State Budgets: The Day of Reckoning

Steve Kroft Reports On The Growing Financial Woes States Are Facing

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"This is different, isn't it?" Kroft asked New Jersey's governor, Chris Christie.

"It is very different," Christie said. "The reason it's different is because the only choices left are choices that people previously have said were politically impossible, that you couldn't do. You couldn't cut K to 12 education funding. You couldn't do those things. They were, you couldn't talk about pension and benefit reform for the public sector unions. That were third rails of politics. We are now left with no alternatives."

"Just the third rail?" Kroft asked.

"Yeah, that's it. I'm just gonna grab it and go, and let the chips fall where they may," Christie said.

In some ways, Christie is the political canary in the coal mine of the state fiscal crisis. He slashed New Jersey's budget by 26 percent, including a billion dollars in cuts to education, forcing the layoffs of thousands of teachers. He got rid of 1,300 state workers and drastically reduced funding to New Jersey cities, counties and villages which have their own financial problems. And he's still facing another $10 billion deficit next year.

Long term, the situation is much, much worse.

"Okay. Let's talk about the pension obligations. Forty-six billion unfunded liability for pensions? Sixty-six billion unfunded for healthcare liability?" Kroft asked.

"Yes, Sir," Christie said.

"That's a lot of money," Kroft remarked. "That's a lot of money, even for the federal government."

"That's a lot of money," the governor agreed.

When Kroft pointed out that there are people who think it's worse, Christie said, "Yeah, I think that's an optimistic view. I think that's an optimistic view. Listen, at this point, if it's worse, what's the difference? I mean, it's bad enough as it is, so what's the difference? I mean now, we're talkin' about money that none of us can really get our arms around."

"This is unsustainable, right?" Kroft asked.

"Totally unsustainable. We have a benefit problem," Christie said. "It's not an income problem from the state. It's a benefit problem. And so we gotta change those benefits."

Asked what the reaction to that has been, Christie said, "Well, it depends on where you sit. I mean, I think the general public thinks, 'I can't believe anybody gets a pension anymore. I've got a 401(k). It got killed in the stock market. I don't know what I'm gonna do for my retirement. I can't believe people get a pension anymore.' So I think amongst the broad, general public, they've said, 'Amen.' And I think among the public sector unions, they are yellin' and screamin'."

And Christie is yelling back. He provoked a very public fight with the teachers union, which is one of the most powerful political forces in the state of New Jersey.

When one teacher told him at a public hearing, "And you're not compensating me for my education and you're not compensating me for my experience. That's all," the governor replied, "Well you know what, then you don't have to do it!"

It's a scene that is starting to play out all over the country.