Christie Wins Legal Battle Over Cuts to Pension System

New Jersey Governor Chris Christie won a key budget battle when a judge ruled he had legal authority to cut payments to the state pension system because he faced a fiscal emergency.

Christie was confronted with “staggering” shortfalls in his $33 billion budget for the year ending June 30, Superior Court Judge Mary Jacobson said today. Christie acted reasonably in paying $696 million to cover current employees, while deferring $887 million to help close the gap left by previous governors, the judge ruled.

“I don’t think it’s something he did lightly,” Jacobson said after a hearing in Trenton. “He was put between a rock and a hard place.”

Unions for teachers, firefighters and other public employees sued to stop Christie, seeking full payment into a pension system underfunded by $38 billion. Christie, a Republican, said an unanticipated drop in revenue forced him to trim pension payments to balance the budget, as required by law.

“The governor complied with the statutes to the extent he determined to be reasonable given the nature and extent of the emergency,” Jacobson ruled. “He took a measured response compelled by the exigencies of the circumstances.”

Jacobson denied a request by Communications Workers of America and other unions to issue an emergency order blocking Christie’s plan for the 2014 fiscal year. The judge declined to rule on a similar request for the next fiscal year, when the governor trimmed his pension contribution by $1.57 billion.


“I am pleased the court recognized the necessity and urgency of this decision,” Christie said in a statement. “For our state’s families who are already overburdened by high taxes, raising taxes even further would not solve a problem created by decades of neglect and irresponsibility.”

At today’s hearing, CWA attorney Steven Weissman urged Jacobson to order Christie to make pension payments this year of another $300 million, or the cash on hand that state officials projected for the fiscal year ending this month.

Assistant Attorney General Jean Reilly argued that Christie’s constitutional responsibility to balance the budget trumps any contractual rights that workers may have to pension payments. The $300 million figure is only an estimate, and the size of the surplus won’t be known until at least December when the state’s books are reconciled, she said.

‘Core Function’

“If the state didn’t start the year with this cash on hand, it would jeopardize its ability to exercise its core function,” Reilly said.

The judge said Christie properly weighed alternatives after the budget crisis emerged in the past two months.

Christie, who has vowed not to raise taxes, said today he’ll veto any increases passed by the Democratic-controlled legislature. He has said he has no alternate plan for closing a deficit that may top $2.7 billion through June 2015.

Christie said when he introduced a $34.4 billion budget for next fiscal year that pension, health-benefit and debt payments threatened to crowd out spending on services such as schools and public safety. Last month, he reduced revenue forecasts for this year and next by a combined $2.75 billion as income-tax receipts fell short. He cut his proposed spending plan to $32.7 billion.

Though Democratic lawmakers have pledged to restore the reductions, New Jersey’s constitution gives the governor broad authority to reject any spending they might add.

Democrats’ Response

Senate President Stephen Sweeney, a Democrat from West Deptford, said his party will push to restore the full payments required in the 2015 budget to help catch up on the unfunded pension liabilities.

“We are disappointed in the ruling and certainly disagree with the outcome,” Sweeney said in a statement. “Democrats put forward a budget that keeps our commitments to retirees and middle class New Jersey families regardless of the governor turning his back on them.”

The CWA’s New Jersey director, Hetty Rosenstein, said that the union will wage the pension fight another day.

“Judge Jacobson said that, due to the very unusual circumstances of a budget crisis that came so late in the year, Christie’s decision to not make the full 2014 payment was reasonable,” Rosenstein said in a statement. “She made it clear she expects to hear from us with regard to 2015. And mark my words -- she will.”

The case is Communications Workers of America v. Christie, L-1304-14, Superior Court of New Jersey, Mercer County (Trenton).

Before it's here, it's on the Bloomberg Terminal.