N.J.’s Highest Court Favors Christie Administration on Pension Payments
New Jersey public workers are dealt a blow in pension contribution legal ruling from the state’s highest court
New Jersey’s highest court ruled on Tuesday that Gov. Chris Christie’s administration didn’t overstep its authority in cutting funding for benefits for state workers, a victory for the Republican governor as he nears an announcement on whether he is running for president.
In the closely watched case, the New Jersey Supreme Court found the Christie administration didn’t defy its contractual obligations in slashing $1.6 billion from his $33 billion budget in the fiscal year that ends June 30.
The court’s majority, writing in a 5-2 decision, found the state needed to honor its obligations to retirees, but that a pension law signed by the administration wasn’t an enforceable contract.
Deciphering how to fund the pension system was a matter best left for the political branches of government, the justices wrote.
“The responsibility for the budget process remains squarely with the Legislature and executive, the branches accountable to the voters through the electoral process,” wrote Justice Jaynee LaVecchia in the majority opinion. “This is not an occasion for the Judiciary to act on the other branches’ behalf.”
Chief Justice Stuart Rabner joined Justice Barry Albin in dissenting. In their opinion, the justices wrote that public workers had a protectable contractual right to the pension funding through a law signed by Mr. Christie in 2011. The law required the state provide escalating pension funding in exchange for worker concessions.
The decision was a vital win for Mr. Christie and will allow his administration to push forward with budget negotiations in the coming weeks. The state must pass a new budget by June 30 for the coming fiscal year.
New Jersey Gov. Chris Christie speaks at the Politics and Eggs breakfast meeting at in Manchester, New Hampshire on Tuesday. Photo: Jim Cole/Associated Press Mr. Christie was out of New Jersey Tuesday for a series of political events in New Hampshire as he eyes a presidential bid. In a statement, he called the ruling a victory for taxpayers and for “limited, constitutional government.”
Mr. Christie said it was time to rekindle negotiations over further benefit cuts to make the system sustainable. “I urge all interested parties to come back to the table and partner with me to finally solve this problem once and for all,” he said.
Union leaders blasted the decision and promised to continue to fight for the administration to make its pension payments. State Democratic leaders said they would continue to push for more pension funding in the coming budget.
“The ruling changes nothing,” said Assembly Speaker Vincent Prieto, a Democrat. “We’ve always intended to fully fund our obligations.”
New Jersey’s pension system representing some 773,000 state workers faces a funding shortfall of more than $37 billion. The system, valued around $80 billion, is funded at roughly 51%, and New Jersey makes its annual pension contributions at one of the lowest levels among the states.
The 2011 law required escalating pension contributions in exchange for concessions from public sector unions. The deal helped fuel Mr. Christie’s national reputation as a Republican willing to take on unions.
But last year, the Christie administration cut $2.4 billion in pension contributions across two fiscal years, citing lower than expected tax collections. More than a dozen unions sued to stop the cuts.
A lower court judge ruled Mr. Christie could make the cut for last fiscal year, but decided in February that the administration had violated workers constitutional rights to pension funding. She ordered lawmakers and the administration to devise a solution.
The Supreme Court decided to take up the matter and held hours of oral arguments in May.
New Jersey Supreme Court Associate Justices Lee A. Solomon, left, and Jaynee LaVecchia, right, listen as Associate Justice Anne M. Patterson asks a question during a hearing on the Christie administration’s public worker pension system in May. A lower-court judge ordered the state to pay up. The administration appealed, arguing the law had been misinterpreted.
Justices writing for the majority agreed with the Christie administration in arguing that the pension reform law didn’t create a legally enforceable contract that would be protected by the federal and state constitutions. The authority to compel payments outlined in the law rests in the budgetary appropriation process, not the courts, they wrote.
Only voter approval of the law through a ballot question could enshrine the law’s provisions in the state Constitution and make them legally enforceable, the justices wrote.
Still, the majority took the administration to task for failing to provide the obligated pension funding, saying the move resulted in a loss of public trust that was “staggering.”
“That the state must get its financial house in order is plain,” they wrote in the 68-page opinion.
In their minority option, the dissenting justices wrote that the decision to not enforce a state contract would have “far-reaching, negative consequences” and could raise concern among other state contractors about whether theirs would be honored.
They pointed to instances when Mr. Christie referred to the law as a contract as indication of its binding nature, and wrote that the administration had diluted the authority of its own law “when the bill came due.”
“The governor and legislature cannot walk away from the contractual commitments they signed into law,” they wrote.
Mr. Christie’s proposed $34 billion budget included a $1.3 billion pension payment, lower than the roughly $3 billion the administration was expected to make for the budget beginning in July.
Democrats have pledged to make the full pension payment by imposing a tax increase on wealthy residents. Mr. Christie has said he won’t raise taxes.
Earlier this year, Mr. Christie endorsed the recommendations of a commission he established to recommend additional cuts to the benefit system for state workers to try to make it more sustainable.
The commission called for a freezing of the existing pension system, shifting to a hybrid style pension that included elements of a defined-contribution benefit plan and scaling back on health benefits. In exchange, Mr. Christie would push for a constitutional amendment to require the state make annual benefit contributions.
Commissioners have continued to refine the plan since it was released in February, but getting the pension payment amendment on the ballot for this November now seems unlikely.
“I think we have run out of time,” said Tom Healy, chairman of the commission and a former Goldman Sachs executive.
