Christie’s Pension-Funding Cuts Upheld by High Court

     TRENTON, N.J. (CN) – The New Jersey Supreme Court today rejected an attempt by unions to challenge cuts by Gov. Chris Christie to the state’s funding of public pensions.
     Tension over the issue has been brewing for years as the Republican governor saw pension funding as a means to fill the budget hole he inherited, a deficit that now approaches $3 billion, while keeping his promise not to raise taxes.
     As Christie made moves in 2011 to cut state contributions to the public pensions – which were also funded by employee contributions and investment returns – Democratic lawmakers adopted Chapter 78 to give public employees a “contractual right” a fully funded pension system.
     Chapter 78 called for an incremental rise in New Jersey’s payments to pension funds, and New Jersey made the required contributions in fiscal year 2012 and 2013.
     Christie’s first cuts took effect in fiscal year 2014, when the pension was underfunded by nearly $1 million, but still met Chapter 78’s threshold.
     The budget proposal for 2015, issued over a year ago, funded the pensions as well, but Christie released an executive order on May 20, 2014, that reduced state payments by almost $1.6 billion, below the Chapter 78 threshold.
     David Rosen, the New Jersey Legislature’s budget and finance officer, warned that the cuts would force employees to contribute more, but Christie’s attorneys justified the move under the debt-limitation clause of the state constitution.
     Several class actions ensued from state police unions, the AFL-CIO, teachers unions, and other public employees, and the claims were eventually consolidated in Mercer County Superior Court.
     Though a judge there had sided with the unions, the state Supreme Court reversed for Christie, 5-2, on Tuesday.
     “The court does not question the good intentions of those participating in the enactment of Chapter 78 or that they intended to create a contractual arrangement to address future payments into the funds to promote the fiscal health of the retirement systems,” Justice Jaynee LaVecchia wrote for the majority. “But a strictly legal question is before the court. That, and that alone, is what must be resolved.”
     A representative for one of the plaintiffs described the ruling as giving New Jersey “a ‘pass’ on fiscal contractual obligations.”
     “I would warn anyone doing business or intending to do business with the state of New Jersey to be wary,” Christopher Burgos said in an email, adding that the majority has given “the state an out if they don’t want to fulfill a contract.”
     Burgos, the president of the State Troopers Fraternal Association of New Jersey, added the plaintiffs will appeal to the U.S. Supreme Court.
     The 68-page lead opinion emhasizes that political infighting had no bearing on the case.
     “That the state must get its financial house in order is plain,” LaVecchia wrote. “But the court cannot resolve that need in place of the political branches. They will have to deal with one another to forge a solution.”
     The unions failed to sway the court that the debt-limitation clause on which Christie relied applied only to new debts or liabilities, not paying “overdue ordinary expenses” like pensions.
     Finding that the clause “is clearly written to have a wide sweep,” LaVecchia said it covers any debts and applies to various financial arrangements.
     The court also rejected the unions’ claims that Chapter 78 created an enforceable contract, finding that the Legislature lacked the authority to make such an agreement without voter approval.
     Chief Justice Stuart Rabner joined the dissent by Justice Barry Albin, which disputes this point. They said Chapter 78 does count as a binding contract, and that nullifying it would violate the U.S. Constitution.
     “If the past is prologue, the solvency of the pension system is in great peril,” Albin wrote. “The Federal Contracts Clause was intended to protect contractual rights from the whims of the majority.”     
     LaVecchia meanwhile chided that “the hyperbole of the dissent is no replacement for legal precedent, and it does not nullify state constitutional law interdicting the formation of the so-called binding contractual right asserted by plaintiffs.”
     Voicing compassion for New Jersey’s pensioners, LaVecchia noted that “the loss of public trust due to the broken promises made though Chapter 78’s enactment is staggering.”
     “We recognize that the present level of the pension systems’ funding is of increasing concern, as does the dissent,” she added. “But this constitutional controversy has been brought to the judiciary’s doorstep, and our obligation is to enforce the state Constitution’s limitations on legislative power.”
     The pension funding issue has soured relations between the Christie administration and unions, even stymieing negotiations over state worker contracts.
     AFSCME Council 1 president Ron McMullen warned last month that, if the state Supreme Court did rule for the unions, “I don’t think negotiations are going to go well.”

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