Court Says It Cannot Force N.J. Pension Payment

The Supreme Court in New Jersey has found that the pension contributions promised in 2011 reform are not part of an enforceable contract.

The New Jersey Supreme Court has ruled on a case about whether the state violated the law by making pension contributions that were less than what was agreed upon in 2011 pension reform.

The state appealed the decision of a Superior Court judge who ruled the state’s failure to make promised contributions into its pension systems was a substantial impairment of public employees’ constitutionally protected contract rights. The Superior Court judge ordered the state to pay approximately $1.57 billion to the pension funds, which was previously approved in a fiscal year 2015 budget by the legislature, but removed by Governor Chris Christie.

However, the state’s Supreme Court ruled the legislature and governor were without power, acting without voter approval, to transgress a debt limitation clause and the corresponding appropriations and other budget clauses of the New Jersey State Constitution. According to the court’s opinion, the parties may have included contractual words in the reform legislation, “but those words, no matter their clarity, could not create an enforceable contract. Voter approval is required to render this a legally enforceable contractual agreement compelling appropriations of this size covering succeeding fiscal years…”

The court said the promised contributions are enforceable only as an agreement that is subject to appropriation, which under the Appropriations Clause renders it subject to the annual budgetary appropriations process. “In that process, the payment may not be compelled by the Judiciary.”

The high court added, “The Legislature’s strong expression of intent remains clear in Chapter 78, but it does not bind future legislatures or governors in a manner that strips discretionary functions concerning appropriations that the State Constitution leaves to the legislative and executive branches.”