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Grapevine

GRAPEVINE: Pension debate reform not over

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    In a press conference held the day before Gov. Chris Christie unveiled his budget for the 2015 fiscal year, state Democrats indicated that without a full payment into the state workers' pension fund, they'd rather shut down the government than pass a budget.

    That won't happen this year since Christie's budget includes a full payment. But if there was one theme that resonated from the governor's address, it was that more pension reform was needed because the system is unsustainable.

    Fiscal year 2014 called for $1.7 billion in pension payments, and Christie's new budget calls for the largest pension payment ever at $2.25 billion.

    So what's to stop this discussion from popping up again in a year?

    As one insider puts it, Christie and Senate President Steve Sweeney (D-West Deptford) have a "good relationship when it comes to picking some of those priority areas" and hashing out a compromise.

    But that might not be enough this time.

    The insider said any further work on the pension system "also has to be done in the context of what the state can afford."

    Sweeney and other Democrats said this year that anything other than a full payment was not up for discussion. Will it be next year?

    "There's a new reality out there," the insider said of the state's finances.

    Christie invoked the bankruptcy situation in Detroit as an example of why entitlement reform was so critical, noting that the city was on the hook for $6.5 billion in retiree health benefits and $3 billion in retiree pension obligations against just $2 billion of cash.

    "The problem for Detroit was poor management and an explosion of employee health and pension costs for promises made by politicians that they knew they could not keep," Christie said. "This is the problem across the country."

    It's a problem that will keep coming up in Jersey until it is fixed.

    Millionaires' taxes on the line?

    "You've got to be kidding me right now."

    That's how Senate President Steve Sweeney (D-West Deptford) responded to a reporter's question about the possibility of a tax cut last week prior to Gov. Chris Christie's annual budget address.

    Though the Christie administration had floated the idea, the governor's budget ultimately shied away from it as he proposed a $34.4 billion spending plan with no tax cuts or hikes.

    But there's still a revenue shortfall the state must deal with.

    One idea — which Sweeney has said might be worth revisiting, to Christie's dismay — is implementing a millionaires tax, an income tax surcharge on the state's wealthiest.

    Christie has vetoed similar bills and said last week during his monthly radio program on Townsquare Media that he would do it again.

    "I'll veto it again and it will die," Christie said regarding the tax.

    According to one insider, the state's business community has long seen the tax as a "non-starter."

    A big issue, the insider said, is the tax wouldn't be able to decipher who's a millionaire on paper and who actually lives the lifestyle of a millionaire.

    They are two different things, but both could potentially be taxed, the insider said.

    The logistics of just determining this figure to become a political battle based on partisianship, not facts.

    No matter how it's determined, it will hurt those in the business community, who fear the tax would hamper its ability to generate jobs and revenues.

    "They're the job providers of our state," the insider said.

    Grapevine reports on the behind-the-scenes buzz in the business community. Contact Editor Tom Bergeron at tomb@njbiz.com.

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