State Budget - Ledger - Mulshine: Corzine gives us the business

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Published in the Star Ledger, Tuesday, June 20, 2006

[Column]
Corzine gives us the business

By PAUL MULSHINE

A deal is a deal. A contract is a contract.

So why isn't a promise a promise?

When he was running for governor last year, Jon Corzine promised over and over again that he was going to use his experience as chairman of Goldman-Sachs to run the state like a business.

But who ever heard of a business where the boss takes the side of the unions as the company is going broke?

That was Corzine's stance yesterday afternoon as he spoke to several thousand public employees who were demonstrating outside the Statehouse.

Here's what a good boss would have said:

"Lunch hour's over. How come you're not at work?"

Instead, Corzine parroted the slogans on the placards held up by the workers. Sounding more like a labor organizer than an executive, he told the crowd, "We're gonna fight for a fair contract."

The governor didn't say whom he was going to be fighting against, but everyone knew: Stephen Sweeney.

Sweeney is a state senator from Gloucester County who has committed the unpardonable sin of proposing to deliver on Corzine's campaign promises. Sweeney and two assemblymen -- all Democrats by the way -- proposed a program of pension and benefit reforms that would begin to restore some sort of balance to the pension fund.

Sweeney wasn't at the rally, which was probably good for his health. The former ironworker has a thick neck but probably not thick enough for the fate the seething crowd seemed to envision for him.

But after the crowd had dissipated, Sweeney encountered a few union people in the hall outside the Senate chambers. I watched as he did what the governor should have done: slowly and patiently ex plained why pension and benefit reform is unavoidable. One of the slogans at the rally was an endorsement of the governor's proposed 1-cent increase in the sales tax. "A penny will go a long way," it read.

No, it won't. And Sweeney explained why to the union reps. That 1-cent increase in the sales tax might produce about $1 billion a year in new state revenue. But the deficit in the retirement funds is dozens of times larger than that.

"We have a budget problem, and it's not going away," Sweeney explained in the hallway. "You're talking about a $27 billion pension fund liability. But no one's talking about a $20 billion health care liability."

That penny hike in the sales tax would have little impact on a combined deficit of about $47 billion. Unless pensions and benefits are reduced, Corzine will be asking for another tax increase next year and another one the year after that.

The only way to avoid that, Sweeney told the union reps, is by adopting a two-tiered system. Current employees would keep their scheduled retirement benefits, perhaps with some reasonable reductions. But new hires would have to come in under an entirely new pension system, probably one similar to the 401(k) system popular in the private sector.

You can quibble about the exact structure of those reforms, but simple mathematics says they're needed. Another former Goldman-Sachs exec, Philip Murphy, chaired a commission that recently issued a report on the pension system. That report concluded the state should pump $12 billion into the pension fund right away, perhaps by selling some asset. And that would be just a down payment.

"Everyone's got to give some blood here," said Murphy when I called him last week. "The unions are going to have to come to the table."

Like Sweeney, Murphy is a Democrat. In fact, he's the finance chairman of the Democratic National Committee. But numbers are numbers, and the numbers in his commission's report are depressing.

"It's not a question of blaming anyone," said Murphy. But if any blame is to be assessed, it falls more on the politicians than on the union bosses.

"The state ignored this for too long," he said.

Both parties pandered to public employees while failing to fund the new benefits. In 2001, for example, the Republicans boosted pensions by 9 percent in an attempt to hang on to the Statehouse. It didn't work.

But the Democrats haven't been much better. Last year, for example, they added what will be thousands of domestic partners to the pension rolls with full knowledge of the growing deficit.

That deficit is now so big that it simply can't be funded, says Sweeney.

"You can't put enough money into the pensions and benefits side to make this up," he said.

As Sweeney patiently explained this to those union workers in the hallway, they seemed to be getting the point.

Maybe next, he can explain it to the governor.

Paul Mulshine is a Star-Ledger columnist. He may be reached at pmulshine@starledger.com.

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