The New Jersey Senate has given final approval to a bill raising pension and health benefits costs to the state's more than 500,000 government workers.
The Senate voted Monday to knock out a provision of the bill that would have restricted access to out-of-state health care.
The bill now goes to Republican Gov. Chris Christie, who has scheduled a bill signing Tuesday.
Christie has said the reforms should serve as a model for other states that are grappling with underfunded public worker pension programs.
"We are once again showing the people of New Jersey that our state is leading the way on the biggest challenges before us and remains unafraid to do what is hard but necessary," Christie said. "We are fixing our pension and health benefit systems in order to save them and in the process bringing fiscal sanity to our state."
The bill requires teachers, police officers and other public workers to pay a portion of their health insurance premiums based on income. Their pension contributions will also rise.
The state's retirement systems are underfunded by a combined $110 billion. Christie said the only way to guarantee pensions for the future was to have employees shoulder more of the costs.
Public worker unions were vehemently opposed. They said the underfunding was due primarily to years of skipped pension payments by the state. They flooded the Capitol with protests, saying health benefits should continue to be negotiated, not legislated.
Many Democrats agreed, and the bill drove a wedge through the party.
The bill was fast-tracked through the Legislature after Christie struck a deal with Democratic and GOP leaders of the Senate and Assembly. It was muscled through with support of Republicans and a few Democrats. Most Democrats remained opposed.
Christie has been touting the deal for days. Appearing on syndicated news shows over the weekend, he suggested that Washington, D.C., could learn from New Jersey on curbing spending.
"It's a monumental accomplishment, it really is. Very few states have done anything this sweeping in one piece of legislation," Christie told The Associated Press, calling underfunded pension and health care obligations "the core problems of government spending in the country."