course, the New Jersey Supreme Court has often vacillated on
when a particular expenditure constitutes a “bonded debt”
which must be subject to voter referendum, and when a particular payment is simply a normal expenditure of government.
Here, it is difficult to ignore the logic that paying a pension
obligation annually is not a “bonded debt,” but simply the cost
of having a pension system at all. And it is worth noting that
New Jersey has never failed to make the full payment on any
bond it has ever issued for private bondholders, even without
such a statute.
The politics, however, trumped logic and fairness. Not surprisingly, the three recent Gov. Christie appointees to the court
all voted for reversing Judge Jacobson’s decision in our favor.
The two dissenting justices accepted our arguments that there
was no inherent contradiction in upholding the Chapter 78’s
contractual promise, despite the constitutional provisions. The
dissent also pointed out that the state’s seven year phase-in of
full contributions was directly tied to the increased pension
and health-care contributions you are required to pay. By
refusing to invalidate employee contributions under Chapter
78, employees must continue to pay while the governor is off
the hook for his end of the bargain. The dissent noted that the
majority decision enforcing the statute’s higher employee contributions, while giving the governor a pass on his reciprocal
obligation, was nothing short of a “bait and switch.” But the
case was effectively lost once the court had split along party
lines.
The opinion is particularly galling in that it contains numerous acknowledgements that our position is fundamentally correct; that what is occurring is grossly unfair and will only
increase cynicism about government; and that it only digs the
pension hole deeper. And, despite the obvious ramifications of
the decision, the court continues to contend that all vested
pension benefit obligations must be paid by the state – even
though it blinds itself to the reality that pension benefits
cannot be paid if pension contributions are not made.
What is occurring in New Jersey, unfortunately, differs from
several other states precisely because New Jersey does not have
a constitutional provision protecting public pensions. In Illinois, for example, there is such a constitutional protection. We
had hoped that the statutory language and history of Chapter
78 would be sufficient to convince any court that the payments
must nonetheless be made – even without a constitutional
amendment or voter approval. After all, the legislature and governor created and entered into this contract – not some errant
mid-level bureaucrat. Unfortunately, a majority of the justices
did not agree.
So, you now ask, where do we go from here? In the short run,
it is the same situation as always – the state is not making its
full contribution, the amount of unfunded liability is
increasing and everyone pays lip service to the the