Tag: state pension contribution cuts

Court: New Jersey Must Make Full Contribution to Pension System

gavel

A New Jersey Superior Court judge on Monday ruled that Gov. Chris Christie acted outside the law when he cut state pension contributions by more than $2 billion through fiscal year 2015.

Through FY 2015, the state’s scheduled pension contribution was $3.85 billion; but in an effort to divert funds to the general budget, Christie cut the pension payment down to $1.38 billion.

Unions sued him shortly after, alleging a breach of contract.

A judge now says Christie must make the full payments.

The full payments, however, are not included in Christie’s budget proposal. That’s because the state is appealing the ruling.

More from Reuters:

Superior Court Judge Mary Jacobson said New Jersey could not renege on its obligations to teachers, firefighters and police who sued the governor and state legislature, which is controlled by Democrats.

“The court cannot allow the State to ‘simply walk away from its financial obligations,’ especially when those obligations were the State’s own creation,” Jacobson wrote.

While New Jersey’s projected budget shortfall was “staggering,” the statute failed to adequately explain why the cuts were reasonable, the court said.

Christie spokesman Michael Drewniak said the governor would appeal.

“The Governor will continue to work on a practical solution to New Jersey’s pension and health benefits problems while he appeals this decision to a higher court where we are confident the judgment of New Jersey’s elected officials will be vindicated,” Drewniak said in a statement.

Damon Silvers, director of policy and special counsel for the AFL-CIO union, which was one of the plaintiffs, said the decision “reinforces what should be black letter law, pension promises by government to the people who work for government are real contractual obligations that must be honored and must be funded.”

Under new GASB accounting rules, New Jersey’s pension system is 44 percent funded.

 

Photo by Joe Gratz via Flickr CC License

Kansas Retirees Rally at Capitol Against Gov.’s Plan to Cut State Pension Contributions

Kansas Seal

Members of the Kansas Public Employee’s Retirement System (KPERS) gathered at the state capitol on Wednesday to rally against Gov. Sam Brownback’s plan to cut state contributions to the pension system.

Kansas is facing a $340 million budget shortfall in fiscal year 2014-15.

To address the shortfall, Brownback plans to slash state pension contributions by $58 million this year.

Additionally, the state would issue $1.5 billion in bonds, with money going to the pension system’s investment fund.

Pension officials have warned that the plan could have long-term consequences.

The Topeka Capital-Journal has more from the rally:

Dennis Phillips, chairman of the Kansas Coalition of Public Retirees, said lawmakers had a responsibility to deliver financial certainty to 280,000 Kansas teachers, judges, firefighters and others participating in the retirement program. Sidestepping state payments to KPERS doesn’t make sense, he said.

“We need your support,” Phillips told retirees. “The governor wants to remove $60 million from KPERS this year. It is real money.”

“How many more of these payments will be deferred?” said Rep. Ed Trimmer, D-Winfield.

House Minority Leader Tom Burroughs, D-Kansas City, said actions undermining integrity of the system betrayed people who dedicated themselves to government service.

“Your pension plan, KPERS, was our commitment to you for standing up and taking these jobs,” he said.

Kansas PERS was 56.4 percent funded as of the end of 2013.

 

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New Jersey Lawyers: 2011 Pension Reforms Invalid, State Doesn’t Have to Contribute to Pension System

New Jersey

New Jersey’s lawyers argued in court yesterday that Chris Christie was acting legally when he cut the state’s pension contribution last year by over $1 billion.

They argued that it didn’t matter that the state’s 2011 pension law – signed by Christie – mandated full pension payments from the state, because that law is unconstitutional.

More on the arguments from NJ.com:

A lawyer for the state argued today that Gov. Chris Christie cannot be forced to make full pension payments because the 2011 law committing him to fully fund the state system in exchange for union concessions was unconstitutional.

Interrupting the assistant attorney general, Superior Court Judge Mary Jacobson said the state’s case suggest that 2011 promise was “a hollow commitment.”

