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Superior Court Scuttles Hopes of Pension Trustees for Legal Settlement

Judge rules that state Supreme Court decision in related case applies to this legal action as well; plaintiffs could still appeal to NJ’s highest court

Superior Court Judge Mary Jacobson
Superior Court Judge Mary Jacobson.

A new attempt to use the courts to secure more money from the state for the chronically underfunded public-employee pension system has been dealt a major blow by a Superior Court judge in Mercer County.

Assignment Judge Mary Jacobson, in a ruling issued yesterday from the bench in Trenton, said she could not allow a case pressed by the trustees of three individual funds that are part of the broader pension system to go forward in the wake of a closely related, but different, case that was decided in June by the state Supreme Court.

“What I’m really faced with now is looking at whether there’s anything left,” Jacobson said while issuing her ruling. “I do find that it is futile … there’s no sense in going forward with the case.”

The trustees were seeking a contract judgment against the state for unpaid pension debt, but Jacobson said the firm wording of the Supreme Court’s decision covered their claims as well.

The combination of yesterday’s ruling and the earlier decision issued by the Supreme Court has now essentially left in shambles a major part of a 2011 bipartisan reform law known as Chapter 78 that Gov. Chris Christie later held up as a national model for other states dealing with pension-funding problems.

The New Jersey law called for workers to pay more toward their pensions, but also pledged the state would increase its own contributions into the pension system over a seven-year term to help reverse years of underfunding that has left the overall retirement system at least $40 billion in debt.

Workers have been paying more ever since the law was enacted, but Christie, a second-term Republican now running for the GOP’s 2016 presidential nomination, has decided to short the state’s side of the deal rather than make steep budget cuts elsewhere or raise taxes to fund it.

In all, Christie’s budgets over the past two state fiscal years shortchanged the pension funds by a combined $2.25 billion. And the current budget is on track to underfund it by nearly $2 billion more. Christie and Democrats who control the Legislature are also now deeply at odds on what to do going forward, with Christie favoring more benefit cuts while Democrats are calling for increased state funding.

A suit filed against the Christie administration by public-worker unions sought to uphold the section of the 2011 law that spelled out the specific state payments that were to be made over the course of seven fiscal years to eventually get the state up to the full payment required by actuaries who each year assess the health of the pension system, which covers an estimated 770,000 workers and retirees.

Lawmakers thought they granted the employees a contractual right to those payments, but the Supreme Court said under New Jersey’s constitution only voters can commit the state to such long-term obligations. The unions are now asking the U.S. Supreme Court to take up the case.

In the wake of the June 9 ruling, the trustees of the Public Employees Retirement System, the Teachers Pension and Annuity Fund, and the Police and Firemen’s Retirement System -- the three largest individual pension funds that make up the broader $80 billion retirement system -- maintained they still had a right to a legal judgment against the state for unpaid debt even if the ruling said the state couldn’t be compelled to make a specific payment into the pension system in a given fiscal year.

“It doesn’t mean the state doesn’t still owe the money,” explained Robert Klausner, an attorney representing the trustees, in court yesterday. “All this case is about … is how do we get paid? That’s the issue before this court.”

But assistant Attorney General Jean Reilly countered that the Supreme Court’s ruling left no room for the trustees to make their claim since it found Chapter 78 did not create a constitutional contractual obligation to the pension funding in the first place.

“Your honor, there’s no point in allowing this case to go forward,” Reilly said.

Jacobson essentially agreed when she issued her ruling moments later, saying the Supreme Court’s language was “unequivocal.”

Still, she acknowledged the pension-funding issue remains grave and could someday mean retirees won’t get their pension checks. But she added that’s not yet the case. “I wish a legal decision could make the problem go away,” the judge said. “But the problem remains.” Afterward, Klausner and Bennet D. Zurofsky, another attorney for the trustees, said they will meet with their clients before determining whether to appeal Jacobson’s ruling.

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