BY Christopher Lang, Northern Valley Suburbanite, Published June 18, 2015
A state senator said he was surprised that New Jersey’s Supreme Court ruled last week to allow the governor to cut billions of dollars in financial support to fund pensions for public workers.
Republican Sen. Gerald Cardinale, D-39, said it was one of the few times the “courts got it right,” adding that the 5-2 decision was in line with the constitution.
Legislation, backed by Governor Christie, signed in 2011 between Republicans and the Democratic-controlled assembly approved the state to increase pension payments over a seven-year period.
However, on June 9, the court majority ruled that only the public — not elected officials — can authorize such a long-term expense.
“This ruling in the court means very little,” said Democratic Assemblyman Gordon M. Johnson, D-37. “The debt is still there. The obligation is still there. The teachers who paid money into the pension system are entitled to have that restored to where it should be. I’m not going to support any budget without this commitment in there.”
In the majority opinion, Justice Jaynee LaVecchia cited a clause in the state constitution “that the Legislature may not create ‘a debt or debts, liability or liabilities of the state’ that exceed 1 percent of the amount appropriated in a given fiscal year,” unless it is put out to a public referendum and approved by a majority vote.
“I don’t think this decision is something to rejoice about,” said Republican Assemblywoman Holly Schepisi, D-39. “I think the decision shows how critical it is that we all stop posturing and stop burying our heads in the sand and work together so we don’t end up being like Greece or Detroit.”
Unions, which filed the suit against the state to make the pension payments, are considering an appeal to the federal courts.
“I think it’s good,” said Republican Assemblyman Robert Auth, D-39, about the court’s decision. “It’s going to force all the parties to come back and find an equitable solution.”
New Jersey’s pension system for the 770,000 public employees and retirees is an unfunded liability of approximately $40 billion, according to state figures.
“To add an extra burden on the taxpayer now would be so counter productive,” Auth said.
With the court’s ruling, lawmakers won’t have to make a $1.6 billion pension payment before the end of the fiscal year on June 30. It also means that Governor Christie’s proposed budget, which included reduce funding for pension contributions, can stay in tact.
“We still have a moral obligation,” said Democratic Assemblywoman Valerie Vainieri Huttle, D-37, adding that the court’s ruling “shouldn’t change anything according to the deal that was made,” with the unions. “The governor and the Legislature made a commitment. They [the unions] made concessions. And we as the Legislature in return promised to pay our share.”
Public employee unions challenged the governor’s plan to cut a $2.25 billion pension payment this fiscal year to $681 million, saying that the workers had rights to a higher pension payment because of previous reforms the Legislature approved.
The Democrat-controlled Legislature last year approved legislation to raise taxes on the highest earners and businesses to generate more money for the pension system. The governor vetoed those tax hikes.
“People of New Jersey are taxed to the gills,” Cardinale said.
Johnson said he would support a millionaires’ tax as long as it had an end date, and added that if the Legislature raises the tax on higher earners “we have to give them something back,” like changes with the estate tax.
Auth and Cardinale said a solution to the pension problem is perhaps a bill that hasn’t come out of committee yet.
The bill, which Auth suggested earlier this year, would cap state spending increases at 1 percent over the pervious year. His idea would take the medium state budget from a five-year period to determine the starting figure for the fiscal year spending plan. It would also stipulate that 98.5 percent of the budget is used for operating costs, with the remaining 1.5 percent earmarked for paying the state’s pension and healthcare costs for public and retired employees. Furthermore, he said, any extra money the state generates during the fiscal year would also be earmarked for paying into the pension and healthcare plan.
Auth said if approved, according to the New Jersey Office of Legislative Services, the pension plan would become solvent in seven years.
“We impose caps on everybody else, why shouldn’t we do it ourselves,” Auth said. “It puts a little cost container on the state. Let’s put the breaks on a little and try to get through this issue.”
In the coming weeks, state leaders will have to reach a deal on a new budget, which local legislators describe as being interesting.
Many agreed that pension payments should be made, but as to how exactly, is the dilemma.
“The current system is not sustainable and I think everybody agrees on that,” Schepisi said. “We’ve got to actually sit down and start coming up with solutions. I think there has to be some give on both side to figure out how to make the payments we owe and how to do it in the future.”
Schepisi favors across-the-board cuts, instead of raising taxes, in part because of representing Bergen County.
Bergen County residents, Schepisi said, “are already paying close to 30 percent of the entire state budget and we receive back less than 3 percent. … If taxes are raised, the burden will disproportionally fall on Bergen’s shoulders.”
While support remains for the millionaires’ tax that would generate approximately $600 million in revenue, Huttle said that should not be the sole answer to solving the pension problem.
“I believe we have to look and be creative to find more revenue to come into the state,” Huttle said. “We need to come up with real solutions that are not a burden. … It should not be a political issue. It should be a moral obligation. We’ve got too many egos in the room. Leave your egos at the door.”
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