Gov. Chris Christie, R-N.J., announced on Tuesday that he's reducing planned pension payments by nearly $2.5 billion in order to deal with New Jersey's $807 million budget shortfall.
"It is about survival," the governor said from the New Jersey State House, where he told reporters he would reduce a payment planned for this year by about $1 billion while cutting a payment slated for next year by about $1.5 billion. The governor said the state will cover the cost of active employees but not the unfunded liability in the pension fund that accrued under other governors.
"We will not make the payments that apply to the sins of the past," Christie said, accusing his predecessors of enhancing the benefits in the state's pension system without identifying ways to pay for them.
Christie defended his decision, arguing that he'll still have made more payments into the pension fund of any other governor in New Jersey history.
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The New Jersey Star-Ledger notes the move could spur lawsuits or prompt credit rating agencies to further downgrade the state. Christie is compelled by law to balance the state budget, but he said that even if he weren't, he would've made dramatic moves to do so.
"Even if I were permitted to have deficit spending, I wouldn't do it, because it's not good for the state's future," he said.
Christie, who is considering running for president, easily won re-election in New Jersey in 2012 after making the campaign pitch that he's led the "Jersey comeback."
On Tuesday, Christie said, "We have come back significantly from where we were in 2010, we just haven't come back enough. I said the Jersey comeback has begun, not that it's finished."
Christie overhauled the state pension system in 2011, increasing employee contributions, which he characterized Tuesday as "an important first step."
The governor said he knew that budget problems were on the horizon, even though his administration's economists failed to predict this year's $807 billion shortfall. "The only thing I'm surprised about is how quickly this has come home to roost," he said.
Still, he threatened to veto any income tax or sales tax bills that make it to his desk. The governor has made the case that his economists missed the shortfall because they didn't anticipate taxpayers shifting their capital gains and bonus payments to the 2012 tax year to avoid paying higher federal rates for 2013. More tax revenue will disappear if the state follows Washington's lead and raises taxes on the wealthy, he argued Tuesday. He said the top 50 taxpayers pay almost 5 percent of the total gross income tax in the state.
"If you're not going to give those people any relief... if you think they're not voting with their feet, you're crazy," he said.