Legislature is moving closer to a constitutional amendment guaranteeing annual pension payments.
Victory for New Jersey Pension Solvency Could Be Short-Lived
Last month, the New Jersey Supreme Court upheld the freeze on cost-of-living adjustments (COLA) for retired public employees’ pension payments. The COLA freeze was passed in 2011 as part of a group of pension reforms that aimed to stabilize the underfunded system and included a raised retirement age and a requirement that workers pay more for benefits.
This ruling is a major win for state taxpayers and for financial solvency for New Jersey. Had the freeze been overturned, the already underfunded pension system would have been plunged further toward insolvency with billions more added to the liability.
However, in the wake of the ruling, lawmakers are moving closer to putting a constitutional amendment before voters that would force the state to make annual pension contributions, a move that Gov. Christie calls a $3 billion tax increase. Late last month, the state Assembly approved the referendum 50-25 with two abstentions. Now the Senate must also pass the referendum, and Gov. Christie has no say in the process. If the Senate passes it for the second time—both chambers passed the measure last year and must do so again this year—the question will go on the November ballot.
Gov. Christie has called this proposal, which would restrict access to significant state funds, the “road to ruin.” In cases of future budget shortfalls, New Jersey will be faced with tax hikes or severe cuts to funding for healthcare, education, criminal justice, the poor, and state infrastructure.