New Jersey Gov. Chris Christie's veto of scheduled contributions to the state's pension fund won't be heard by the U.S. Supreme Court, providing short-term budget relief but leaving the state's pensions underfunded. The high court Monday declined to take up the appeal filed by New Jersey public sector labor unions.
That action leaves standing a June 8, 2015 ruling by the New Jersey Supreme Court that upheld Christie's veto of $1.57 billion in pension contributions from the 2015 budget.
That 5-2 ruling reversed a lower court decision by State Superior Court Judge Mary Jacobson that had said union members were entitled to the full pension contributions.
The state's highest court said that a section of Christie's 2011 pension reform law that called for ramp-up of the state's pension system over a seven-year period was not legally enforceable.
"At least we tried to hold the Governor to his word, which means nothing," said Chris Burgos, president of the State Troopers Fraternal Association of New Jersey, who was the lead plaintiff in the appeal.
"The highest court in the land has allowed lies in this case, and once again, workers suffer at the hands of selfish union busting politics by the rich and powerful," Burgos said. "It is another sad day for the evaporating middle class and our fight for fairness and equity."
The union petitioners were led by the New Jersey Education Association, the Communication Workers of America, the State New Jersey AFL-CIO and the New Jersey State Policemen's Benevolent Association.
The plaintiffs wanted the Supreme Court to review the case under the Constitution's Contract Clause, which prohibits states from enacting any law that retroactively impairs contract rights.
Credit analysts said Christie's U.S. Supreme Court victory provides the Garden State short-term budget flexibility, but will also hamper its already-low pension funding levels.
A study released last year by the National Association of State Retirement Administrators showed that New Jersey has underfunded its pensions more than any other U.S. state for the last decade.
"With SCOTUS' decision not to hear the pension appeal, New Jersey's near term budget flexibility is preserved and the state retains a tool it has used to balance its budget for decades," said Moody's Investors Service analyst Baye Larsen.
"However, this comes at the cost of its long-term pension fund health, as it perpetuates severe pension underfunding and rapid growth of state liabilities," according to Larson.
Moody's rates New Jersey A2.
"The decision from the Supreme Court reduces some of the state's liquidity crunch and gives them far more budget flexibility," said Standard & Poor's analyst John Sugden. "It's one less hurdle they need go through, but it doesn't solve how to deal with their pension problem."
S&P rates New Jersey A, as do Fitch Ratings and the Kroll Bond Rating Agency.
New Jersey's ratings are the second-lowest of any U.S. state, ahead of only Illinois.
Christie's floated a $34.8 billion budget proposal on Feb. 16 that designates a record $1.9 billion to the state's pension funds, 40% of the state's actuarially required contribution and a $550 million increase from last year.
The Republican governor has been fighting efforts by Democratic legislative leaders seeking a constitutional amendment to require a projected $2.4 billion payment representing 50% of the actuarially required contribution in the 2018 fiscal year.
"We're heartened by the U.S. Supreme Court's decision today," said Christie spokeswoman Joelle Farrell in a statement. "Now it's time to return to the hard work of coming together to find a real, long-term solution to make our pension system and public employee health benefit costs affordable and sustainable. All parties need to come back to the table and work on the Governor's plan to find a solution that is fair for all taxpayers."
A spokeswoman for the U.S. Supreme Court said there was no comment submitted by justices related to their denial of the unions' petition.
The court typically takes up about 80 appeals every year from more than 7,000 that are submitted, according to its website.
