More cuts to NJ pensions and health benefits? Not so fast, says Phil Murphy Sweeney's cost-cutting crusade puts Murphy in a bind

Charles Stile | NorthJersey

Show Caption Hide Caption Governor Murphy during his press conference on the budget impasse Governor Murphy during his press conference on the budget impasse

Senate President Stephen Sweeney's plan to wring savings out of government is also putting the squeeze on Gov. Phil Murphy.

Emboldened after out-dueling Murphy in last month's budget drama, the Gloucester County Democrat says he wants to enlist the governor as his "partner" in this smaller-, smarter-government enterprise. Murphy, the ex-diplomat, wants no part of it.

And that may be due to a simple reason: Sweeney's cost-cutting ax could fall hard on public employee unions, a die-hard Murphy constituency.

But the post-budget focus on cost cutting now poses a thornier, long-term dilemma for Murphy. Will he be able to effectively govern without inflicting pain on the very people who carried him to victory last November? And can he find a way to collaborate with Sweeney and Assembly Speaker Craig Coughlin, D-Middlesex, who loom as powerful counterweights and impediments to his agenda, or can he go it alone?

The last governor to "partner" with Sweeney was Republican Chris Christie, and that led to sweeping rollbacks in public worker pension and health benefits in 2011. It's a deal that government workers recite with bitterness — many union leaders and workers are still wary of Sweeney.

So it comes as no surprise that Murphy, in a roundabout way, said no when asked if he would team up with Sweeney for the next crusade. Murphy prefers to negotiate savings at the bargaining table.

"The problem I have of re-cutting a deal on the pension side is that we have left the public-sector employees at the altar now for 20 years,'' Murphy said in an interview with The Record and NorthJersey.com, referring to the reckless practice of shortchanging or skipping the state's annual pension payments since the mid-1990s.

Workers "have done what they said they would do. We haven’t as a state. And I think reclaiming the trust factor is a big deal. And that’s a big deal for me,'' he said.

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Yet the state's mounting costs are looming as a big deal in the next decade. Rising debt, pension, public-worker health care and school costs threaten to gobble up every new dollar coming into the state — those costs alone represented 90 percent of new spending in Murphy's first budget. The state's ability to invest in infrastructure, dispense property tax aid and respond to emergencies will be severely curtailed.

And the ability to raise new money is also limited. Tax hikes are politically unlikely in the next couple of years, and Murphy's hope that an economic turnaround will avert the need for tough-love cuts strikes many Trenton veterans as pie-in-the-sky dreaming.

"The road that we've got to be absolutely laser-focused on is to grow our way to a better tomorrow,'' Murphy said.

But tomorrow is already here for Sweeney, a fiscally conservative Democrat who has been clashing with public-employee unions over cost-containment issues for more than a decade.

"We really have to have a conversation or we'll not be able to fund anything but government pretty soon,'' Sweeney said in an interview. "We're at a place where we can't continue to raise taxes. We need to start fixing things."

In February, Sweeney rolled out a team of analysts, economists, lawmakers and veteran Trenton hands to explore ways — both unpopular and potentially painful — to rein in government costs, stabilize the pension system and revise local and state tax structure. The findings of the Economic and Fiscal Policy Work Group should be released later this month.

Some of the ideas being explored are potentially explosive — like installing tolls on interstate highways near the state border.

Many of them are old standbys that have been kicking around for years, like merging small municipalities and smaller school districts into regional ones. But many ideas also fall hard on public employees, Murphy's core supporters.

They include raising the retirement age from 65 to 67; capping the pensionable salary for all government workers except state judges; and moving collective bargaining from the local to the state level to "foster leverage" with state unions, according to a summary of the panel's topics for consideration.

The impact on public employees raises questions about Sweeney's motives.

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Sweeney, an ironworkers' union official, has had rocky relations with the government employee unions, especially after he backed out of a 2016 promise to post a constitutional amendment requiring the state to make its annual pension payments. Sweeney has tried to repair relations, but the New Jersey Education Association, the powerful teachers' union, retaliated by spending $5 million to defeat Sweeney in last fall's election. Sweeney won easily but spent heavily to defend his seat.

That campaign also soured his relations with Murphy, who was endorsed by the NJEA. Murphy refused to urge the union to curtail its take-out effort, leading Sweeney and his allies to suspect that Murphy hoped the union would prevail.

Sweeney denies that his cost-cutting push is spurred by payback, an attempt to make Murphy and his allies squirm.

"We're not beating up or picking on anyone,'' Sweeney said, noting that one possibility would be to dedicate any savings to the pension fund. "We need to have a conversation. They don't have to be hostile. There are some structural problems that have to be corrected. We want to work with them, not attack them, not fight with them."

Sweeney also argues that Murphy is ideally suited to work with him, given that he authored a 2005 report that outlined a series of reforms for health and pension benefits.

"Phil Murphy is the guy who can fix this,'' Sweeney argued. "I don't agree that we wait five years to fix it."

Yet Murphy, who created his own panel last February to advise him on ways to grow jobs and expand the economy, has his own plans. He is moving forward with a minimize-the-pain approach to unionized public workers. And he's in no rush to link arms with the leader who just outfoxed him on the budget.

Last week, for example, state Treasurer Elizabeth Muoio announced several administrative steps that could save $100 million in health benefits without cutting packages for state workers — what Murphy has called the "holy grail combo."

But there was also a subtext to the announcement. It was Murphy saying: "We can rein in costs without harming our base supporters or signing on to Sweeney's crusade."

Murphy was asked if he felt that Sweeney was determined to undermine him from the outset of the bitter budget negotiations. Not at all, Murphy replied. "It was a constructive process,'' he said.

That "process" forced Murphy to accept a humbling setback. He settled for a dramatically reduced version of his proposed tax on millionaires, and agreed to accept the short-term revenue-raising gimmicks he had vowed to end.

Now Murphy is confronting another fiscal "process" with the legislative leadership standing in the way.

Staff Writer Nicholas Pugliese contributed to this column.