State top court to rule in high-stakes public pension case

(Reuters) — The New Jersey Supreme Court is expected to decide on Thursday whether the state’s 2011 public pension reform improperly froze retirees’ cost-of-living increases, a ruling that could cost the state billions of dollars in new liabilities.

Gov. Chris Christie’s administration suspended the so-called COLA payments, which are tied to inflation, in 2011 as part of bi-partisan reforms aimed at curtailing the ballooning cost of public pensions.

Retired prosecutors challenged the provision, saying they have a contractual right to the cost-of-living adjustments, just as they do to their base pension payments.

If the retirees prevail, New Jersey’s already underfunded pension system could be hit with another $17.5 billion of liabilities, according to The Record, a Bergen County newspaper, which cited a court filing.

New Jersey’s roughly $83 billion pension system is as poorly funded as it has ever been. The state’s aggregate funded ratio for all plans is 48.6%.

When including local government contributions to two of the bigger funds, the overall system appears somewhat better funded at 59.5%, which is still far below the baseline 80% level considered healthy.