UPDATED: Eleven more unions sue Christie over pension plan

UPDATED: Eleven more unions sue Christie over pension plan

By Salvador Rizzo/The Star-Ledger
on June 09, 2014

UPDATE, 2:35 p.m.: Six more unions have filed a separate lawsuit against Gov. Chris Christie's pension plan. They are the Communications Workers of America, the Professional Firefighters Association of New Jersey, the American Federation of Teachers, the Fraternal Order of Police, the International Federation of Professional and Technical Engineers, and the Service Employees International Union. A hearing on all the lawsuits will be held June 25 in state Superior Court in Trenton, union leaders said today.

TRENTON — Gov. Chris Christie’s plan to take $2.4 billion meant for the pension system violates the state and federal constitutions, according to a lawsuit brought by a group of public-worker unions and individuals.

The largest teachers union in the state, the New Jersey Education Association, said today it has filed a lawsuit against Christie as he tries to grab more than $2.4 billion meant for the state’s pension system to balance his struggling budgets over two years.

Grabbing those funds would show a “flagrant disregard” for pension-reform laws Christie himself signed in his first term, the lawsuit states, and would violate the constitution and the rights of hundreds of thousands of public workers in New Jersey.

Workers began to pay more for their retirement and medical benefits in 2011, and in exchange, they won stronger contracts with the right to bigger payments every year by the state into their troubled retirement fund. Christie is now breaking his word, the unions charge, while workers continue to pay the higher rates for their benefits.

Four other unions — the State Policemen’s Benevolent Association, the Firefighters’ Mutual Benevolent Association, AFSCME and the AFL-CIO — are also parties in the lawsuit, along with 10 individual public workers.

“Everyone in New Jersey is subject to the laws of New Jersey, including Governor Christie,” said Wendell Steinhauer, NJEA president. “Our lawsuit seeks to hold him accountable to follow the law that he signed in 2011.”

It is the second legal challenge to Christie’s pension plan, which the governor announced last month as an emergency fix to a $2.7 billion revenue shortfall that came to light in April. Christie said he would rather cut pension payments than raise taxes or reduce spending for schools or hospitals — and that New Jersey can no longer afford the benefits it pays to public workers.

"Let them go to court and we’ll see what happens," Christie said of the unions at a news conference last month. "But nervous and intimidated? No, no, I’m not all that concerned, and what the people of the state need to understand ... is that we cannot afford this system."

Ultimately, Christie said, the state constitution requires a balanced budget every year.

In a sign of the pressure building in Trenton over Christie’s plan, unions for New Jersey State Police troopers filed a similar lawsuit last week. Superior Court Judge Mary Jacobson has agreed to hear both lawsuits, with a ruling expected before the June 30 budget deadline, the unions said.

After decades of New Jersey governors who neglected to make full payments into the pension system, saddling it with long-term debt, Christie signed laws in his first term that promised higher payments each year until 2018. Public workers also began to pay more for their health and retirement benefits, their retirement age rose to 65, and their yearly cost-of-living adjustments were frozen.

Combined, Christie said, the changes put New Jersey’s pension fund on a 30-year path to financial stability. But now, if Christie cuts the pension contributions this year and next — from a combined $3.8 billion to $1.38 billion — his plans for pension reform could end up in tatters.

The unions argue that Christie cannot pull out of the bargain now because it would violate the contractual rights that hundreds of thousands of public employees in New Jersey won in 2011 after they began to pay more for their benefits. Under the state and federal constitutions, New Jersey cannot break its own contracts, the lawsuit says.

The plan could also break the pension system, the unions argue.

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"The state has a viable path to pension solvency, but only if Governor Christie lives up to his obligations," said NJEA President Wendell Steinhauer.
Saed Hindash/The Star-Ledger
 “If contributions are not made in any given year, and for any significant period of time, the loss of the contributions … dramatically increases the amount of future contribution necessary each year, until ultimately reaching a point at which the system can no longer pay benefits,” the lawsuit warns.
“If the governor’s actions, both immediate and future, are permitted to stand, the systems will become insolvent within a few years: The pension as an actuarial reserve system will collapse.”

New Jersey’s pension system is currently facing nearly $47 billion in unfunded liabilities, according to Standard & Poor’s, which has threatened to downgrade the state’s credit rating because of Christie’s pension plan. The more money that gets poured into the pension fund every year, the quicker it can pay down its built-up liability.

Yearly cost-of-living adjustments were frozen for retirees under the 2011 pension law. Under the terms of that law, the COLA benefits would not come back until the pension system is 80 percent funded. Skipping pension payments means the COLAs will be frozen for an even longer period of time, the unions argue.

“More than 500,000 active members of New Jersey’s public pension systems have been making larger pension contributions out of every paycheck while being promised reduced benefits in retirement," Steinhauer said.

"Nearly 300,000 retirees have seen their promised cost of living adjustments frozen as well. They did not get to choose whether to comply with the law and we will not allow Governor Christie to treat his obligations under the very same law as optional."