The commission had made some headway with union officials about embracing elements of its plan, most notably the New Jersey Education Association. Those talks have now stopped, though commissioners said they are making some progress in selling municipal officials on their plan.
http://www.wsj.com/articles/n-j-s-h...administration-on-pension-payments-1433860848
New Jersey public workers are dealt a blow in pension contribution legal ruling from the state’s highest court
New Jersey’s highest court ruled on Tuesday that Gov. Chris Christie’s administration didn’t overstep its authority in cutting funding for benefits for state workers, a victory for the Republican governor as he nears an announcement on whether he is running for president.
In the closely watched case, the New Jersey Supreme Court found the Christie administration didn’t defy its contractual obligations in slashing $1.6 billion from his $33 billion budget in the fiscal year that ends June 30.
The court’s majority, writing in a 5-2 decision, found the state needed to honor its obligations to retirees, but that a pension law signed by the administration wasn’t an enforceable contract.
Deciphering how to fund the pension system was a matter best left for the political branches of government, the justices wrote.
“The responsibility for the budget process remains squarely with the Legislature and executive, the branches accountable to the voters through the electoral process,” wrote Justice Jaynee LaVecchia in the majority opinion. “This is not an occasion for the Judiciary to act on the other branches’ behalf.”
Chief Justice Stuart Rabner joined Justice Barry Albin in dissenting. In their opinion, the justices wrote that public workers had a protectable contractual right to the pension funding through a law signed by Mr. Christie in 2011. The law required the state provide escalating pension funding in exchange for worker concessions.
The decision was a vital win for Mr. Christie and will allow his administration to push forward with budget negotiations in the coming weeks. The state must pass a new budget by June 30 for the coming fiscal year.
New Jersey Gov. Chris Christie speaks at the Politics and Eggs breakfast meeting at in Manchester, New Hampshire on Tuesday. Photo: Jim Cole/Associated Press Mr. Christie was out of New Jersey Tuesday for a series of political events in New Hampshire as he eyes a presidential bid. In a statement, he called the ruling a victory for taxpayers and for “limited, constitutional government.”
Mr. Christie said it was time to rekindle negotiations over further benefit cuts to make the system sustainable. “I urge all interested parties to come back to the table and partner with me to finally solve this problem once and for all,” he said.
Union leaders blasted the decision and promised to continue to fight for the administration to make its pension payments. State Democratic leaders said they would continue to push for more pension funding in the coming budget.
“The ruling changes nothing,” said Assembly Speaker Vincent Prieto, a Democrat. “We’ve always intended to fully fund our obligations.”
New Jersey’s pension system representing some 773,000 state workers faces a funding shortfall of more than $37 billion. The system, valued around $80 billion, is funded at roughly 51%, and New Jersey makes its annual pension contributions at one of the lowest levels among the states.
The 2011 law required escalating pension contributions in exchange for concessions from public sector unions. The deal helped fuel Mr. Christie’s national reputation as a Republican willing to take on unions.
But last year, the Christie administration cut $2.4 billion in pension contributions across two fiscal years, citing lower than expected tax collections. More than a dozen unions sued to stop the cuts.
A lower court judge ruled Mr. Christie could make the cut for last fiscal year, but decided in February that the administration had violated workers constitutional rights to pension funding. She ordered lawmakers and the administration to devise a solution.
The Supreme Court decided to take up the matter and held hours of oral arguments in May.
New Jersey Supreme Court Associate Justices Lee A. Solomon, left, and Jaynee LaVecchia, right, listen as Associate Justice Anne M. Patterson asks a question during a hearing on the Christie administration’s public worker pension system in May. A lower-court judge ordered the state to pay up. The administration appealed, arguing the law had been misinterpreted.
Justices writing for the majority agreed with the Christie administration in arguing that the pension reform law didn’t create a legally enforceable contract that would be protected by the federal and state constitutions. The authority to compel payments outlined in the law rests in the budgetary appropriation process, not the courts, they wrote.
Only voter approval of the law through a ballot question could enshrine the law’s provisions in the state Constitution and make them legally enforceable, the justices wrote.
Still, the majority took the administration to task for failing to provide the obligated pension funding, saying the move resulted in a loss of public trust that was “staggering.”
“That the state must get its financial house in order is plain,” they wrote in the 68-page opinion.
In their minority option, the dissenting justices wrote that the decision to not enforce a state contract would have “far-reaching, negative consequences” and could raise concern among other state contractors about whether theirs would be honored.
They pointed to instances when Mr. Christie referred to the law as a contract as indication of its binding nature, and wrote that the administration had diluted the authority of its own law “when the bill came due.”
“The governor and legislature cannot walk away from the contractual commitments they signed into law,” they wrote.
Mr. Christie’s proposed $34 billion budget included a $1.3 billion pension payment, lower than the roughly $3 billion the administration was expected to make for the budget beginning in July.
Democrats have pledged to make the full pension payment by imposing a tax increase on wealthy residents. Mr. Christie has said he won’t raise taxes.
Earlier this year, Mr. Christie endorsed the recommendations of a commission he established to recommend additional cuts to the benefit system for state workers to try to make it more sustainable.
The commission called for a freezing of the existing pension system, shifting to a hybrid style pension that included elements of a defined-contribution benefit plan and scaling back on health benefits. In exchange, Mr. Christie would push for a constitutional amendment to require the state make annual benefit contributions.
Commissioners have continued to refine the plan since it was released in February, but getting the pension payment amendment on the ballot for this November now seems unlikely.
“I think we have run out of time,” said Tom Healy, chairman of the commission and a former Goldman Sachs executive.
The commission had made some headway with union officials about embracing elements of its plan, most notably the New Jersey Education Association. Those talks have now stopped, though commissioners said they are making some progress in selling municipal officials on their plan.
http://www.wsj.com/articles/n-j-s-h...administration-on-pension-payments-1433860848
