Senate Moves Forward With Pension Constitutional Amendment, As Assembly Begins Process of Review
The Senate Budget & Appropriations Committee approved a resolution, SCR-184, December 10, that would seeks to amend New Jersey’s Constitution to require quarterly pension payments, and get the Legislature back on track to paying its share of pension liability.
The Senate Budget and Appropriations Committee approved the resolution 8-5 in a vote along party lines. Republicans clashed openly with labor representatives who testified in favor of the amendment. The Assembly version of the legislation, ACR-3, is expected to be heard in the Assembly Judiciary Committee December 17.
State Senate President Stephen Sweeney introduced the legislation, SCR-184, December 7 that would permanently cement the State’s responsibility to fund government workers’ pensions within the New Jersey Constitution.
What the amendment does?
• 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.
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 6/10 of full payment due in FY 2017, and increasing increments of 1/10 of full payment each consecutive fiscal year thereafter until full annual payments are due each fiscal year starting in FY 2021. 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.
The plan would mandate a $3.1 billion contribution in fiscal year 2018. That’s $650 million more than what the Governor had proposed, and a hole that the Democratic leader would fill by taxing millionaires — yet another contentious issue. The governor has said the plan would actually cost $3 billion and that there’s no obvious way to come up with the cash.
SCR-184 (Sweeney) /ACR-3 (Prieto) is the first step in gaining voter approval which will REQUIRE the State to MAKE its annual contributions. To be placed on the ballot next year, both the state Senate and Assembly must either approve it with a single three-fifths majority vote, or with two simple majority votes in consecutive legislative years. The governor does not have a role in the process, but most Republicans are sure to follow his direction.
NJPSA supports the measure, testifying before the Senate Budget & Appropriations Committee at the December 10.
At the hearing last week, labor groups, including NJPSA, argued a constitutional amendment was needed because the agreement to ramp up funding had been breached by the State and the pension system has been underfunded for 20 years. The Association is expected to speak before the Assembly Judiciary Committee December 17. We will keep you posted as the legislation moves forward.