Meanwhile, New Jersey’s credit outlook is cut because of pension woes.
New Jersey Awaits COLA Verdict
It’s
been just over a month since the New Jersey Supreme Court began hearing oral
arguments in Berg v. Christie—more commonly known as the COLA case—which will
decide whether the state must reverse its freeze on retired public employees’
cost-of-living adjustments.
The
freeze on COLAs was enacted as part of a pension reform plan to stabilize the
vastly underfunded system, but retired workers filed suit, arguing that this
move was a violation of their pension benefits rights.
Retired
workers already lost in trial court, NJ.com reported, where a judge ruled that
the state couldn’t be forced to pay COLAs because of a clause that gives
legislators and the governor discretion over state spending. The appellate
panel, however, disagreed and called the clause irrelevant, so the State
Supreme Court will now determine whether COLAs are a nonforfeitable pension
benefit right.
If
the COLAs are reinstated, billions of dollars will be added to the New Jersey
public pension systems’ already staggering unfunded liability—and the fund,
which is already dwindling, would be depleted much sooner. However, this
pension debt has already caused problems, even before the Court’s ruling. Last
month, Standard and Poor’s Ratings Services lowered New Jersey’s credit outlook
from stable to negative because of the pension fund’s declining funding levels
and growing liabilities.
