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Arguments Over Cost-of-Living Raises Heard by State’s Highest Court

Friday, March 18, 2016   (0 Comments)
Share | 03/18/2016

After several years of back-and-forth litigation and a full two hours of in-person arguments before the New Jersey Supreme Court yesterday, the fate of the state’s $72 billion public-employee pension system now depends largely on how the justices interpret just one phrase from a nearly two-decades-old law. A lot is riding on the definition that the justices will arrive at given that the state pension system is already underfunded by roughly $40 billion. If they side with a group of retired public workers who believe the 1997 protections apply to both pension benefits and the cost-of-living increases, another $13 billion would be tacked on to the pension system’s unfunded liability, according to one recent estimate. Less than a year ago, lawyers for the Christie administration went before the Supreme Court for oral arguments in another major pension case. They took the unprecedented position that a main element of a signature pension-reform law enacted by Christie in 2011, a section that called on the state to make increased contributions into the pension system, was unconstitutional. But yesterday, the Christie administration lawyers launched a full-throated defense of another section of the law known as Chapter 78, saying language that suspended the cost-of-living increases for retirees is fully legal. Their defense came in the wake of a 2014 state appellate court ruling that sided with a group of retired workers who believe the cost-of-living increases cannot be suspended based on “non-forfeitable rights” established by the 1997 law.

But all eyes will be on how Justice Jaynee LaVecchia, an independent nominee of former Republican Gov. Christie Whitman, will view the arguments made by both the state’s attorneys and the retired employees yesterday. That’s because the makeup of the high court right now is split between Patterson and two other Republicans, and Albin and another Democrat. There is also a vacancy that’s being filled by Appellate Division Judge Catherine Cuff, who is also a Democrat. Christie has argued that long-held state tradition permits the governor to seat a court that has as many as four justices from his party. But Sweeney has blocked confirmation hearings for any additional Republican nominees from Christie, saying LaVecchia, though she is registered as an independent, should be considered a Republican for the purposes of determining the court’s partisan balance. Last year, in the case involving the schedule of state pension contributions that were spelled out in Chapter 78, it was LaVecchia who LaVecchia who wrote the majority opinion in favor of the Christie administration. The ruling determined that only New Jersey voters could commit the state to such long-term obligations. Several weeks later, the high court agreed to hear oral arguments in the case involving the cost-of-living increases, which had reached the appellate court after the state prevailed in Superior Court. An analysis earlier this year by Moody’s Investors Service, a major Wall Street credit rating agency, determined the pension system’s unfunded liability would go up by another $13 billion if the state loses the cost-of-living increases case.

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