raucous crowd of county government officials in Atlantic City the following day, Christie praised the bipartisan nature of the pension compromise.

“The debate and discussion that’s going on in Trenton this morning [about the pension reform bill] and will continue through next week, is in the interest of the taxpayers first and foremost.  But it is equally in the interest of the public employees who want to continue to be provided with excellent health coverage and who want to be able, at the conclusion of their careers, to collect a pension that they were promised,” Christie said.

“The pension reforms in this bill alone will save taxpayers $122 billion over the next 30 years and bring all of those pension systems, within 30 years, into an 80% funding ratio, [r]estoring the stability of those systems.”

Under the proposal, state employee contributions to their pensions will increase by 2% to 7.5% of their salaries, cost-of-living adjustments will be eliminated, and the retirement age for new school employees will increase from 60 to 65, with early retirement eligibility increasing from 25 to 30 years of service.  In return, unions get mandatory contributions from the state into the system and the right to sue if those payments are not made, and representation on a board to determine future contribution rates, retirement ages and benefit levels.

On health benefits, the deal includes a graduated scale for employee premium contributions based on salary and a mandatory four-year period before any negotiated changes to the system.  A state board will be created to offer new plans by 2012, which may include catastrophic and reduced coverage plans in exchange for lower premiums.  Employees with 20 years of service will see no changes to their pension or health benefits.

Public sector unions, particularly the New Jersey Education Association (NJEA), the state teachers’ union, reacted angrily to the deal, holding rallies at the State House to protest the proposed changes.  NJEA President Barbara Keshishian focused her ire on Sweeney—who is the president of an ironworkers union local—alleging in a Newark Star-Ledger op-ed that he was pushing the legislation to benefit a political patron, state Democratic Party boss George Norcross, who runs an insurance brokerage house that stood to benefit from any proposed changes.  “Make no mistake.  Without greater controls, the Sweeney-Christie proposal will be a gift to brokers, paid for by public employees and taxpayers,” Keshishian wrote.

Sweeney has long advocated reforms to the pension system, and he dismissed the criticism.  “Supporting reform was the right thing to do then, and it’s the right thing to do now,” he said.

Christie has been basking in the glow of yet another victory over Democrats and the public sector unions.  “This is a watershed moment for New Jersey, proving that the stakes are too high and the consequences all too real to stand by and do nothing,” Christie remarked on Senate passage of the bill.  

“As a result of Democrats and Republicans coming together to confront the tough issues, we are providing a sustainable future for our pension and health benefit system, saving New Jersey taxpayers hundreds of billions of dollars and securing a fiscally responsible future for our state.”

Last year, Christie succeeded in passing a budget that reduced state aid to schools and made across-the-board cuts to 375 state boards and agencies, closing an $11 billion budget shortfall while vetoing a tax increase on high earners supported by the union.  Christie also convinced New Jersey taxpayers to reject a record six of 10 local school budgets in response to the NJEA’s opposition to health insurance premium contributions.  Now, Christie has succeeded in driving a wedge between public and private sector unions—as evidenced by the NJEA’s attack on private sector union head Sweeney—with his pension and heath benefits reform proposal.

New Jersey’s tough-negotiating governor is building his reputation on schooling the teachers’ union, once one of the most powerful forces in New Jersey politics.