The cause of the war is the state's chronic underfunding of public employee pensions.
The New Jersey Education Association is officially at war with Stephen Sweeney. The state Senate president is now caught between the state's most powerful political force and cold, hard fiscal reality. Whether he can fight his way out of this predicament will be the biggest test of his political career.
Back in 2011 the NJEA felt betrayed by Sweeney, a Democrat and former ironworkers union president, who hammered out a bipartisan pension reform bill with GOP Governor Christie.
The cause of the war is the state's chronic underfunding of public employee pensions. The NJEA spent $10.4 million lobbying to get a constitutional amendment on the ballot this fall that would require the government to fully fund the pension system. The reason the union is so insistent on funding the system is that pensions constitute a significant slice of compensation for its members. In the union's view, if the state is constitutionally required to fully fund the system, that will protect the retirement income of its members.
Sweeney, however, came out forcefully against the measure. First, he charged the union with coercion by refusing to make contributions to legislators' campaigns if they did not support the amendment. He said that "we will not allow public-sector unions to dictate, to intimidate and coerce legislators who want to do the right thing." In that spirit, he wrote a letter to the U.S. Attorney and the state Attorney General asking them to investigate the union for extortion.
Then, last Monday, Sweeney effectively killed the amendment by letting the deadline for ballot measures pass without a vote.
Opposing bid for governor
The NJEA went ballistic. Union President Wendell Steinhauer signaled that the union will oppose Sweeney's likely 2017 bid for governor. According to Steinhauer, passing the amendment is its No. 1 priority, and the union has made support for the amendment a litmus test for the candidates it will endorse and fund. The other two likely gubernatorial candidates have both come out in support of the amendment.
The problem is that New Jersey has dug itself a fiscal hole with pensions that it can't easily get out of. Having failed for years, under governors of both parties, to fund the pension system, current taxpayers are now on the hook to pay for public services consumed a generation ago. Only in the wake of the great recession did the state begin wrestling with the problem.
Back in 2011 the NJEA felt betrayed by Sweeney, a Democrat and former ironworkers union president, who hammered out a bipartisan pension reform bill with Republican Governor Christie. That legislation required workers to contribute more to their pensions. While Christie has since paid more into the pension fund than the previous five governors combined, the pension system still has an unfunded liability of $43.8 billion. Hence the union's demand for the constitutional amendment.
If the NJEA's amendment were ever to become law and the state were to continue with the current defined-benefit pension model, either huge tax increases or severe cuts in public services would be required to fully fund the pension system.
Limits to taxation
Yet New Jersey is already among the highest tax states in the nation, so there are real limits to how much taxes can go up if the state wants to remain a competitive place to live and do business. Steep cuts to public services are also unpalatable to politicians because citizens depend on those services and public-sector workers want to keep their jobs.
Since the unions want to avoid public employee layoffs and increased employee contributions, while simultaneously fully funding the pension system, their strategy is to use the amendment to box in policymakers and force them to tax increases.
Sweeney's opposition to the amendment stems from his recognition of these fiscal and political realities, and he wants to preserve government's flexibility to deal with the crisis. To do that, he'll have to entertain reform options that are anathema to the unions, such as those suggested by the bipartisan Pension and Health Benefit Study Commission. It has recommended hybrid retirement plans that feature some elements of a 401(k).
Such plans would reduce the state's long-term liabilities and perhaps give it the space to catch up funding the promises that are already on the books. However, because such plans shift risk off the government and taxpayers and onto workers, the states' public-sector unions have opposed them tooth and nail.
Should Sweeney run for governor, he will have to do so in the face of the state's most powerful interest group, which is also closely aligned with his party. Such is the fate of a fiscally responsible Democrat in a state with powerful public employee unions. Ultimately, voters will have to declare a victor in the war between the unions and Sweeney.
This piece originally appeared in the New Jersey Star-Ledger
Daniel DiSalvo is a senior fellow at the Manhattan Institute and associate professor of political science at the City College Of New York - CUNY
Photo by Andrew Burton / Getty