TRENTON, N.J. (AP) - Senate President Stephen Sweeney proposed an alternative to Gov. Chris Christie’s budget on Wednesday that raises taxes on the state’s wealthiest residents and imposes a business tax surcharge to fund next year’s required pension system payment.
Sweeney unveiled his $34.4 billion budget proposal the same day trustees for one of New Jersey’s public employee pension funds voted to sue over Christie’s plan to skip a $900 million pension payment due June 30, and the administration filed legal briefs defending the slashed contribution.
“They’re doing their part. It’s our responsibility to do our part,” Sweeney said of the state’s public workers, who have been paying significantly more for benefits since 2011.
The state agreed to phase in its required pension contribution in exchange for the benefits changes in 2011. Sweeney, a labor leader with the ironworkers and a likely candidate for governor in 2017, aligned with Christie to enact the changes. He now says he will insist that the state live up to its part of the bargain.
Arguments in the pension suit are scheduled for June 25 in Mercer County Superior Court, less than a week before the deadline for the state to adopt the fiscal 2015 budget. Any proposed budget will need legislative approval and the governor’s signature.
Lawyers with the Attorney General’s Office say in legal briefs Wednesday that the only way to end the fiscal year without a deficit is to reduce the appropriation made for the pension contribution by $887 million. They say that with two weeks left in the 2014 fiscal year, most of the budget has already been spent, leaving few options.
Sweeney’s budget would raise roughly $1.6 billion in revenue, which would allow next year’s $2.25 billion pension payment to be made.
The Democrat’s proposal raises the income tax rate to 10.75 percent for those earning more than $1 million and to 10.25 percent for those earning $500,000 to $1 million. Top earners now pay 8.97 percent.
He also proposes adding a 15 percent surcharge on corporation business taxes and suspends business employee incentive grants, known as BEIP, for a year.
Sweeney said the tax increases would sunset when the state’s lagging economy improves, but he was not specific when that would be.
Christie has repeatedly vetoed tax increases.
“The governor has been emphatic that he will not raise taxes on already overburdened New Jersey taxpayers suffering from one of the harshest tax structures of any state in the country. Raising taxes drives businesses and citizens out of New Jersey and makes our problems worse,” said Christie spokesman Kevin Roberts.
If Democrats send him a budget that raises taxes, he can use his veto power to eliminate the increases. The Republican governor and possible 2016 presidential candidate has said repeatedly that the state cannot afford to make the pension payments it promised for this year or next year.
He has said he will make payments that cover active employees, but will not pay down the system’s debt.
The trustee board that oversees the Public Employees Retirement System voted Wednesday to hire its own lawyer to try to force the Christie administration to make a legally required pension payment. The vote was 6-0 with three administration appointees not voting.
The action follows similar lawsuits by other public employee unions. The police and firefighter pension board authorized a similar move last week.
More than 10,000 PERS members sent letters to the trustees urging them to sue.
The trustees said they are exercising the additional legal rights they were given under the 2011 pension reform law.
Assembly Speaker Vincent Prieto said the Senate plan will be reviewed.
The unions sued the administration after Christie announced plans to reduce the state’s pension payment to close gaping holes in the state budget. He signed an executive order in May to lower this year’s pension payment from $1.6 billion to $696 million. His proposed budget for next year includes a $681 million pension payment, not the $2.25 billion that current law requires.
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