State asks judge to reject pension suits

Posted: June 20, 2014

TRENTON - The Christie administration argued in a court brief Wednesday that its decision last month to cut the state's payment into the pension system was necessary to head off an "unprecedented and unanticipated fiscal crisis."

In response to lawsuits filed by a dozen unions that seek an order forcing New Jersey to make its full actuarially required contribution, the acting attorney general responded that court interference could set off "chaos, credit rating downgrades, and upheaval."

"The public and compelling interest lies in closing the fiscal year with a balanced budget as constitutionally mandated, and not in allowing a subset of the population to lay hold of scarce funds at the expense of vulnerable portions of the citizenry," John J. Hoffman wrote.

Superior Court Judge Mary C. Jacobson is scheduled to hear arguments next week. The filing Wednesday came as the trustee board that oversees the state's largest pension fund, the Public Employees Retirement System, voted to hire outside counsel to sue over the pension cut.

Also Wednesday, the Legislature moved to be dropped as a defendant.

The case stems from laws passed during Gov. Christie's first term that required public employees to contribute more toward their pensions and health benefits, and mandated that the state phase in escalating pension-fund payments over time.

The unions say the laws bind Christie and the Legislature to a contract protected by the U.S. Constitution.

In May, Christie signed an executive order reducing the payment for the current fiscal year from $1.58 billion to $696 million, citing an eleventh-hour revenue shortfall.

In Wednesday's filing, the state said the pension cut was justified because of a constitutional requirement to balance the budget. It also said the governor had the power to protect the "health, safety, and welfare" of the people of New Jersey, as well as to freeze spending or place money in reserve.

By early May, only $6.2 billion in unspent funds remained for fiscal year 2014 out of a budget greater than $30 billion.

The administration said the alternative to slashing the pension payment would be to default on debt service, cut aid to hospitals and Medicaid, and reduce spending on higher education, which could have triggered tuition hikes.

Those issues aside, the state said, interference by the court would violate the separation of powers.

"Any decision by this court that enjoins, interferes with, or places conditions on the governor's discharge of his constitutionally mandated duty to ensure that expenditures do not exceed revenues would be an impermissible trespass by the judiciary into the essential functions of the executive branch," Hoffman wrote.

Moreover, the unions raise political questions outside the court's scope, the state said. It said the court does not have the resources or expertise to conduct a fiscal analysis of the state.

The state also argued that contracts only constrain legislative action, not executive. Even then, previous legislatures may not "contract away" the appropriation powers of future legislatures, the administration said.

It said the plaintiffs had not met their burden of proving that the pension cut lacked a legitimate public purpose or was unreasonable.



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