This afternoon, New Jersey governor Chris Christie is giving a speech that won’t, unlike his state-of-the-state address earlier this year, be obviously aimed at a national audience. He’s trying to sell his Fiscal Year 2016 budget proposal to the state legislature. But the address is an important step in Christie’s attempt to fix his state’s finances for good — perhaps even creating a national model for reform and getting himself back on track for a competitive 2016 presidential bid.
Christie first made himself a presidential contender by winning election in a deep-blue state, and then tangling with public-sector unions to restrain spending, avoid tax increases, and fix the state’s serious pension woes. It’s the last issue, pensions, that Christie will place at the heart of this year’s budget debate, because that battle, it turns out, is far from won.
There are a few other wrinkles in the budget — a drained highway trust fund, a possible gas-tax hike, Medicaid funding issues — but the pension question has by far the most importance nationally and in the long term.
The governor will use part of his address to set the terms for a new round of negotiations with public-sector unions over how to bring the state’s health-care and pension-benefit systems to solvency. Despite Christie and the legislature’s 2011 bargain to increase pension contributions and trim benefits, the promises made by those systems still threaten to sink the state.
Specifically, Christie plans to lay out a roadmap for some kind of solution to the pension problem. His administration says unions have shown real interest in discussing that roadmap, and it will presumably include some of the ideas put forth by the nonpartisan pension commission the governor set up in 2014.
The original 2011 deal looked good at the time: Christie had taken on the unions and won real concessions, in exchange for promising to ramp up contributions to the pension funds. But it didn’t fix the problem, because the promised contributions were still unrealistic. So Christie skipped out on its requirements last year, a move one state judge ruled illegal on Monday night.
The dollars involved in the 2011 deal so far are, in a way, symbolic. As I explained last summer, the problem is much, much bigger than the initial bargain could fix. Future benefits and pension eligibility will have to be restructured again, more dramatically.
Hence, Christie is back at the bargaining table. Representatives of the New Jersey Education Association, the state’s largest teachers’ union, will be at the speech Tuesday, the governor’s office says, and his administration is optimistic that unions are going to be willing to talk.
Although the governor could also be busy with a 2016 campaign fairly soon, he’s planning to launch a series of his trademark town halls across the state to talk pensions, an effort he began in part last year. The governor’s office suggests his efforts will show that he’s not just all bluster and aggression, that he’s the kind of leader who can bring disparate interest groups to the table to solve a tough, important issue.
It’s absolutely necessary, and just a matter of basic fairness, the governor will argue, for public employees to agree to more changes in their compensation schemes. “There are politicians, some of whom may be in this very room, who will tell you that we don’t need further pension and health-benefit reform,” he’ll say. “They will tell you that this will just go away if we ignore it. They will tell you that this is solvable if we just raise takes. But we cannot tax our way out of this problem.”
The longer the state government puts off dealing with the pension deficit, he’ll point out, the bigger the problem gets: the bigger the cuts in benefits, the bigger the tax increases, or the bigger the cuts in current state services.
“Every increase in the dollars devoted to pension and health benefits is a decrease in dollars invested in other priorities, creating a series of missed opportunities to build a better New Jersey,” he’ll say.
But Christie has at least a couple of problems standing in his way: For one, he’s asking public-employee unions for more cuts to their future benefits, after fighting hard for what he got in 2011. Fiscal inevitability doesn’t make for political feasibility.
More important, even as Christie lambastes others for kicking the can down the road, he’s the one who skipped most of the required pension payment last year when tax revenues came in low. The legislature proposed to pay for the scheduled $2.25 billion payment — less than half of what the 2011 deal requires to be spent every year by 2018 — with new taxes. Christie, who could have covered the pension payment with spending cuts instead (although that would have been politically hazardous), made just a $681 million payment. He proposes to make a $1.3 billion payment this year, again, much less than the 2011 deal asked for. How this all affects the unions’ desire to negotiate is anyone’s guess.
Making matters even more tense, on Monday, a state judge ruled in a long-running court case that Christie’s decision to skip the payment was illegal. (The governor argues he can break the 2011 deal because the state is in a fiscal emergency.) The decision can still be appealed, but if the Christie administration loses as a final matter, he’ll presumably need to make a $1.57 billion payment from last year — and the huge future payments, too.
That will throw the state’s budget into total disarray — forcing big spending cuts or tax hikes — but it may highlight the point Christie wants to make: that there is simply no way out of a mess like this without fundamental changes to the pension system.
If Christie succeeds, his example will be important for beleaguered states and municipalities nationally. New Jersey’s situation is about as bad as it gets. It didn’t just have decades of governors’ overpromising while paying almost nothing into the pension system — it also has an stagnant economy, an already incredibly high tax burden, and more.
That may be too much for even a politician as driven and talented as Christie to ever fix, let alone do so in time to bolster his case for the presidency. But, based on what he’ll say Tuesday, it looks like he knows he has to try.
— Patrick Brennan is opinion editor of National Review Online.