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News & Press: Pension

Guaranteed Funding for State Pension Probably Won't Make Ballot

Friday, August 5, 2016   (0 Comments)
Share | 08/05/16

With the deadline for final legislative approval of a proposed constitutional amendment to boost public-employee pension funding now just days away, it appears more likely than ever that it will not be put before voters this fall. Senate President Stephen Sweeney (D-Gloucester) continues to say he won’t allow the issue to go on the ballot if the state can’t afford to make the series of ramped-up pension contributions the amendment calls for. With Democrats still at odds with Gov. Chris Christie over renewing the state Transportation Trust Fund, that remains an open question. Funding the pension system and paying for transportation projects seem to be completely unrelated issues, and many have been confused that they’re now linked so closely together, especially as an Aug. 8 deadline for approving ballot questions has drawn so close. But years of only modest state revenue growth and Christie’s insistence that a significant tax cut has to be part of any deal to renew the TTF has now effectively put public workers and transportation advocates in a battle for the same limited budget resources.

Financial projections prepared by the nonpartisan Office of Legislative Services that were obtained by NJ Spotlight show just how close the budget margin is projected to be under the TTF renewal plan that’s being backed by Sweeney and other top Democrats. Under that plan, New Jersey’s estate tax would be phased out over several years while several other targeted tax cuts would go into effect along with a 23-cent gas-tax hike to renew the off-budget TTF. Adopting those cuts while also paying for the increasing pension contributions that are called for in the proposed amendment leaves a surplus of less than $100 million by the 2020 fiscal year, assuming modest annual revenue growth, according to the OLS estimates. Christie wants to balance the gas-tax increase by cutting the state sales tax from 7 percent to 6 percent. The OLS estimates that would leave the state with a $1 billion budget hole in the 2020 fiscal year if the same pension payments are locked in by voters and the same modest growth occurs.

In many ways, New Jersey faced a similar scenario several years ago after Christie started implementing a multibillion-dollar business-tax cut while at the same time promising revenue growth would allow the state to both increase pension contributions and ramp up pay-as-you-go transportation spending. When that growth in revenue failed to materialize over the next few years, Christie largely abandoned the pay-as-you-go portion of his transportation plan and also walked away from his pension-funding promise. But the business-tax cuts have remained in place, costing an estimated $3 billion in lost revenue since they kicked in during the 2012 fiscal year. Without knowing the exact cost of the new tax cuts that are now up for debate, Sweeney said it makes no sense to send the ballot question to voters. The proposed amendment calls for state pension contributions to grow over time to more than double the $1.86 billion payment that’s budgeted for the current fiscal year. “I’ve got to face reality with what we’re dealing with,” Sweeney told reporters yesterday. “It’s not sound fiscal policy to not know what a major cost is.”

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