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New Jersey lawmakers make move for pension contribution stability


The New Jersey Legislature has taken the first step to place before voters in November a proposed constitutional amendment that would provide consistent state payments each year to the $79 billion New Jersey Pension Fund, Trenton.

The move was immediately attacked by Gov. Chris Christie who, in his State of the State Address, said such an amendment would make retired and current public employees a “special class of citizens” and all other New Jersey residents “second-class citizens.”

On Jan. 11, the last day of the legislative session, the Senate voted 23-16 in favor of the proposal, and the General Assembly supported the proposal by a 43-27 vote.

However, state law requires 24 votes in the Senate and 48 votes in the General Assembly to send the proposed amendment directly to the voters.

By not reaching that threshold, both houses must vote again during the next session of the Legislature, which started Jan. 12. For this second vote, supporters need 21 votes in the Senate and 41 votes in the General Assembly to place the amendment on the November ballot. Unlike most bills, constitutional amendment resolutions aren’t subject to a governor’s veto.

Supporters of the constitutional amendment say they acted partly in response to Mr. Christie’s withholding of certain contributions to the state pension system. They said Mr. Christie reneged on his promise to make contributions to the New Jersey Pension Fund in return for pension fund changes signed into law in 2011. Among other things, the law raised the retirement age of certain public employees and required workers to contribute more to their pension benefits.

But the governor withheld some contributions for the fiscal years ended June 30, 2014, and June 30, 2015.

A lower court supported the governor’s action for the 2014 fiscal year, and the state Supreme Court ruled in his favor in June 2015 for the withholding of some contributions for the 2015 fiscal year. However, the pension fund changes affecting public employees remain in force.

Supporters of the constitutional amendment cited the state Supreme Court ruling as a reason for proposing the pension-contribution guarantee in the state constitution.

The proposed amendment would require the state to make full pension contributions recommended by actuaries starting with the fiscal year that begins July 1, 2021, and require the state to pay partial payments in the other fiscal years. The payments would be made on a quarterly basis, unlike the year-end lump-sum payments that the state now makes.

On Jan. 12, Mr. Christie used his State of the State address in Trenton to attack the proposal and the legislators who support it.

“Public (plan) pensioners would be a special class of citizens whose retirement is protected above all other public concerns,” the governor said in a speech before a joint session of the Legislature.

No state spending is guaranteed by the state constitution, Mr. Christie said. “All of those issues — education, health care, crime, our environment, support for the poor, protection for our children — would be subject to elimination to pay for the pensions of 800,000 current and former public employees.”

Mr. Christie said the only way to pay for the constitutional amendment — if the Legislature wants to avoid “brutal” spending cuts for other state responsibilities — would be to raise the state sales tax or the state income tax. A tax on millionaires would be insufficient, he said.

“This is the road to ruin,” Mr. Christie said. “We cannot deny funding for health care, education, criminal justice, the poor, our environment, our children and our infrastructure to pander to pensioners. We cannot soak every taxpayer for the benefit of the privileged few.”

Robert Steyer writes for Pensions & Investments, a sister publication of Business Insurance.

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