TRENTON, N.J. — New Jersey’s top court sided with Gov. Chris Christie on Tuesday in a legal fight with public worker unions over pension funds, sparing a new state budget crisis this month but leaving unanswered questions about how the state will pay for the pensions it has promised.
The state Supreme Court overturned a lower-court judge’s order that told the Republican governor and the Democrat-controlled Legislature to work out a way to increase pension contributions for the current fiscal year, which ends June 30.
In a 5-2 ruling, the court said that state constitutional provisions calling for an annual budget process trump a 2011 law requiring high pension contributions from the state.
“That the State must get its financial house in order is plain,” Justice Jaynee LaVecchia wrote in the majority opinion. “The need is compelling in respect of the State’s ability to honor its compensation commitment to retired employees. 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.”
She wrote that the ruling would not lead the court to be called upon to arbitrate budget disputes constantly.
LaVecchia also noted that the state is obligated to pay individual retirees their pensions. That’s not in danger this year, but unions say the funds could start going insolvent within the next decade unless changes are made.
Justice Barry Albin dissented and was joined by Chief Justice Stuart Rabner.
“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.”
Christie, who is considering seeking the Republican presidential nomination, hailed the ruling from a court with which he has had major disagreements in the past.
“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,” he said in a statement. He called on lawmakers and unions to join him in solving pension problems “once and for all.”
Governors from both political parties have been skipping public employee pension fund contributions entirely or making small ones over the past two decades, creating a major funding shortfall.
One of Christie’s major achievements as governor has been the 2011 deal that required workers to pay more and raised retirement ages while also setting up a system for the state to make up for the shortfalls over seven years of escalating contributions.
But amid an unexpected revenue shortfall last year, Christie reduced the state’s contributions by more than half for fiscal 2014 and 2015 and made a similar proposal for the budget that kicks in on July 1.
The governor says he has a new plan to reduce health benefit costs and use the savings to stabilize pension funds — but over a longer time. Current workers would also have their defined benefit plans frozen and replaced with 401(k)-style plans. Lawmakers and unions have not agreed to that.
While the court fight over pensions could be over — unless unions find a way to appeal to the U.S. Supreme Court — pensions are still a major political and fiscal issue in New Jersey.
In a statement Tuesday, Democratic Assembly Speaker Vincent Prieto said the Legislature would adopt a budget this month that will “choose the path of responsibility” and fully fund pension obligations.
Last year, it passed a budget that did and included a tax increase for high earners. Christie used a line-item veto to reduce pension contributions and eliminate the tax increase. The same situation could play out this year.
Hetty Rosenberg, president of Communication Workers of America in New Jersey, said her members would continue to fight for pension funding.
“It’s of course extremely disappointing that the Supreme Court didn’t decide the law was exactly what the law said. It’s just one obstacle,” she said. “We will win, there is no way we will ever, ever give up this fight.”
