Christie Administration Faces Skeptical Court on Pensions

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New Jersey Governor Chris Christie
New Jersey Governor Chris Christie’s bid to reform the state’s underfunded pension system helped propel him into the national spotlight. Photographer: Andrew Harrer/Bloomberg

A lawyer for New Jersey Governor Chris Christie’s administration met sharp questioning from the state’s highest court after saying a law mandating minimum annual payments to state pension funds is “simply unsustainable.”

Assistant Attorney General Jean Reilly, apparently reversing on the governor’s earlier position, argued that state workers have no contractual or constitutional right to the payments under the pension law. She further argued the law, signed by Christie in 2011, violates the state constitution by binding future legislatures to make specific payments.

“You’re making an argument that no contract the state enters is any good or can be enforced,” Associate Justice Barry Albin said at the Supreme Court hearing in Trenton. “You’re also arguing that the state can never be held to its promises.”

Reilly said every contractual obligation requires the Legislature to set aside money through the appropriations process.

“Is that some sort of bait and switch?” Albin asked.

Unions representing hundreds of thousands of state workers claim Christie violated the law by paying $1.57 billion less than the $2.25 billion that the state owes by June 30 to its underfunded pension system.

Christie’s bid for state pension reform helped propel him into the national spotlight, and poses a political challenge as he weighs a Republican run for the White House in 2016.

‘It’s Tragic’

After the hearing, Senate President Steve Sweeney, a Democrat, said Christie is choosing to not follow a law he once touted. For Reilly to call it unconstitutional, Sweeney said, is “comical, except it’s tragic because we’re dealing with people’s lives.”

Superior Court Judge Mary Jacobson ruled in February that the state’s failure to make the full payment this year is a “substantial impairment” of contractual rights of the police, firefighters, teachers and office workers who sued. She said Christie must work with lawmakers to fill the $1.57 billion gap.

Chief Justice Stuart Rabner asked whether the state could disregard the compromise that lay at the heart of the 2011 law, which required both the workers and the state to increase contributions to shore up the pension systems.

Political Compromise

“It may have been a political compromise but there’s nothing in the statute that makes one dependent on the other,” Reilly said.

Rabner asked Reilly if it was her view that if the legislature had wanted only greater employee contributions -- not more state spending -- then lawmakers would have agreed to pass the law. Reilly said yes.

Rabner also asked Reilly if the language of the 2011 law is “in essence, aspirational, and nothing more.” She answered “yes.”

Reilly said Christie is willing to pay an additional $200 million in the fiscal year ending June 30.

Steven Weissman, a lawyer for the Communications Workers of America, argued the employees have a contractual right to state pension contributions and the court must uphold that.

The judges questioned Weissman and other lawyers for the employees at length about whether that contractual right trumps other budget priorities such as Medicaid, education and law enforcement. Justices also grappled with the question of whether the courts should get involved in deciding pension payments, taxes and government spending.

Priorities

“Who makes the determination as to which one of those budget priorities take priority?” Associate Justice Anne Patterson asked attorney Kenneth Nowak, who represents the New Jersey Education Association.

Robert Klausner, an attorney for the state pension trustees, urged the justices to protect the pension systems.

“The social disaster that would result from the court’s failure to act would be extraordinary,” Klausner said.

Sweeney said the governor’s pledge to make a $200 million payment is a good start.

“The $200 million is the right thing to do, but there’s more that needs to be done,” Sweeney said.

He also questioned how Reilly could call the law “aspirational.”

“It wasn’t aspirational when we were negotiating,” Sweeney said. “It wasn’t aspirational when the governor was running around the country taking credit.”

The case is Burgos v. New Jersey, L-1267-14, Superior Court of New Jersey, Mercer County (Trenton).

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