Yesterday, June 25, 2014, Judge Mary Jacobson denied the interim relief application made by several public employee unions and professional associations, including the NJPSA, in which the Plaintiffs sought to compel the State of New Jersey to meet its funding obligations to the various public employee retirement systems.
The case was filed earlier this month after the Christie Administration announced that because of a large tax revenue shortfall it would not allocate its almost $700 million dollars worth of contributions to the various public retirement funds. The State has contended that the money had to be diverted to insure the continuation of essential services.
The Complaint filed is predicated on Chapter 78 § 26 of P.L. 2011, now codified as N.J.S.A.43:3C-9.5. Chapter 78 was passed by the Legislature and signed by the Governor to address the chronic underfunding over a period of years of the various public employee pension funds. The 2011 legislation increased contribution rates of active members and required the State to meet its annual contribution requirements to the various funds. The goal was to restore the fiscal health of the pension systems.
Chapter 78 also provided the right of each member of the various pension funds with an enforceable non-forfeitable contractual right to compel the annual required contributions by the State. The statute provides that the failure of the State or any other public employer to make the annually required contribution constitutes an impairment of the contractual right of each employee.
In addition to asserting the statutory contractual right on behalf of members of the pension funds, the plaintiff’s also sought “emergent relief” to force the Christie Administration to make the required payments for fiscal year 2014 which ends on June 30. The Plaintiffs contended that this is required by the statute, and necessary to ensure the fiscal well being of the pension funds.
The State argued that its actions were necessary because of the fiscal emergency it found itself in because of the revenue shortfall. To this end the State presented certifications from various officials, including the State Treasurer and the Director of the Division of Budget and Accounting, who painted a dire picture of what would happen to essential services if the court prevented the State from diverting the monies that had been intended for the pension funds.
After lengthy arguments, Judge Jacobson concluded that while the plaintiffs had successfully demonstrated “irreparable harm,” one of the prongs necessary for the issuance of a preliminary injunction, the plaintiffs had not met the other factor necessary for the issuance of emergent relief; a “likelihood of success on the merits” of the case as it presently stands. Essentially, Judge Jacobson concluded that until a more complete record is established she would have to accept at face value the certifications filed by the State Treasurer, and other officials, as to the consequences, or potential consequences that could occur if the money intended for the pension funds were not used to plug the budget gap for FY 2014.
The judge’s ruling on the emergent relief application does not pertain to the substitutive aspects of the complaint. The contract issue raised in the complaint, as well as the constitutional and civil rights issues, will go forward. However, with her decision, the Governor’s decision to not make the State’s required contributions to the various public retirement funds for fiscal year 2014 in accordance with Chapter 78 will stand.
The Governor has also proposed to withhold the required contributions for FY year 2015. Whether that will hold up will depend upon the outcome of the merits of the complaint filed by the plaintiffs.
What is certain is that the NJPSA will continue to work with the other public unions and professional associations to protect the pension fund and pensioners as well as future retirees by seeking the full legal remedies available to enforce the State’s obligation to make the necessary contributions in accordance with Chapter 78.