Corzine eyes pension and wage economies
ATLANTIC CITY - Gov. Corzine called yesterday for cutting municipalities' April pension payments in half, and trimming them through 2012, to help local leaders cope with the difficult economy and avoid massive property-tax increases.
> Corzine also said he would seek givebacks from state workers, possibly including wage freezes or layoffs, to help New Jersey cope with a $1.2 billion shortfall in the current state budget and an even larger projected gap next year.
> The two moves are Corzine's latest attempt to control the fallout from the nation's economic crisis, but they could further weaken New Jersey's ailing pension system and set up a confrontation with state workers.
> The pension move is aimed at easing towns' costs in the near term, giving them the flexibility to keep taxes in check.
> "Taxpayers deserve help, and they are demanding it," Corzine said in a speech to hundreds of municipal officials gathered for their annual convention in Atlantic City. They applauded when he made his proposal.
> But the plan comes as state and local governments face a long-term pension shortfall that topped $28 billion as of June 2007. The gap includes a shortfall of more than $10 billion for the local governments that would get a deferral this year.
> And the shortfall is sure to grow. New Jersey's pension funds lost $9 billion, roughly 13 percent, just in October.
> Corzine said the deferral would save local governments $540 million this budget year. He said those savings should translate directly into property-tax relief. Without a break, towns will have to choose between cutting vital areas, such as public safety, or sharply raising taxes, he said.
> Corzine said that many towns were eyeing property-tax increases of 7 percent or more, and that many last year saw double-digit tax hikes.
> "In a time of economic crisis, such hikes are unacceptable," he said.
> Local governments would have to pay gradually larger portions of their required pension contributions in 2010 and 2011 and make full payments by 2012.
> Corzine said the break would only delay payments, that the full amounts would have to be paid eventually. And with the state's liability growing by the year, he acknowledged that the future payments would be even larger than what towns are currently scheduled to contribute in April.
> He compared the break this year to restructuring a mortgage or refinancing debt.
> Pension payments have been delayed before, and state and local governments have yet to catch up to full funding after years of putting almost nothing into the system. The state, which was supposed to ramp up payments gradually to make full contributions, now puts in half of what is required. Towns were supposed to make full contributions for both local workers and police and firefighters for the first time in recent years in April.
> Senate Minority Leader Thomas Kean Jr. (R., Union) said Corzine's proposal was "awful fiscal policy."
> "Simply deferring payments is the exact wrong approach," Kean said.
> The plan would require approval by the Legislature; Democratic leaders were non-committal yesterday.
> Some mayors welcomed the idea, while others were wary of the long-term costs of delaying contributions. Labor unions also approached cautiously.
> "We certainly don't like our pension moneys to be used as a bailout for the state," said Bill Lavin, president of the New Jersey Firefighters' Mutual Benevolent Association. He said firefighters needed assurances that their staffing wouldn't be cut, but added, "We're willing to do our share, as we always have, and agree to some really stark measures."
> Bob Master, regional political director for the Communication Workers of America (CWA), said the union was concerned with the pension deferral, but recognized the need for creative answers to the economic crisis.
> But Jim Marketti, a labor representative on the state investment counsel, called a delay "a continuation of the unfortunate tendency of this last decade of using employee pension funds as a funder of the last resort."
> "Rather than face the music, they want to use employee pension money. It undermines retirement security," Marketti said.
> The CWA's Master was forceful in responding to Corzine's call for union givebacks less than two years after the state and unions agreed to a new contract.
> Corzine said he would likely have to get the next budget down to $30 billion, which would mean a roughly $3.5 billion decrease over two years.
> "I think some kind of support from our public employees will be necessary," he told reporters. "I don't know how we can do that without everyone pitching in."
> He said he would consider wage freezes, furloughs and even layoffs to reduce personnel costs, but he emphasized the importance of negotiations.
> Master said that if the sacrifice was going to be shared across the board, Corzine should tax the wealthy. He said Wall Street traders, not state workers, had created the economic problems.
> "Are you asking the wealthiest people in the state to make a contribution to solve this crisis, or are you only asking schoolchildren and college students and people with disabilities?" Master asked. "The first principle we have to respect is equality of sacrifices. We don't see any evidence that they're honoring that principle."
> Corzine's approach yesterday was different from the one he took earlier this year during the state's first round of budget cuts. Then, he said that as state government scaled back, so should towns, and he proposed slashing aid to municipalities. This time, he is offering towns relief.
> Evesham faces a nearly $2 million pension contribution for local workers, police and firefighters.
> "We will encourage the governing body to take a close look at this because it may provide some much-needed relief," said Thomas Czerniecki, Evesham's township manager. "At the same time it creates an obligation in the near future that we would have to plan for." Taxes for the municipal government rise 27 percent this year.
> Gloucester Township Mayor Cindy Rau-Hatton, a Republican, said Corzine's proposal could provide relief, but added that it seemed like a Band-Aid. Her town is looking at a $2.5 million pension contribution.
> "Then what do you do the next year?" she asked. "It may be a temporary fix, but it's not solving the problem in the long run."