Education Funding

N.J. High Court Slams ‘Broken Promises,’ But Lets State Skip Pension Payments

By Andrew Ujifusa — June 10, 2015 3 min read
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The New Jersey Supreme Court has upheld the state’s decision during the past two fiscal years to skip payments to the state’s pension system for public employees. The news could save New Jersey’s budget from a world of trouble, but it highlights Gov. Chris Christie’s decision to back away from one of his highest-profile promises four years ago.

The June 9 ruling by the Garden State’s highest court stated that the decision by the state not to make roughly $2.4 billion in scheduled payments into the pension system in fiscal years 2014 and 2015 represented “broken promises” of a “staggering” nature. However, in a 5-2 vote, the justices ruled that the state’s obligation to make pension payments didn’t equate to a constitutional requirement for the state to make scheduled payments specified in a 2011 law that Christie claimed at the time would solve the problem of underfunded pensions, as The New York Times put it.

It’s a downbeat note for teachers’ unions concerned about protecting retirement benefits, following the more positive ruling for union members in Illinois earlier this year that proposed reductions to retirement benefits made by Land of Lincoln lawmakers in 2013 were unconstitutional.

The 2011 New Jersey law also required public employees to increase their contributions to their pensions. The New Jersey Education Association and other labor unions sued to force the state to make the payments in 2014 and 2015 as required by the law. A lower court sided with the unions earlier this year, ruling that the 2011 law created a constitutional protection for the scheduled pension payments.

But in a 5-2 vote the state supreme court overturned that ruling, stating in the majority opinion in Burgos v. State of New Jersey that, "[T]he Judiciary is ill-suited to enter into the political decision-making that accompanies the balancing of competing spending priorities.” In essence, the 2011 law did not create a “legally enforceable contract,” according to the court.

In a dissent, Justice Barry Albin argued that the court’s ruling defied common sense: “If the enforceability of a contract depends on the willingness of the Legislature to appropriate money in any particular year, then, by the majority’s logic, no contract is enforceable. That conclusion will come as a great surprise to many who count on the good faith and credit of the State in honoring its contractual commitments.”

The state’s new budget year begins July 1. If the court had ruled in favor of the unions, it could have precipitated tremendous chaos among state lawmakers, who would have been forced to come up with the payments with only weeks to go before the fiscal 2016 budget begins. As the Times put it, Christie argued that he couldn’t balance the budget if he made the scheduled payments.

Wendell Steinhauer, president of the 195,000-member New Jersey Education Association, blasted the ruling, saying that it improperly gave Christie carte blanche regardless of whatever laws are on the books.

“This ruling does nothing to resolve or reduce the state’s pension liabilities. In fact, it affirms our members’ non-forfeitable right to receive their pensions. But it also allows the current administration to push that obligation off onto future taxpayers, with interest,” Steinhauer said in a statement.

It’s the second time in a month that the NJEA has attacked Christie on a high-profile issue. In May, Steinhauer criticized Christie’s decision to initiate a review of the Common Core State Standards but keep the common-core-aligned test, the Partnership for Assessment of Readiness for College and Careers (PARCC) exam.

A version of this news article first appeared in the State EdWatch blog.