“You’re saying it should have been known at the time that it was a false promise,” Jacobson asked. “You’re saying that from the get-go, this statute, the requirement to make these contributions was void.”

[…]

Attorneys for the state said that the contract was unlawful from the start because the state cannot be obligated to any spending unless it’s approved by the voters — barriers imposed through the debt limitation clause and appropriations act.

Much of today’s arguments centered on whether the 2011 law conflicts with those restrictions.

The contract would interfere with the Legislature’s discretion over how the state spends its money, lawyers for the state said, and the state can’t be obligated to debt unless it’s approved by the voters.

Jacobson was skeptical of the state’s arguments that the appropriations act and debt limitations clause would trump the contracts clause, which appears in both the state and federal constitutions.

But, the state countered, the appropriation and debt limitation measures apply to the formation of contracts, while the contract clause applies to the enforcement of contracts.

In 2014, Christie cut a total of $2.4 billion in state payments to the pension system and used the money to cover revenue shortfalls elsewhere in the budget.

 

“New Jersey State House” by Marion Touvel – http://en.wikipedia.org/wiki/Image:New_Jersey_State_House.jpg. Licensed under Public domain via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:New_Jersey_State_House.jpg#mediaviewer/File:New_Jersey_State_House.jpg

Video: Chris Christie Talks New Jersey Pension System and Cutting the State’s Contribution

New Jersey Gov. Chris Christie gave an extended interview this week, during which he talked about his decision to cut the state’s pension contribution and paying off pension debt by increasing the tax on millionaires.

The pension conversation starts just past the 18:00 mark.

 

Feature photo by Walter Burns [CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons

Kansas Lawmakers React to Governor’s Plan to Cut State Pension Contribution

Kansas Seal

Earlier this month, Kansas Gov. Sam Brownback announced his plan to cut the state’s annual pension payment by around $60 million and use the money to plug budget shortfalls elsewhere.

Several prominent lawmakers have now given their reactions to the proposal. From Salina.com:

[Steven] Johnson, R-Assaria, who is chairman of the House Pensions and Benefits Committee, was “not happy” with Tuesday’s proposal by Gov. Sam Brownback to cut the state’s pension contribution this year by $40 million as part of a plan to close a $280 million shortfall in the state budget.

And he’s not alone, even among Republicans.

“There’s no easy solution,” Johnson said Wednesday, “but I’m not happy with what they’re doing with KPERS.”

[…]

Late Wednesday afternoon, Kansas Treasurer Ron Estes, who campaigned with Brownback across the state just before the November election, released a statement critical of the planned KPERS cuts.

“While I understand the need to re-balance the budget in light of unexpected shortfalls, the decision to delay state contributions to our underfunded pension system is disappointing,” Estes wrote in the statement. “By delaying action now, we run the risk of KPERS consuming an even larger amount of our state’s budget at the expense of other vital state services to Kansans in the future.”

Senate Vice President Jeff King, R-Independence, who led KPERS reform in the Senate, said, “Over the last four years, Kansas has become the model for responsible pension reform. We inherited a pension system that was going broke and returned it to fiscal health. By raiding the KPERS fund instead of continuing prudent reform, Gov. Brownback is threatening to undo all of the hard-fought gains that we have made.”

The state’s Senate Minority Leader also weighed in. From the Topeka Capital-Journal:

Senate Minority Leader Anthony Hensley, D-Topeka, rejected the idea Brownback is protecting education funding by cutting KPERS instead. The governor has previously counted KPERS contributions when touting a high level of education spending under his administration. During the campaign, Brownback highlighted an overall increase of $270 million in education funding since 2011, a figure that included KPERS contributions.

“I would argue then, using his logic, that he’s actually cutting education,” Hensley said. “It’s so inconsistent, or downright contradictory, to make that kind of argument.”

Kansas PERS manages over $14 billion in assets.

 

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