Supreme Court Decision Reverses Lower Court Ruling in Pension Payment Case
Updated On: Jun 20, 2015
Nominated by Gov. Chris Christie to the Supreme Court in 2013, Justice Faustino J. Fernandez-Vina was one of five judge’s writing today’s majority opinion. (Governor’s Office/Tim Larsen)
politickernj.com - The New Jersey Supreme Court this morning reversed a lower court ruling that Gov. Chris Christie and state lawmakers must contribute more toward the pension funds for public workers.
In a 5-2 ruling, the judges focused their analysis on Chapter 78.
“Our conclusion that no enforceable contract was created here because the Debt Limitation Clause prohibited the Legislature and Governor from binding the State to an enforceable contract of this nature eliminates the need to engage further in a contract impairment analysis,” wrote the five.
From the court, the following justices voted to reverse the initial decision:
JUDGE CUFF (t/a)
Justices Rabner and Albin dissented.
The ruling was a win for Christie in his ongoing statewide tug-of-war with public sector unions.
He took it.
“This decision is an important victory not only for our taxpayers who simply cannot afford these unsustainably high costs, but for limited constitutional government that recognizes the proper role of the executive and legislative branches of government,” said the governor in a statement. “The court’s position is clear, as is mine, it is time to move forward and work together to find a tangible, long-term solution to make our pension system and public employee health benefits costs affordable and sustainable for generations to come. In light of today’s decision, I urge all interested parties to come back to the table to partner with me to finally solve this problem once and for all.”
Christie balanced the fiscal 2014 and 2015 budgets mostly by reducing the public pension contributions, and his current $32.5 billion fiscal year offering hung in the balance of today’s decision. A state budget revenue shortfall prompted the crisis, wherein Christie argues that New Jersey cannot afford to pay more and dismisses the role of what he termed an activist judge who initially made the ruling that Christie must restore $1.57 billion he cut from the pension payment by the end of the current fiscal year, which ends on June 30th, or stand in violation of state law.
Chief Justice Stuart Rabner was one of two judges who co-wrote a dissenting opinion in the case.
Union critics, of course, sharply disagree with the governor and promptly filed suit.
“As we wait anxiously for the Court’s decision we can’t help but reflect on the commitment the more than 5,000 firefighters, EMTs and dispatchers represented by the NJFMBA have made to helping keep our portion of the pension system healthy,” Eddie Donnelly, president of the New Jersey Fireman’s Mutual Benevolent Association, said in the lead up to this morning’s decision. “Our members have increased individual contributions by nearly 20%, have given up cost of living increases, and have worked closely with their employers so that they also could make their full contributions consistently. Our members have paid their fair share, Governor Christie shouldn’t need a court decision to pay his.”
This morning’s decision hinged on Chapter 78, P.L. 2011, which Christie signed into law, effective June 28, 2011. The law provides for changes to the manner in which the State-administered retirement systems operate and to the benefit provisions of those systems. The law also changes the manner in which the State-administered Health Benefits Programs operate and the employee contribution and benefit provisions of those programs.
The decision this morning concluded that the Legislature and Governor clearly expressed an intent that Chapter 78 create a “contract right” to timely and recurring ARC payments to reduce the unfunded liability of the pension funds to safe levels. But, that conclusion does not address the question of authority to do so, and can be interpreted at odds with the state Constitution. In such a collision, the Constitution trumps an act.
From the Court:
“No matter how worthy the cause to be advanced by Chapter 78, the Debt Limitation Clause speaks directly to this situation and, in pertinent part, commands:
“‘The Legislature shall not, in any manner, create in any fiscal year a debt or debts, liability or liabilities of the State, which together with any previous debts or liabilities shall exceed at any time one per centum of the total amount appropriated by the general appropriation law for that fiscal year, unless the same shall be authorized by a law for some single object or work distinctly specified therein. . . . [N]o such law shall take effect until it shall have been submitted to the people at a general election and approved by a majority of the legally qualified voters of the State voting thereon.’
“The purpose to be achieved by the Debt Limitation Clause dovetails with the Framers’ intent for a fiscally responsible annual budget process,” the judges wrote in their opinion. “Efforts to dedicate monies through legislative acts other than the annual appropriations act have no binding effect. They are read as impliedly suspended when contradicted by the budgetary judgment of the presently constituted Legislature acting in concert with the Governor in their constitutionally prescribed budget formation roles. Those debt limitation and appropriations-related constitutional clauses conflict with the contractual language of Chapter 78 and thwart plaintiffs’ impairment claims.”
If the act Christie signed with lawmakers has no teeth, it ought to scrapped, according to New Jersey Police Benevolent Association President Pat Colligan, who called for the demolition of Chapter 78 as soon as the court rule.
Ruling in concert with Christie’s initial objection to the lower court ruling in the case, the court today recognized the Judiciary’s “absence of authority” for any role in the budgetary process.
In their dissenting opinion, Chief Justice Stuart Rabner and Associate Justice Barry Albin wrote, “The decision strikes down the promise made to hundreds of thousands of public workers by the political branches of government that deferred wages earned for years of service would be funded during their retirement.
“The decision unfairly requires public workers to uphold their end of the law’s bargain — increased weekly deductions from their paychecks to fund their future pensions — while allowing the State to slip from its binding commitment to make commensurate contributions,” they added. “Thus, public workers continue to pay into a system on its way to insolvency.”
High drama accompanied the lead-up to the Supreme Court ruling. Teachers took to the streets yesterday demanding a full pension payment regardless of what the court said today, and Assembly Speaker Vincent Prieto (D-32) released a statement following the Supreme Court’s pension funding ruling promising full payment.
“The ruling changes nothing,” Prieto insisted. “We’ve always intended to fully fund our obligations, just as we did last year. Democrats will choose the path of responsibility. The governor chose last year to be fiscally irresponsible and to further weaken our economy. For the sake of New Jersey’s taxpayers and its economy, I hope he chooses a different course this year.”
Seton Hall University’s Associate Professor of Political Science Matthew Hale put the decision into immediate political context, citing a Christie win – but a diminished one in the overall context of the governor’s hunger for higher office.
“The Supreme Court said very clearly that New Jersey finances are a mess, but they see it as a political problem that requires a legislative solution not a legal one,” said Hale. “This is a big win for Governor Christie. He gets to point fingers at the media who claimed he was acting illegally and paint himself as a reasonable and competent executive. I would expect the Governor to start another round of ‘I told you so’ just like he did with the Federal indictments surrounding Bridgegate. That can be a powerful narrative in places convinced of a liberal media bias.
“The Governor is likely to pivot on this to talk about how he is a champion for not raising taxes. He can legitimately say he fought all the way to his Supreme Court to prevent the crazy Democrats from raising taxes,” Hale added. “While this is clearly a victory for Governor Christie, it also shows how low that bar is for what we consider a win for the Governor. At the end of the day Governor Christie still has to say his state is not financially secure enough to pay its obligations to state workers. That might end up being a short-lived victory. It is interesting to note that neither of the two major news radio stations serving New Jersey [remember New Jersey doesn’t have its own broadcast TV stations] interrupted their broadcast when the decision hit. That says a little bit about how far Governor Christie’s star has fallen.”
Mark Lagerkvist of NJ Watchdog sized it up as a Christie political win on the short-term perception front even as the court took apart the constitutionality of Chapter 78. “With billions of dollars and New Jersey’s fiscal future at stake, Gov. Chris Christie won a strange legal victory Tuesday when the State Supreme Court ruled that his pension reform of 2011 was unconstitutional,” Lagerkvist wrote.