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Pension crisis: Which Governor Christie deserves the blame?

By Paul Mulshine | The Star Ledger
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on April 28, 2015 at 8:06 AM, updated April 28, 2015 at 12:53 PM

The public interest website ProPublica recently put out an excellent series of articles on New Jersey's current fiscal woes.

In it we find this quote from the prior governor named Christie concerning the current governor named Christie's claims that she had a large role in creating the current mess:

"He's right to say he inherited a problem; I just wish he'd get the facts right," Christie Whitman told the writer

Me, too. If Chris Christie took a good look at the way things worked under the past governor named Christie, perhaps he could teach the national Republican Party a long overdue lesson: That lesson would be: Decide whether you want to be a tax-cutting cheapskate or a bleeding-heart big spender. You can't be both.

Whitman started off as a fiscal conservative. After she took office in 1994 she quickly made good on her campaign promise to cut the state's income tax 30 percent.

So far, so good. But she spent the rest of that and her next term implementing a bunch of do-gooder programs that had to be funded out of the proceeds of the same tax she had just cut. That led to the creation of a structural deficit in the state budget that was worsened during the administrations of the two Democrats elected after her.

When it comes to pensions, most people misunderstand just what Whitman did wrong. The prevailing belief is that Whitman took $2.7 billion from the pension funds and put it into the general budget.

The opposite is true. She took that $2.7 billion out of the general fund and put it into the pensions. One problem: She borrowed it and passed the bill on to future governors. The bill due July 1 is $355 million.

Another problem: Once the funds were flush with borrowed money, Whitman began giving away new benefits to the public employees. In this, most of the blame should go not to Whitman but to the Republican majorities in both houses.

They persisted in passing bills designed to get the votes of union members. In 2000 they sent Whitman a bill that permitted police and firemen to retire after 20 years. (NOTE: This originally stated retirees would get health benefits, but several people challenged that. I have asked my original source to check it out). She raised objections but ultimately signed it.

At that point, the other public employees felt shortchanged. To fix that, the Republicans passed a 9 percent hike in their pensions – and extended it to those already retired. Whitman had made her escape to Washington by then, so the GOP legislators deserve much of the blame.

Just one legislator voted against that hike. That was Republican Assemblyman Rick Merkt. Merkt, who is now the township administrator in Christie's home town of Mendham, recalls being told that the state could afford the increase.

"We were all being told by Treasury that funds were so flush that there was enough to pay for a 9 percent increase without adding a single dollar," Merkt said. "I said, 'If you want to drill another 9 percent hole in the bottom of the pension barrel then you have to drill one on top and put 9 percent in.'"

That quote sums up the dilemma that the Republicans of the Whitman era created for subsequent governors. Once Whitman had established her conservative bona fides with that tax cut, she joined her fellow Republicans in passing social programs that come out of the kitty she had just cut.

Coming due July 1 is a bill for $800 million in debt service on the school-construction bureaucracy Whitman created - one that has been amazingly good at spending money and amazingly bad at building schools.

Then there's the state-funded preschool program Whitman created to burnish her national image as a compassionate conservative. That will cost $655 million next year.

Both of the above were ordered by the state Supreme Court, but Whitman had named her former aide and trusted ally Deborah Poritz to head that court. So this was something of a tag team on the taxpayer.

But the biggest bill the first Gov. Christie ran up is rarely mentioned. When Whitman took office, retiree health benefits were funded just like pensions. Each year, the state would set aside an amount necessary to cover future expenditures.

Whitman ended that practice and made the system pay-as-you-go. And as you go, that's an additional $1.6 billion bite out of next year's budget.

Add it all up and you see that the structural budget changes in the Whitman era far outstrip the pension shortfall.

But for all her big-spending antics, Whitman had nothing on the president whose cabinet she joined in 2001. George W. Bush also began with a big tax cut and spent trillions in borrowed money. The tab Bush left is so massive that Whitman's bill would not represent even a rounding error in it.

Why expect any different from the next Republican president?

I've yet to hear that question asked by any of the contenders for the 2016 presidential nomination. Perhaps this Gov. Christie should bring it up.

COMMENTS: Sorry but for some reason the post was not accepting comments at first. That is now fixed.

ALSO - THE REAL CULPRIT: It's no accident that so many Republicans come into office pledging to cut taxes and leave behind massive debts. This can all be traced to the work of Grover Norquist of Americans for Tax Reform. As I noted in this column, Norquist's no-tax-hike pledge is really a sham, for the simple reason that the politician does not pledge to curb spending as well:


When Norquist was in Newark last year, I asked him why the pledge didn't cover deficit spending. He replied, "I was focused then on a two-thirds supermajority to raise taxes, which I think is more important than a balanced budget amendment."

No, it's not. If you permit politicians to approve new spending with a mere majority but require a two-thirds majority to approve new revenues, then you are inviting them to do what my friend loves to do: Spend money they don't have.

This is a serious problem with the national Republican Party, one avoided by just about all of the potential candidates for the 2016 presidential nomination. I have watched one after another of them pledge to spend more money on defense or Social Security or Medicare while never mentioning that the federal budget is already running a half-trillion-dollar deficit.

Even when Congressman Paul Ryan brags of his promise to balance the budget he means balancing it in 10 years, a pledge that is of course meaningless because a current Congress cannot bind a future one.

Do we just need better candidates? No, that's not the solution. Look at what has happened to candidates who are true skinflints. I'm thinking of Steve Lonegan, the former Bogota mayor who ran against Christie in that 2009 primary.

Lonegan is the biggest tightwad I've ever met. He would have really changed thing in Trenton. But he lost to the mainstream candidate, which was Christie. Guys like Lonegan scare the GOP establishment, all those lawyers and contractors who get fat off projects like that $14 billion school-construction program.

By the way, Christie promised to shut the Schools Development Authority down by pledging to stop borrowing money to fund it without voter approval. What he really did was clean house of the Democratic hacks running it and replace them with Republican hacks.

He got away with it, though. The liberals love the thought of the state building all those free schools for the Abbott districts. As for the conservatives, there are about three or four of them in the Legislature that I can think of now that Merkt is gone.

The rest of the Republicans still subscribe to the do-gooder politics of the Whitman era.

 

 

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