New Jersey Gov. Chris Christie and the state's teacher's union have agreed to a "roadmap to reform" to begin solving the state's pension challenges, the governor announced in his 2016 budget address Tuesday afternoon.

Christie said during his speech to the state legislature that the New Jersey Education Association has agreed to work with him on a pension reform plan proposed by the New Jersey Pension and Health Benefit Study Commission in its final report released Tuesday. Christie said he authorized the commission to begin direct negotiations with the NJEA on his behalf.

"For the last five months the commission quietly has worked with the NJEA to try to find common ground," said Christie, a Republican who has in the past clashed with the union over pension and tenure issues. "I'm pleased to announce today that the commission with my support has reached an unprecedented accord with the NJEA on a roadmap to reform to solve our long-term problems with the pension and health benefits systems."

NJEA president Wendell Steinhauer said in a statement that no agreement on pensions is in place, but the union will continue working toward a solution. He said his members have discussed a proposal from the study commission that would create a new union-managed pension system funded by employees and employers. This would replace the current system, which would be frozen at current levels with existing liabilities "funded by a constitutionally-guaranteed funding source," according to Steinhauer.

"While we believe some of the concepts in the report are worth exploring further, we have not yet agreed to anything in the report and we will not agree to some of what it contains," said Steinhauer in a statement. "But we will be at the table, working in good faith with all parties to arrive at solutions that fix the problems the state has created, while protecting the security of our members' pensions and health benefits."

Christie's budget rollout came a day after he was dealt a legal setback by State Superior Court Judge Mary Jacobson, who ruled that his veto from the fiscal 2015 budget of a scheduled actuarially based annual payment to pension funds violated the state constitution. Christie had argued that the state could not afford the $1.57 billion contribution because of a $2.7 billion budget gap. Unions who filed suit against Christie argued that a 2011 law implementing a scheduled ramp-up of the state's pension funding for seven years created a contractual right for the money to go to employee pension funds.

Christie did not address Monday's pension ruling in the budget speech, but spokesman Michael Drewniak said in a statement issued to The Bond Buyer late Tuesday morning that the decision would be appealed..

Christie said he endorses the Commission's roadmap reform plan and if the NJEA agrees to it by June, the pension system will be "returned to health." He said closing the pension-funding gap without reforms would require increasing the sales tax to 10% or hiking the income tax by 29%.

"Sometimes it doesn't seem immediately apparent, but this problem is eating us away little by little," said Christie. "Every increase in the dollars devoted to pension and health benefits is a decrease in dollars invested in other priorities, creating a series of missed opportunities to build a better New Jersey."

Christie said his $33.8 billion fiscal 2016 budget proposal, outlined Tuesday without many specifics, is his sixth in a row that contains no new taxes and would have $2.3 billion less discretionary spending than 2008. He said the $1.3 billion taxpayers would pay toward the pension system would be the largest single pension payment in New Jersey history.

Marc Pfeiffer, assistant director of the Bloustein Local Government Research Center at Rutgers University, said he is not surprised that much of Christie's speech was devoted to combatting the state's pension challenge rather than offering budget details.

"It is clearly the elephant in the room when it comes to the state budget," said Pfeiffer. "Both sides need to recognize that there aren't a lot of other good solutions."

Christie's budget will need to be approved by the Democratic-controlled State Assembly and Senate.

"For five years, retirement funds for teachers, public safety workers, and public employees have been used as a credit card to cover the state expenses," Assembly Deputy Speaker Wayne DeAngelo said in a statement Tuesday after the pension commission report was released and the judge ruled against Christie in the pension funding case. "We can no longer use these working-class individuals to solve the problems that the administration has chosen to push down the road by slashing and postponing pension payments."

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