TRENTON, N.J. (CBSNewYork/AP) — The Democrat-controlled New Jersey Legislature voted Thursday to raise taxes on companies and high-earning individuals while fully funding pension funds for public employees, but no one doubts that Gov. Chris Christie will veto the measure.
Democrats came up with a $34.1 billion budget for the 2015 fiscal year that fully funds the pension but comes with an income tax hike on earnings over $1 million;, a one-year, 15 percent surcharge on the corporate business tax; and a suspension in tax credits on a program used to try to attract companies to New Jersey. The taxes, they said, are a last resort.
Christie had already pledged to veto those measures before the budget was adopted by the Assembly and the Senate on Thursday on party-line votes. Democrats supported it; Republicans did not.
Christie has been mum though on whether he intends to use his line-item veto power to nix other spending. But he has the power to do so, WCBS 880’s Levon Putney reported.
“He’ll be able to reduce the pension payments down to the level that he wants,” said Ben Dworkin, head of Rider University’s Rebovich Institute of New Jersey Politics.
Since the court ruled that Christie can cut pension payments to fill the budget gap, no new taxes or tax hikes are needed. But can state Democrats still come out looking good if they do not get the taxes? Dworkin said they can.
“The governor, the Democrats will say, wanted to favor his millionaire friends over the retirement funds of working people,” Dworkin said.
Dworkin emphasized that Christie has put in enough money for current retirees, so the pension cuts are actually a threat to future retirees if the state never catches up on the missed payments.
Democratic lawmakers say it comes down to principles.
“It’s our obligation to show the people of New Jersey that we can be fully prudent and meet all of our needs,” said Assembly Budget Committee Chairman Gary Schaer (D-Passaic.)
But there could also be political and legal implications.
Earlier this year, it looked like another post-Great Recession budget would not feature either huge new initiatives or major new or expanded taxes. Christie was lamenting that pension funding — rising quickly because of a 2010 deal to boost payments to make up for decades of skimping — was eating up too much of the budget plan. But he didn’t offer a specific fix, saying he wanted to work with lawmakers on it.
Then in April, his administration reported a surprise: Tax revenue was well short of targets for the fiscal year that ends June 30. The projections for fiscal 2015 were also revised showing a total $2.75 billion gap through June 30, 2015.
Christie wants to fill the hole mostly by making smaller-than-planned payments to pension funds. He said he was left with no choice, and that retirees will still receive their monthly checks.
He used an executive order to cut the payment due this month by more than half and reworked his budget proposal to shrink the one for the coming year by two-thirds.
Christie is expected to take action Monday, the day before the new fiscal year when the state is supposed to have a balanced budget in place to avoid a shutdown. And there are not enough Democratic lawmakers to override any veto without help from Republicans.
Christie, a possible 2016 presidential candidate, has vetoed increases in the so-called “millionaires’ tax” three times in the last four years. Whenever he does, he is able to claim he stopped Democrats from raising taxes. But Democrats can assert that the governor chose to protect the wealthy rather over other priorities.
This time, it is possible there will also be legal fallout from vetoing full funding for pensions.
Unions for public workers sued earlier this month over Christie’s pension-funding cuts.
On Wednesday, a state court judge ruled that workers do have a contractual right to a fully funded pension. But she found that the state’s fiscal 2014 budget situation was so precarious there was no choice but to reduce the payments due this month.
Hetty Rosenstein, the New Jersey director for Communication Workers of America, the largest union of state workers, said the same logic may not pass a judge’s muster in a challenge over pension funding in the coming fiscal year.
“Now, right in front of your desk is going to be a budget with a pension payment made in it and you’re going to veto it. To me that’s a very different circumstance,” she said. “You have money but you chose not to do it.”
Republican Assembly Leader Jon Bramnick (R-Westfield) said he does not know that a judge will look at the Legislature’s action if Christie vetoes full pension funding, but rather that courts will focus on the state’s financial circumstances.
“It’s a case-by-case situation,” he said.
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