Update! Governor's Cuts to Pension – What to Do and When

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NJPSA is pursuing all legal and legislative options to address Governor Christie’s recent announcement that he will renege on his promise to fund public employee pensions, including the Teachers Pension and Annuity Fund (TPAF), in accordance with the reforms he previously agreed to as part of P.L.2010, c.78.  NJPSA stands united with our sister organizations who are opposing this plan to solve a state budget problem on the backs of those who dedicate their careers to the public good.  We have filed suit – joining the other unions in opposing the Governor's plan

We are also tracking what the Administration may plan to announce with regard to future changes to pension and/or health benefits.  To date, there is no specific information on what the Governor plans to announce as to changes to current or future pension or health benefit recipients

Failure to Make This Year’s Full Payment – ACTION

NJPSA is legally challenging the reduction of this year’s payment in court.  We are also advocating before the Legislature.  But, we need your help!

As you know, the Governor announced by executive order on May 20 that he would slash pension payment by $2.4 billion.  His action directly violate the provisions of the 2011 pension law he and Senate President Sweeney championed – that law obligated the state to meet the state's obligation to fully fund its share of the deficit-ridden pension system by a seven-year ramp-up to full actuarially required funding by Fiscal Year 2018.  Instead, the Governor cut pension funding from the expected third-year and fourth-year levels of $1.558 billion and $2.24 billion to just $696 million in FY14 and $681 million in FY15 — effectively abandoning the seven-year pension phase-in.

The fact remains that employees continue to fund their share of the pension, while the government does not, and we have already seen the results of that unsustainable formula.

When the pension reforms were enacted, the state was well aware that the first few years would represent a difficult payment schedule, but that making these payments now would allow for reduced payments in future years as the fund becomes more solvent. Skimping now creates a disaster down the road that would be avoided if the state would simply make the payment that it had promised.

Action: Advocacy by Pen

Under Chapter 78, the pension plans themselves have the right to sue if the state fails to make its full, required contribution. We are urging pension plan members to demand that the board of their fund sue on their behalf as well.  Please take a few minutes to send a letter to your pension board via our Advocacy Center.  You simply provide the requested information and the system will help process the letter for you. 

Then consider contacting your Legislator to let them know how you feel about being shorting the pension bill.  We are advocating with the State Legislature to honor the commitment they made to public employees and the taxpayers of New Jersey to meet their funding obligations to these systems over a seven-year payment cycle.  We are working with our Legislative leaders but your voice helps to move the issue to the front of the line.  Consider contacting your Legislator today via our Advocacy Center to let them know of your concerns with the Governor’s unilateral action.

Action: Lobby Day

Finally, join us on June 23 for a Lobby Day in Trenton!  Let Legislators know first hand how the State's failure to live up to its commitment is affecting you and your family! Simply sign-up online and we'll send you details for the day!

Future Changes – Keeping Tabs

While there has been ongoing discussion around what the Administration may propose with regard to future changes to the pension and health benefits of retirees the Governor has NOT released any specifics as of yet. NJPSA is keenly watching for any proposals if and when they are released – we are prepared to act.  We will keep you apprised of any details as they arise. 

To date, speculation has surrounded moving to a ‘hybrid’ system’ akin to what Rhode Island has instituted.  NJSpotlight’s Mark Magyar did a great job laying out the benefits and detriments of that potential proposal.  The hybrid” model would give current employees a smaller defined-benefit payout supplemented by a 401K-style defined contribution plan.


But, the Governor may also propose changes in health benefits for retirees.  Even though no state has succeeded in cutting the actual monthly pension benefits earned by retirees, courts across the country have upheld the authority of state and city governments to cut retiree healthcare benefits, notably including an Illinois law that ended free lifetime healthcare coverage for retirees with more than 20 years of service.

Regardless of what the Governor proposes, however, the Legislature must agree so, stay tuned – if and when the Governor announces any proposal we’ll need your voice and NJPSA will be there to mobilize membership around this critical issue.

Question in the meantime?  Please join us for our Twitter Chat or consider joining us for our upcoming Webinar.  Also feel free to contact the Debra Bradley or Jennifer Keyes-Maloney in the Government Relations Department at 609.860.1200 or jmaloney@njpsa.org with any questions you may have!