The Assembly Judiciary and Senate State Government, Wagering, Tourism and Historic Preservation Committees held a public hearing on ACR-3 (Prieto) /SCR-184 (Sweeney/Turner), the proposed constitutional amendment that would require payments by the State to State-administered retirement systems on a schedule established under the amendment. The hearing is required to comply with Article IX, paragraph 1 of the New Jersey Constitution for proposed constitutional amendments. NJPSA was on hand to speak on the amendments in both committees, voicing our strong support for the proposal.
- Requires a responsible, phased- in funding schedule that makes full actuarially required payments by 2022;
- Mandates the state to make its pension payments annually and on a quarterly basis;
- Protects the right of vested public employees to their earned pension benefits; and
- Provides that pension funding obligations would be enforceable in court.
Specifically, the amendment would effectively reverse the Supreme Court’s recent decision to NOT compel the State to make required payments under the P.L.2011, c.78 (commonly referred to Chapter 78).
Chapter 78, the bi-partisan pension reform legislation endorsed by Governor Christie as a core achievement of his administration required members of the various pension systems, including those in the Teachers’ Pension and Annuity Fund (TPAF), to make increased pension contributions in exchange for the State getting back on track with their pension payment obligations. That same law also eliminated retirees’ cost of living adjustments, continued the tiering of public employee pensions and created a constitutionally protected contractual right to payment of the pension contribution by the State.
In June 2015 however, the NJ Supreme Court found in Burgos v. State, 222 NJ 175 that the State’s requirement payment was subject to the appropriations process and that barring a public referendum as proposed in SCR 184, the Legislature could not legally bind future legislatures with a mandatory payment schedule. The Burgos decision also found that Chapter 78 violated the ‘Debt Limitations Clause’ of the NJ Constitution, absent voter approval.
ACR-3 / SCR-184 is the best way forward to ensuring that the State makes its annual contributions. It will require voter approval but it will also seal, in indelible ink, the Legislature’s responsibility to make its required contribution.
And, while the resolution doesn’t require the State to begin making its full pension payment until July 1, 2021, the legislation does require the State to follow a phased-up schedule with a 4/8 of full payment due in FY 2017, and increasing increments of eighths of full payment each consecutive fiscal year thereafter until full annual payments are due each fiscal year starting in FY 202 1 (note that this ramp up schedule was amended during the deliberative process prior to the holiday, changing Section IV to reflect a 4/8ths versus 6/10ths ramp up to the full annual required contribution for each system and fund). Additionally, the State will be required to make its annual payments on a quarterly basis in order to avoid the events of recent years where the State no longer had funds available at the end of the fiscal year to honor its pension payment obligation in full.
Why is the legislation necessary?
Absent a constitutional amendment, the State can continue to renege on its part of the Chapter 78 agreement while requiring public employees like you to continue make increased contributions. More importantly, without the State’s contribution TPAF and the other pension funds are becoming insolvent. We need to act!
What happens now?
Under New Jersey’s constitution a proposed amendment can be passed by simple majority in two separate legislative to be considered by the voters. Under the constitution, a public hearing is required to move the amendment forward for final consideration by the Legislature and ultimately the voters. NJPSA will continue to advocate on this key issue as it did prior to the holiday and today in both committees. We will keep you posted as the amendment continues to move through the legislative, and ultimately, the voter approval process.