Pension Crisis

Judge Won't Let Gov. Christie Abandon His Own Pension Reforms

Ordered to restore state payments he had cut


I think his friendship bracelet is broken.
Credit: Gage Skidmore / photo on flickr

New Jersey's unfunded public employee pension obligations top more than $80 billion. According to a report from December, the state's two largest pension plans could run out of money by 2024 or 2027. Non-profit policy group State Budget Solutions estimates the unfunded obligations to be much higher, more than $200 billion, and calculates that only 30 percent of the state's public employee pension obligations are accounted for.

Regardless of whose numbers are more accurate, the fact is New Jersey's pensions, like many state employee pensions, are a disaster area. But how could this be? In 2011, Gov. Chris Christie and all parties involved (including a Democratic legislature) hammered out a plan that was going to fix it. Public employees would begin contributing more to their own pensions. In turn, the state, which had failed to put in the necessary funds for decades under governors from both parties, would ramp up its payments to close that unfunded gap by 2018. Problem solved!

And then in less than three years Christie screwed up his own plan. Facing revenue shortfalls, he chopped down last year's and this year's state pension contributions, shaving down $900 million and $1.5 billion respectively. The unions sued over Christie's betrayal. On Monday Mercer County Superior Court Judge Mary C. Jacobsen ruled against Christie and ordered him to restore the $1.5 billion cut from the budget.

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.

The lesson here should be that these pension systems are unsustainable. Christie should have kept his promise and just butchered the existing budgets of state agencies, forcing both the state employees and the state's taxpayers to get the point. Pension costs are eating up more and more of state budgets, making it impossible for the state to actually provide the services for which it exists. Check out the graph below, showing both the growth in the state's pension payments and its history of failure in meeting its obligations. It's interesting how unions are just now suing over the underpayments given how long this is going on. But now employees are actually paying more into the system:


According to Reason's latest polling, Americans are concerned about the state of public employee pensions, do recognize it as a crisis, and want public employees to take more responsibility for their own retirements. Read more about our poll results here.