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 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 that begins July 1. 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.
He said both years’ payments would be enough to cover the state’s current obligation but would not 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.
“I have been talking over and over and over since January about the fact that we need to deal with this problem,” Christie said at a news conference. “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.
Democratic lawmakers have been warning the governor not to balance the unexpected shortfall with pension payments. They said they would prefer raising the income tax rate on high earners.
“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 Tuesday.
But Christie said he is not open to raising taxes, partly out of fear that it would drive the state’s wealthiest people away.