June 09, 2015
The New Jersey Supreme Court sided with Gov. Chris Christie Tuesday, ruling that the state constitution did not prevent the governor from slashing contributions to the public employee pension system despite a law previously specifying the government's commitment.
The 5-2 ruling in favor of the governor means that the state will not have to scramble to fill a huge budget hole by the end of June.
"That the State must get its financial house in order is plain," said the majority's opinion written by Justice Jaynee LaVecchia. "But this Court cannot resolve that need in place of the political branches."
"They will have to deal with one another to forge a solution to the tenuous financial status of New Jersey’s pension funding in a way that comports with the strictures of our Constitution."
It was a high-stakes win for Christie, a Republican and potential presidential candidate, who trailed in polls behind rivals such as Wisconsin Governor Scott Walker, a fellow Republican.
While the opinion sides with Christie by ruling that an answer to the pension crisis must be found politically and not through a lawsuit, it also presents a problem for the governor who now has the state Supreme Court saying on record that he has failed to mend an issue that the governor has previously touted as one of his key achievements.
The state's pension system has about $83 billion of unfunded liabilities and was funded at only about 44 percent in fiscal 2014.
Christie praised the ruling in a statement.
"This decision is an important victory not only for our taxpayers who simply cannot afford these unsustainably high costs, but for limited, constitutional government that recognizes the proper role of the executive and legislative branches of government," Christie said. "The Court's position is clear, as is mine, 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."
Christie made the pension cuts last year because of a large, unexpected revenue shortfall. The cuts prompted lawsuits by public sector unions and retirees, who won in lower court when a state judge decided that Christie's landmark 2011 pension reforms created a contractual right obliging the state to pay its fair share into the retirement system.
A dissenting opinion was written by Justice Barry Albin using language similar to what the unions have been arguing since they started their lawsuit - Christie's decision not to honor the 2011 reforms is unfair.
"The decision unfairly requires public workers to uphold their end of the law’s bargain -- increased weekly deductions from their paychecks to fund their future pensions -- while allowing the State to slip from its binding commitment to make commensurate contributions," Albin wrote. "Thus, public workers continue to pay into a system on its way to insolvency."
His dissent was joined by the Chief Justice Stuart Rabner.
The court, in reversing a lower court ruling, said while it laments the "staggering" loss of public trust resulting from broken promises, the pension payment at issue was not a contractual obligation entitled to constitutional protection.
Christie cut a $1.6 billion state contribution to the public pension system last year because of a revenue shortfall. The state's pension system has about $83 billion of unfunded liabilities and was funded at only about 44 percent in fiscal 2014.
The stakes were high for Christie, who has trailed in polls behind rivals such as Wisconsin Governor Scott Walker, a fellow Republican. The governor's representatives were not immediately available for comment.
Christie is battling to improve his record on the economy in his own state, where he has come under fire for his handling of the state’s sluggish recovery, as well as a scandal around the 2013 George Washington Bridge closure, which saw a former ally plead guilty to federal charges.
"This will be a much-celebrated victory after a year and a half of bad headlines," said Tim Albrecht, a Des Moines, Iowa, Republican strategist. "The question is, will a lone victory be enough or will Chris Christie be able to parlay this into something bigger."
Christie is viewed unfavorably even in his own state according to one poll.
Christie is battling to improve his record on the economy, where he has come under fire for his handling of the state’s sluggish recovery, as well as a scandal around the 2013 George Washington Bridge closure, which saw a former ally plead guilty to federal charges.
"[Those impacted] are the police officers who protect our citizens and neighborhoods from violent crime; the firefighters who enter burning homes to save lives and salvage property; the teachers who educate our children," Albin said.
Even if the court had ordered Christie to restore the funding, the state has said it does not have the money to make the full payment.
"I don't see a good outcome under any scenario here, just because the deficits are so overwhelming," said Richard Dreyfuss, senior fellow at the Manhattan Institute.
The pension ruling is important for New Jersey and the state's economic health, Democratic Senate President Stephen Sweeney said in a statement.
Sweeney said lawmakers expect to pass a 2016 budget before the end of this fiscal year on June 30, one that fully funds the required pension payment.
They would do it through a tax hike on the state's high-income earners, a so-called millionaire's tax that Christie has repeatedly vetoed in the past.
This is a developing story. Check back for further updates.
Reuters contributed to this report.