Although Governor Christie has so far avoided paying a required $2.43 million in pension contributions this year and next, CWA and other unions are continuing their lawsuits.
The suits were filed in June by CWA, along with the Professional Firefighters Association (PFANJ), the AFT, FOP, IFPTE, AFSCME, HPAE, and the State AFL-CIO, as well as the NJEA, PBA, FMBA, and the State Troopers Association. The Police and Firemen’s Retirement System (PFRS) and the Public Employees Retirement System (PERS) also voted to file suit.
In May the Governor announced that he would withhold approximately $900 in pension contributions that were legally required by June 30, along with $1.57 billion that is due in the new fiscal year beginning July 1, 2014.
The cuts blatantly violate P.L. 2011, Chapter 78—the pension reform law which Christie signed three years ago with support from Senate President Steve Sweeney. Not only will the cuts hurt the pension system, but they will hurt the State's credit-worthiness because of the mounting pension debt. Credit rating agencies already have begun to begun to downgrade New Jersey’s rating, which in turn will force the State to pay higher interest rates on its bonds.
On June 25, Superior Court Judge Mary Jacobson ruled that Christie did not have to pay the $900 million that was due by June 30 because of a fiscal crisis that made it impossible for the State to pay. However, she left the door open regarding contributions in the new fiscal year.
At the same time, Democrats in the Legislature, led by Sweeney and Assembly Speaker Vincent Prieto, passed a budget that would fully fund the required pension contribution for the new fiscal year. They were able to do so by including increased income taxes on corporations and wealthy residents (the so-called "millionaires' tax"). Vowing to protect the wealthy and the state's corporations from paying more taxes, Christie delivered on his promise to veto the increases. He also vetoed most of the required pension contribution. Unable to override the vetoes, the Democrats conceded and let the budget pass with the Governor's changes.
Hetty Rosenstein, the New Jersey state director for CWA, said that the lawsuits would continue. She said CWA was encouraged by Judge Jacobson's ruling that employees had a contractual right to have the pension contributions paid as the law requires.
Meanwhile, on June 26, another court ruling gave additional encouragement to CWA when a state appellate panel ruled that the freezing of pension cost-of-living increases (COLAs) in Chapter 78 violated the contractual rights of eligible employees and retirees. The case was remanded to a lower court to determine whether the freeze also violated the Contracts Clause of the United States Constitution.