New Jersey Governor Chris Christie’s decision to cut pension contributions to balance the budget for two years was challenged by state troopers who asked a judge to order the payments reinstated.
Unions representing current and former troopers, led by the State Troopers Fraternal Association of New Jersey, sued yesterday in Trenton. They asked for a ruling that the cuts violate state law and an order requiring full funding of pensions for the fiscal year ending June 30.
Judge Mary C. Jacobson today ordered the parties to argue the case June 25. Christie, a 51-year-old Republican, reversed course on his pledge to raise pension payments this year and next after revenue estimates fell short by as much as $875 million.
This year’s $696 million pension payment will be less than half the planned $1.58 billion, Christie said on May 21. For fiscal 2015, the contribution will be $681 million, less than one-third of the record $2.25 billion Christie proposed. The governor expects to resume full contributions in 2016, state Treasurer Andrew Sidamon-Eristoff said last month.
The Christie administration will address the claims in court as necessary, Michael Drewniak, a spokesman for the governor, said in an e-mail.
“We cannot afford this system,” Christie said at the May 21 news conference in Trenton in announcing the pension cuts. Unions, he said, “want to be able to promise their members everything, but they pay for none of it.”
Christie’s cuts allow the potential 2016 Republican presidential candidate to curry national favor as a fiscal conservative, with states and cities across the U.S. facing pension gaps of at least $1 trillion, according to the Nelson A. Rockefeller Institute of Government in Albany, New York.
Under a law Christie signed in 2010, New Jersey was to make higher pension payments each year through fiscal 2018 to help make up for a decade of skipped contributions. The funding gap fell to $36.3 billion with the changes, then rebounded to $47.2 billion in 2012, as Christie made only partial contributions. The 2011 overhaul didn’t go far enough to contain costs, the governor said.
Because of Christie’s lower payments, the state’s share of the pension gap, now $38 billion, will exceed $40 billion by 2016 as its funded ratio drops to 50.8 percent from 53.7 percent, Sidamon-Eristoff told lawmakers on May 21.
New Jersey’s credit rating was cut one step to the fifth-highest level by Moody’s Investors Service last month because of Christie’s revenue shortfalls, matching downgrades by Standard & Poor’s and Fitch Ratings. Moody’s A1 grade for New Jersey tied it with California and put it ahead of only Illinois for the lowest rating among U.S. states.
Moody’s and Fitch both have negative outlooks on New Jersey debt, signaling potential for lower ratings. Fitch in a May 21 report said the lowered pension payments would be a negative ratings factor and that the move displays an “inability to deliver a recurring solution.”
Standard & Poor’s earlier this week said the state may face another credit downgrade because of the lack of a solution to balance the budget.
New Jersey has been downgraded six times under Christie, tying the record set by Democrat Jim McGreevey.
The case is Burgos v. New Jersey, L-1267-14, Superior Court of New Jersey, Mercer County (Trenton).