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Public workers' fight for pension adjustments hits N.J. Supreme Court

Friday, March 18, 2016   (0 Comments)
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Nj.com 03/14/2016

Government workers' fight for cost-of-living adjustments to their retirement benefits hits the state Supreme Court on Monday in a case that could pile billions of dollars onto New Jersey's steep pension debt. Berg v. Christie, or the COLA case as it is known, again pits public workers against the administration, though this time for allegedly violating their contractual right to cost-of-living increases.  Restoring the increases could send the public pension system's unfunded liabilities soaring and speed up the time frame for the funds to run dry. But if workers lose, they would see their lifetime pension checks eaten away by inflation. Public workers will argue before the New Jersey Supreme Court on Monday morning that the state unlawfully froze their increases as part of a 2011 pension reform law that reduced workers' benefits to save money. The state contends they are not a protected part of the benefits package. The appellate court in 2014 ruled that retired workers were guaranteed COLAs by contract. Retirees had lost at the trial court level, where a judge found that, based on a clause that gives lawmakers and the governor discretion over annual state spending; the state couldn't be forced to pay cost-of-living increases. The three–person appellate panel disagreed, saying that clause was irrelevant, because "pensions are neither funded by appropriations on a pay-as-you-go basis... nor is their payment contingent on the making of a current appropriation."

The U.S. Supreme Court will not intervene in the tug-of-war for pension contributions between Gov. Chris Christie and state worker unions. The state continued to pay out COLAs even as it skipped and underfunded pension payments. The state's high court has been asked to determine whether COLAs are part of workers' nonforfeitable right to pension benefits that lawmakers granted in 1997. The COLA suspension was part of a broader law requiring public employees and the state to pay more into the declining pension system. The overhaul was undertaken to reduce the state's massive unfunded liability and stabilize the public pension system. Freezing cost-of-living adjustments was expected to save tens of billions of dollars over the next three decades. Under that landmark law, COLAs could be reinstated as the seven individual pension plans become 80 percent funded. The adjustments were tied to the rate of inflation. Moody's Investors Service warned in January that the state portion of the pension system's unfunded liability would increase from $40 billion to about $53 billion, and the system would fall from 51 percent funded to 44 percent funded, if the court forces the state to restore the adjustments.


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