TRENTON, New Jersey (Reuters) - New Jersey Governor Chris Christie said on Tuesday he will slash the state’s contributions to its public pensions by nearly 60 percent, or $2.3 billion, for this and next fiscal year combined in order to close a large, unexpected revenue shortfall.
Speaking at a press conference in the state capital, Christie said he would not reveal details but said they would be forthcoming soon. He did say he would not support a tax on high earners in the state, which opposition Democratic legislators have started to push.
The slashed payments come in response to a newly discovered $807 million revenue shortfall for this fiscal year, which ends in just six weeks. Christie said the state reduced revenue projections over the two fiscal years by $2.75 billion.
The budget hole is due largely to April tax collections that fell far short of projections.
While many other states also got an unwelcome April surprise, Christie’s revenue estimates have been inflated for three consecutive years. His proposed budget solution is likely to test his low-tax, bi-partisan fiscal management agenda.
The move could lead to lawsuits from public sector unions and is likely to meet resistance from the Democratic-led legislature, which has already said it is opposed to additional pension changes after cooperating with Christie on bi-partisan reforms in 2011.
Those reforms called for the state’s pension contributions to rise by a set amount each year, culminating at $4.8 billion in fiscal 2018 in an effort to make up for years of underfunding in the past.
But instead of making the required contributions of $1.6 billion in fiscal 2014 and $2.25 billion in fiscal 2015, the state will pay only $696 million and $681 million, respectively. Christie said he would use an executive order to push through this year’s reduced payment.
The payments cover only what is owed to active employees. “We will not make the payments that are applied to the sins of the past,” Christie said.
The state’s retirement system for public employees had nearly $59 billion of unfunded liabilities as of fiscal 2012, Moody’s Investors Service said on Tuesday.
Christie called for additional pension changes earlier this year, without providing specifics.
Democrats have begun pushing for tax increases on the state’s high-income earners. That “will not happen while I‘m governor. Under no circumstances,” Christie said, while also ruling out a sales tax increase.
The $807 million shortfall has helped drop New Jersey’s credit rating to among the lowest of all U.S. states, while exposing the fragile state of the economic rebound Christie hoped to make his legacy.
Democrats said they would review his plan and figure out their next steps. They also said Christie’s plan would hurt middle-class New Jerseyans.
“Gov. Christie’s plan will make our fiscal situation even bleaker,” said Assembly Majority Leader Lou Greenwald, who said Christie had “driven New Jersey into a ditch.”
Reporting by Hilary Russ; Editing by Dan Grebler