New Jersey Gov. Chris Christie is betting on a sharp revenue increase to help finance a $1.1 billion state pension contribution — the largest in the state's history — in his fiscal 2013 state budget.
Mr. Christie on Tuesday proposed a $32.1 billion spending plan for the fiscal year that counts on tax revenue increasing the most since the recession began in 2007. The budget, which is $2.4 billion more than the plan enacted last year, would more than double the pension contribution to $1.1 billion to the New Jersey Division of Investment, Trenton — which oversees $67.2 billion in pension assets — while cutting income and business taxes.
The governor's budget calls for the largest jump in revenue since collections increased 8.7% in fiscal 2007 from a year earlier. Yet in the first six months of fiscal 2012, revenue trailed forecasts by 3.2%, according to figures from Treasurer Andrew Sidamon-Eristoff.
Rising pension costs and a slow recovery prompted Standard & Poor's, Moody's Investors Service and Fitch Ratings to lower New Jersey's credit grade last year. While first-half revenue rose 3.2% compared with the same period a year earlier, it was $326 million less than targets.
The state's estimated pension deficit fell to $36.3 billion after Mr. Christie signed bills last year that raised workers' contributions to the pension plan and health-care expenses, increased the minimum retirement age for new employees to 65 from 62 and froze cost-of-living increases. Yet the governor's budget didn't include the $3 billion recommended pension payment and the unfunded liability swelled to $41.8 billion for the 12 months through June.
A 2010 law required the state to phase in full payments over seven years after a decade of lapsed funding. Mr. Christie budgeted $484 million payment for the current fiscal year. Actuaries recommended the state put in $3 billion. His plan calls for more than $1 billion in payments in fiscal 2013.
The unfunded liability will continue to grow, however, because of the failure to make full contributions until fiscal 2018, Fitch has said.
The pension payment represents about 3.4% of the total budget this year, Mr. Christie said in his speech. “My proposal of $1.1 billion for pensioners in this state reinforces my commitment to the security and financial future of all public workers,” he said. “Stand with me on this commitment. Let us live up to our word.”