By Dan Aubrey
Although New Jersey’s 2015 fiscal year ended with the Jersey Supreme Court ruling that the Christie Administration did not break a contractual agreement by reducing public pension payments as promised, the decision is anything but final or settled.
The ruling was in response to New Jersey Supreme Court hearing where attorneys representing Governor Christie asked the court to overturn a Superior Court ruling requiring the Christie Administration to honor a 2011 union pension payment agreement known as Chapter 78 — named after the public pension statute.
The union-approved agreement was built on Christie’s promise to fully fund pension obligations in exchange for union members agreeing to higher contributions and lower cost-of-living raises.
But when the Christie Administration diverted $1.57 billion in pension funds in 2014 to balance the state’s 2015 fiscal budget, New Jersey State Troopers Fraternal Organization president Christopher Burgos entered a suit to grant the union’s request to require the administration to fund the pensions as agreed.
The suit — Burgos v. State of New Jersey — gained the support of other state and public unions, including the Communications Workers of America and New Jersey Education Association.
The lower court ruled earlier this year in favor of the unions, interpreted Chapter 78 as a contract, and ordered the governor to work with the state legislature to find a way to replace the funds Christie diverted to balance the state’s 2015 fiscal year budget.
The administration in turn appealed and argued that Chapter 78 was unconstitutional, that the unions were attempting to subvert the state constitution by violating the state’s appropriations clause, and that the state administration and legislature could not be forced to support a particular program without voter approval.
Five of the seven state Supreme Court justices generally sided with the administration, but the court statement — written by Justice Jaynee LaVecchia — also noted “to be clear, the Court emphasizes that it is not declaring Chapter 78 unconstitutional. Chapter 78 remains in effect, as interpreted, unless the Legislature chooses to modify it.”
While the court’s decision noted the “good intentions” of Chapter 78 to promote the fiscal health of the retirement systems, the justices found that Chapter 78 was not a legally enforceable contract entitled to constitutional protection.
Among the points the justices used in their decision are New Jersey State Constitution’s Debt Limitation Clause and the inability for the state to create a legally binding contract compelling multi-year financial payments in the sizable amount called for by the statute, the legality of the governor’s line item vetoes to the 2015 budget made in response to budget shortfalls, the failure of the legislature to overturn the cuts, and the need to involve the general electorate in the approval of a general appropriation law, such as Chapter 78.
Reactions to the rulings showed that positions are still fixed and that the pension situation is still the point of contention and concern.
“The court’s position is clear, as is mine,” said Christie after the decision. “It is time to move forward and work together to find a tangible, long-term solution to make our pension system and public employee health benefit costs affordable and sustainable for generations to come. In light of today’s decision, I urge all interested parties to come back to the table and partner with me to finally solve this problem once and for all.”
However, the statement released by CWA NJ director Hetty Rosenstein shows that a return to the table will be difficult. “We hoped the (Supreme Court) would uphold the basic tenet that the law is what it says it is. But the fact that they didn’t rule for us is merely another obstacle that we will overcome. Governor Christie broke his word, and whatever shred of credibility he had left when he refused to fund the pension. Our union will never permit the destruction of the pension system. If it is unconstitutional to meet the pension obligation, perhaps we will have to change the constitution. But one thing I know is this: we will fight, and we will win,” wrote Rosenstein.
NJEA president Wendell Steinhauer added similar sentiment by saying, “The only beneficiary of this ruling is Governor Christie, who can continue to deceive New Jersey residents into believing that his budgets have been balanced. For anyone who will be in New Jersey after 2017, the cost of his deception will be staggering. This ruling has given the governor permission to kick the pension can down the road for the rest of his term. By doing that, the court has now increased the state’s future pension liability and ensured that taxpayers will bear a much greater burden in years to come. The court may have given the governor a pass on funding the pensions, but the state’s liability remains. Responsibility for the health of the pension system now rests solely with the Legislature, which must step up and act responsibly.”
The Supreme Court also noted its concern: “The state must get its financial house in order. The need is compelling in respect of the state’s ability to honor its compensation commitment to retired employees.” It also noted that the two branches needed “to forge a solution to the tenuous financial status of pension funding in a way that comports with the strictures of our constitution.”
Meanwhile the governor is calling for pension reforms, New Jersey State Troopers Fraternal Organization president Burgos says that his union will “exhaust every legal avenue available and not just wave the white flag of defeat,” and a suit filed in January by the boards of trustees of the Public Employees’ Retirement System, the Teachers’ Pension and Annuity Fund of New Jersey, and the Police and Firemen’s Retirement System waits in the wings.
And that’s just the start of a new fiscal year.
