TRENTON, N.J. (CBSNewYork/AP) -- In a stunning announcement, New Jersey Gov. Chris Christie said there will be no tax hikes to deal with the state's enormous budget gap – and instead, there will be no payments for retiree pension and health benefits.
As CBS 2 Political Reporter Marcia Kramer reported, lawmakers in New Jersey were in a tizzy about the decision Tuesday.
Christie: Budget Must Be Balanced With Pension, Retiree Health Care Cuts
The hole in the New Jersey state budget is big, and getting bigger. Christie plans to deal with it – accounting for $1 billion this year and $1.7 billion next year, by cutting pension and health care contributions for retired state workers.
The move will not affect those currently on the payroll.
"Our problem is we have made promises to people that we cannot keep, and so we have to adjust this," Christie said.
As WCBS 880's Alex Silverman reported, Christie said he did not expect the budget shortfall to be as severe as it was.
"We did see it coming," Christie said. "We didn't see it coming to this extent."
He said there was plenty he could have slashed to claw his way out of the $800 million hole.
"I've made the decision that we are not going to blindside our students; we're not going to blindside our seniors," Christie said.
Instead, the state will pay $681 million to the pension system, rather than increasing the state's pension contribution to $2.25 billion, as he proposed earlier this year.
Christie said both years' payments would be enough to cover the state's current obligation but would not continue the plan he hashed out with lawmakers three years ago to make up for years of skipped or skimped state contributions over the course of seven years.
"In a time when we are confronted with this type of challenge, I cannot also pay for all the sins of my predecessors," Christie said.
The decision is not popular. All workers past and present want to keep their pensions and health benefits as is, Kramer reported.
But Christie said New Jersey cannot afford it, and will offer a reform plan next month. He challenged lawmakers to go along – but not by raising taxes.
"They send me an income tax or a sales tax increase, it will be vetoed," Christie said.
When Christie said that, lawmakers immediately hit the roof – suggesting taxing millionaires.
"Someone needs to call 911," said state Assembly Majority Leader Lou Greenwald (D-Voorhees.) "Governor Christie has officially driven New Jersey into a ditch."
Christie argued that it is not possible to raise taxes – especially on the rich. He said the top 10 taxpayers, literally the top 10 individuals, pay more in taxes than the bottom 2 million filers combined.
"I understand that class warfare is an absolute tenet of what they do, but the fact is if those 10 people leave, they think they have a problem now – wait 'til they see the problem they're going to have if those 10 people leave," Christie said. "Income taxes being raised in any way, shape or form will not happen while I'm governor – under no circumstances."
Christie said that more than 40 states have taken steps in recent years to rein in mounting public employee pension costs, and that failure to do so drove cities such as San Jose and Detroit to the brink of fiscal disaster.
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