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Senate President Stephen Sweeney, right, was criticized by state unions in 2011 for passing a pension overhaul with Gov. Chris Christie. Now, he must decide whether Christie can shirk parts of that same overhaul.

(Star-Ledger file photo)

TRENTON — No one wants to be the politician who guts spending, raises taxes or reneges on a promise.

But thanks to Gov. Chris Christie and a sluggish economic recovery in New Jersey, those are the choices facing Democratic leaders in the state Legislature. A new state budget is due on Christie’s desk in two weeks, the ball is in the Democrats’ court, and no one can say yet what the final product will look like.

The biggest unknown: Will the budget include a $2.25 billion payment to the state’s underfunded pension system — or the much smaller $681 million infusion Christie has proposed?

In an about-face after signing a series of laws meant to shore up the pension system, Christie says reducing the pension payment is the only viable way to close an unexpected $1.7 billion revenue shortfall for the fiscal year beginning July 1. His plan is being challenged in court by more than a dozen unions.

Democrats have vowed they will try to block it in the Legislature, but that would mean finding more than $1 billion in cuts — or proposing hefty tax increases.

The stakes are high for Senate President Stephen Sweeney (D-Gloucester), a union ironworker who insiders say is laying the groundwork to run for governor when Christie leaves. Sweeney had threatened to shut down the government this year if Christie did not make the full pension contribution, but a spokesman last week declined to say that was still an option.

"I have no idea which way this is going to go," said state Sen. Ray Lesniak (D-Union), a veteran lawmaker who is proposing to raise taxes on income above $350,000 and repeal the estate tax this year instead of cutting the pension payment. "I don't think anyone, Republican or Democrat, wants to shut down the government. That's no solution."

Spokesmen for Sweeney and Assembly Speaker Vincent Prieto (D-Hudson) declined to say whether the full pension payment would be made.

"The Senate president has been talking to various labor leaders on this issue and those discussions remain ongoing," said a Sweeney spokesman, Chris Donnelly.

Assemblywoman Sheila Oliver (D-Essex), who was speaker when the pension laws were passed, said the first big budget discussion in the lower house will happen at a caucus meeting today. "In terms of a ‘Democratic Assembly caucus position,’ we don’t know yet," she said, adding that she "wholeheartedly" supports Lesniak’s plan.

Fellow Democratic senators and union leaders laced into Sweeney in 2011 — one union official even called him a Nazi general at a rally outside the Statehouse — for teaming up with Christie to raise workers' costs for health and retirement benefits.

In exchange, another law in the pension package guaranteed higher payments into workers’ retirement system every year — including the $2.25 billion scheduled for the coming budget — to save it from financial ruin.

Three years later, Sweeney and the Democrats now have to decide whether they will allow Christie to short those same payments they designed together. Whatever move Sweeney makes is likely to follow him into a Democratic primary, where the support of public-worker unions can make or break candidates, political observers say.

"If the governor doesn’t make the payment, essentially, they’re both reneging on a deal that Sweeney forced his hand into," said Brigid Harrison, a political science professor at Montclair State University. Union support is one of the things that elevated Sweeney to become Senate president, she noted. And if Sweeney agrees to short the pension system, the mountain of debt it would accumulate as a result would become squarely his problem if he were to run for governor and win.

"And the union employees will still have to pay more for their benefits, deal with the increase in their retirement age, and retirees will still have a freeze on their cost-of-living adjustments," Harrison said.

In a letter sent to legislators last week, Hetty Rosenstein, the state director for the Communications Workers of America union, wrote that "it would be a stunning betrayal for any Democrat to vote for any budget agreement that fails to raise revenues."

"And it would be a betrayal to support an agreement that does not include the entire pension payment," Rosenstein wrote.

In an interview, however, Rosenstein said it was too early to say what today’s pension problems will mean for the next gubernatorial election, which would be held in 2017 if Christie serves out his full second term. "Nobody even knows who’s running yet," she said.

Assemblyman Declan O’Scanlon (R-Monmouth), the Republican budget officer in the Assembly, said the state cannot afford to pay its pension bills due to slower-than-expected growth, and if the unions win their court battle, "they will rue the day they prevailed, because the other options are massive cuts to schools and health-care, or massive tax increases that will devastate the New Jersey economy."

"Senator Sweeney needs to have the guts to do the right thing, even if it means costing him the Democratic nomination for governor," he said. "I know in his heart that Sweeney’s a man who desires to do the right thing. He showed real promise as a leader in 2011. We need that gutsy guy now."

But Lesniak and Oliver said the ball is in Christie’s court, not Sweeney’s. Even if the Legislature sends him a budget with a full pension payment, Christie could cut it again by using his line-item veto power, which Democrats don’t have enough votes to override.

"We’ve got to bite the bullet and deal with raising revenue in this state," Oliver said. "I know this governor does not want to ruin his national reputation by raising taxes, but I think he has to make a choice between his national reputation and the people of New Jersey."

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