New Jersey Gov. Chris Christie proposed lowering pension benefits for state and local workers to help reduce the state’s $46 billion pension deficit.
Mr. Christie called on lawmakers to indefinitely freeze cost-of-living adjustments and roll back a 9% benefits increase approved in 2001.
His proposal would increase required pension payments to 8.5% of salary from 5.5%, and raise the retirement age to 65 for teachers and public workers. Those who retire before 65 would face a 3% penalty for each year.
Police and firefighters would be required to work 30 years before retiring with the current final benefit of 65% of pay, an increase from 25 years. Retirement after 25 years of service would lower the pension to 60% of pay under Mr. Christie’s plan.
He called on legislators to approve his package by the end of their legislative session in 98 days.
New Jersey’s seven public pension plans had a combined $67.4 billion as of Jan. 31, according to the state Division of Investment, which oversees state pension fund investments.
“These are ugly, hard truths. I no more want to say them than you want to hear them,” Mr. Christie said Tuesday at a town hall meeting in Gloucester Township. “We have two choices — get ourselves out of this hole or keep digging.”
New Jersey legislators in 2001 passed a measure that changed the formula used to determine pension benefits, by dividing their length of service by 55 instead of 60. That move resulted in a 9% benefit enhancement. Mr. Christie is seeking to reverse that law for current workers by basing the calculation on age 65.
Mr. Christie skipped a $3.1 billion pension contribution this fiscal year, saying he wouldn’t put money into a “broken” system.
The state’s governors have skipped most pension contributions for the past decade as they sought to lower spending. Earlier this year, Mr. Christie signed an overhaul calling for the state to pay at least $512 million of a scheduled $3.5 billion contribution next year.
“I’m going to take the steps I need to take to protect the taxpayers and public employees,” Mr. Christie said. Government workers “are going to thank me in 10 years when they have a pension to collect.”