Christie Pension Ruling Tuesday Has N.J. in Bind No Matter What

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An imminent New Jersey court ruling on a skipped pension payment may buffet the state’s budget, drive down its credit rating and chill Republican Governor Chris Christie’s 2016 presidential chances.

The state Supreme Court on Tuesday morning will release its decision on whether Christie must make good on his full promised contribution for the fiscal year that ends June 30.

Last month, David Rosen, the legislative budget officer, told lawmakers that it may not be “physically or fiscally possible” to come up with $1.6 billion, the amount Christie cut from what should have been a $2.25 billion payment into the retirement system.

A law for which he advocated and then signed called for the full amount. The governor has since argued that the measure, which required seven extra payments to make up for decades of underfunding, is unconstitutional.

State Treasurer Andrew Sidamon-Eristoff testified at budget hearings in Trenton that Christie and lawmakers have options for paying the full sum, though he didn’t disclose details.

The decision in a suit filed by unionized state workers comes as Christie is near to announcing whether he’ll seek the presidential nomination. The issue may leave an opening for rivals who also have gubernatorial experience: Jeb Bush of Florida, Scott Walker of Wisconsin and John Kasich of Ohio.

Attack Line

“They have the ability to say ‘We ran our state a lot better than you have,’” said Patrick Murray, director of polling at Monmouth University in West Long Branch. “If it comes down to that, and Chris Christie is trying to peel off supporters from other governors, that will be the line of attack.”

Christie spokesmen Kevin Roberts and Brian Murray didn’t respond to e-mails seeking comment. Christopher Santarelli and Joe Perone, spokesmen for the treasury, also didn’t respond.

Fiscal 2016 promises similar uncertainty, with a separate union lawsuit pending on a $3.1 billion commitment that Christie cut to $1.3 billion.

Christie’s total 2016 spending plan of $33.8 billion, with a June 30 deadline, has yet to be scheduled for a vote in the Democratic-led legislature.

The market has treated the governor’s decisions harshly.

Investors are demanding the most extra yield since at least January 2013 to own New Jersey bonds instead of benchmark munis, according to data compiled by Bloomberg. Ten-year New Jersey debt yields 3.2 percent, or almost 0.9 percentage point above AAA munis.

Spreads could widen further if the court calls for the full payment, according to Paul Brennan, a money manager in Chicago at Nuveen Asset Management.

That decision also may increase the risk of the 10th rating cut of Christie’s tenure, he said, and even a ruling in his favor wouldn’t change how investors view the state’s credit and its $83 billion unfunded pension liability.

“Pension payments still need to be made,” Brennan said Monday. “They’re still well underfunded, and so it wouldn’t change anything except give them temporary relief.”

Christie and the legislature approved a bill in 2011 that increased the state’s annual payments in exchange for cost-cutting, such as higher employee contributions. Christie made the first two payments, deferred $887 million last year when revenue sagged, and withheld $1.6 billion for this year.

The court’s chief justice, Stuart Rabner, was nominated by Democratic Governor Jon Corzine and tapped for tenure by Christie. Three of the six sitting associates were selected by Christie; the bench has one vacancy.

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