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Christie broke law by cutting pension payments, judge rules

Friday, February 27, 2015   (0 Comments)
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NJ.com 02/24/15

In a significant blow to Gov. Chris Christie, a judge ruled today that the governor broke a law he signed by cutting $1.57 billion from a pension payment this year, and must now work with state lawmakers to restore the money. The decision could blow a massive hole in the current state budget, sending the Republican governor and the Democratic-controlled state Legislature scrambling to come up with the funds by June 30, when the fiscal year ends.

Superior Court Judge Mary Jacobson sided with a group of public worker unions that sued to stop Christie from slashing an annual payment to New Jersey's retirement fund for hundreds of thousands of government workers. The governor made the cut to fill a gaping hole in the budget after his administration's revenue projections fell far short. The unions -- which include teachers, police officers, state troopers, firefighters, and office workers -- argued that Christie's reductions violated a 2011 law he signed to put the pension system back on solid financial ground. Under that overhaul, the state promised to make increased annual payments to the fund after years of governors short-changing it, and in exchange workers have paid more for their pension and health benefits.

Jacobson ruled today that the governor's cuts "substantially impaired" the contractual right to payments that were guaranteed to employees as part of the deal. "The court is unwilling to rely on what has now become a succession of empty promises," Jacobson wrote in the 130-page decision. "In short, the court cannot allow the state to 'simply walk away from its financial obligations,' especially when those obligations were the state's own creation," she added. Christie, who appears close to launching a presidential bid, is expected to appeal the decision. His office slammed the ruling. Union leaders applauded the ruling.

Charles Wowkanech, president of the state chapter of the AFL-CIO, said the union was "elated." "By refusing to make the required payments, the governor has exacerbated the chronic underfunding of the entire retirement system to the point of crisis," Wowkanech said in a statement. The unions' lawsuits aimed to reverse Christie's moves to cut two years of pension payments to balance the budget. But last June, days before the previous fiscal year was set to end, Jacobson ruled that Christie could cut that year's payment from $1.58 billion to $696 million because the revenue shortfall had created a fiscal emergency.

The unions' lawsuits aimed to reverse Christie's moves to cut two years of pension payments to balance the budget. But last June, days before the previous fiscal year was set to end, Jacobson ruled that Christie could cut that year's payment from $1.58 billion to $696 million because the revenue shortfall had created a fiscal emergency. In January, attorneys for the state argued that Christie could not be forced to make a full pension payment this year because the 2011 law was unconstitutional.

Jacobson said today that Christie's position is "unusual" because it claims the "legislative contractual guarantee, which embodied significant reforms for which he took substantial credit with great national fanfare, violates the New Jersey constitution." The judge also ruled that the state must reimburse the unions for legal costs. New Jersey's pension system faces $83 billion in unfunded liabilities -- one of the highest in the nation. It's estimated the two-year, $2.4 billion cut will cost the state twice as much over the next five years.


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