New Jersey assembly passes worker benefits reform

Reuters News
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Posted: Jun 23, 2011 10:43 PM
New Jersey assembly passes worker benefits reform

NEW YORK (Reuters) - New Jersey's Democratic-led Legislature gave final approval on Thursday to a plan that would force public workers to pay more for benefits -- a signature issue for Republican Governor Chris Christie.

The bill, which was bitterly opposed by public-sector unions, would raise the retirement age and increase employee contributions to their pension and healthcare plans, reducing the state's burden by potentially tens of billions of dollars.

"We are putting the people first and daring to touch the third rail of politics in order to bring reform to an unsustainable system," Christie said in a statement.

He said pension reform would save New Jersey taxpayers more than $120 billion over the next 30 years, while reform of the state health benefits system will save an additional $3.1 billion over the next decade.

Wall Street rating agencies and investors in the $2.9 trillion U.S. municipal bond market are increasingly focused on unfunded pension liabilities as they weigh the credit-worthiness of state and local government debt.

Reining in the state's costs for its 500,000 public workers has been a top priority for Christie since he took office in 2010. The issue has helped vault him to national prominence, where he is seen as a future presidential candidate.

Critics say Christie hurt the state's fiscal standing by skipping a $3 billion payment to the pension fund last year. He pledged to make a $506 million payment to the fund only if the Legislature approved his pension reform plan.

Pension costs are ballooning in states across the country, and promised payments have not been funded. New Jersey has one of the largest unfunded pension liabilities of any state.

Despite union demonstrations in the capital, Trenton, the situation in New Jersey has been in sharp contrast to pro-union protests that all but shut down the Wisconsin state capital, Madison, in February, when thousands of demonstrators took to the streets to protest a plan to curb collective bargaining rights.

(Reporting by Edith Honan; Editing by Peter Cooney)