The New Jersey Supreme Court delivered a victory Thursday to Gov. Chris Christie and ruled the state does not owe public pensioners cost-of-living payments suspended under a 2011 law.
The 6-1 ruling effectively keeps the state from having its unfunded liability increased by about $17.5 billion and is the second significant victory for Christie over public unions on the pension issue.
Justice Jaynee LaVecchia, writing for the majority, reversed an appellate court’s ruling and said there isn’t enough proof that lawmakers intended to create non-forfeitable right to cost-of-living adjustments.
“We conclude that the Legislature retained its inherent sovereign right to act in its best judgment of the public interest and to pass legislation suspending further COLAs. Having determined that there is no contract violation, and because the additional arguments advanced by plaintiffs are not meritorious, we must respect the legislative choice,” LaVecchia wrote.
The decision sparked outrage from labor groups that were also plaintiffs in the suit. The head of the state’s largest teachers’ union called the ruling “despicable” and “theft,” and said teachers counted on the increases as part of their compensation.
“This is theft, plain and simple,” said New Jersey Education Association President Wendell Steinhauer. “For twenty years, New Jersey’s politicians have failed New Jersey’s public servants. Now, for the second time in two years, the Supreme Court has done the same thing.”
Moody’s credit-rating agency, on the other hand, said the ruling eliminated a major fiscal threat to the state.
The court heard oral arguments in March in the case that reaches back to a nearly 5-year-old law passed by a Democrat-led Legislature and signed by the Republican governor that suspended cost-of-living adjustments or COLAs.
It’s the latest case to go before the court in a battle between the Christie administration and pensioners and unions. Last year, the court delivered the Christie administration a victory by declining to require the governor to make specific payments to the pension as required under the same 2011 law.
The ruling comes as Christie and the Legislature face a roughly $600 million budget deficit in the current fiscal year and spares the state from finding potentially billions of dollars to fund the payments.
It also comes as the Legislature advances a constitutional amendment, which voters could decide on as soon as November, to require quarterly pension payments. Christie opposes the measure and has instead called for cutting retirees’ health benefits, which he describes as platinum and out of step with the private sector. Steinhauer, the union official, said the ruling reinforces the need for the amendment that lawmakers are considering.
A group of retired prosecutors brought the case, arguing the law violated contractual rights to the pay raises. Public unions also supported their effort.
The state argued a 1997 law establishing the right applies to pensions, not the adjustments, setting a high bar for what’s considered a right.
Charles Ouslander, a plaintiff representing himself, argued that the 1997 law created a right to receive benefits, which cannot be reduced, except for medical benefits. Ouslander argued that by excluding medical benefits specifically, cost-of-living increases were included. The court rejected Ouslander’s argument.
Assistant Attorney General Jean Reilly, though, argued that the plaintiffs’ interpretation of the 1997 law incorrectly applied the Legislature’s intent.