Sweeney's bold play could trump Christie on N.J. pensions

Such a constitutional amendment requiring the state to make payments into the public retirement fund was expected to be the next step after the state Supreme Court this summer dismantled a 2011 pension law that established a pension payment plan to strengthen the system.

"Each year that we fail to make the required pension payments, the crisis gets worse and the future cost to taxpayers grows," said Sweeney (D-Gloucester), who is considered a likely candidate for governor in 2017. The public employee pension system is underfunded by about $40 billion.

Short on cash, Gov. Chris Christie fell behind on payments promised in the 2011 law within three years, and labor unions took him to court. The state Supreme Court ultimately sided with Christie, sparing him from scraping together billions of dollars in the coming years.

That case turned on whether the law created a contractual right to pension funding for 770,000 current and retired workers. The justices said the law does not create a "legally binding, enforceable obligation" for the state to make payments into the system and the state cannot be bound to such large future payments without voter approval.

Labor leaders said they would seek the Legislature's help in securing the constitutional protection that has eluded them.

The announcement immediately drew praise from the union leaders who've condemned Christie's cuts and protested and sued for full pension contributions.

Charles Wowkanech, president of the New Jersey AFL-CIO, said the union considers a constitutional amendment "the only way to force the state to abide by the law and fully fund pensions."

"When the (New Jersey) Supreme Court allowed Gov. Christie to break both his word and his own law by refusing to fund the pension, we said our union would never permit the destruction of the pension system and New Jersey's economy," said Hetty Rosenstein, director of the Communications Workers of America, the largest state public worker union.

"We're doing everything we can to save the pension for hundreds of thousands of people. So we wholeheartedly support the call for a constitutional amendment to make sure the state lives up to its promises and obligations to the working people who make up the backbone of New Jersey."

Sweeney's proposed constitutional amendment would go before the voters for approval next November when the presidential race tops the ballot and turnout is at its highest.

The 2011 law, the result of a partnership Christie and Sweeney, gave the state seven years to step up to the full payment actuaries recommend to keep the fund solvent. Released from that obligation by the courts, Christie opted for a 10-year ramp up. At $1.3 billion, this year's payment is about a third of what actuaries recommend.

Sweeney's proposal resets the clock again, putting a new timeline into the state constitution, with the state making the full actuarial contribution by 2022, one year sooner than Christie's unofficial payment plan. 

The state would be paying about $3 billion by 2018 — nearly as much as the state would have been required to pay this year under the now-fractured 2011 law. Each year the state would have to come up with about $600 million more than the year before, according to Treasury estimates.

Brian Murray, a spokesman for Christie, said the state cannot simply "issue a blank check."

"Any proposal to solve the state's underfunded pension system must address how to pay for it," he said. "...  The pension system is in desperate need of widespread reform that constitutionally required pension payments alone will not solve."

Christie's own pension commission that recommended a plan for huge savings and cuts to employee and retirees' pensions and health care included a constitutional amendment in its plan.

"A constitutional amendment permitting the reduction of benefits and implementation of these reforms, and also compelling compliance with the payment schedule intended to fund these obligations, would provide an enforcement mechanism that beneficiaries could trust," the commission said.

If lawmakers get enough votes for a constitutional amendment, Christie would have no power to stop it from going to the ballot. It would take effect if voters approved it. 

Sweeney is also calling for the amendment to force the state to make the contribution into the retirement fund in installments throughout the year. Waiting until year's end costs the state millions of dollars in investment earnings and has, in the past, made it vulnerable to last-minute cuts.

"This constitutional amendment protects taxpayers by requiring that pension payments be made on a quarterly basis to maximize investment earnings and to protect public employees by guaranteeing the pension benefits they earned," Sweeney said in a statement.

His office estimated the quarterly installments could save taxpayers $8.5 billion over 30 years.

Christie has twice vetoed such bills, calling it "an improper and unwarranted intrusion upon the longstanding executive prerogative to determine the appropriate timing of state payments in order to match properly the timing of state payments in order to match properly the timing of large annual expenditures with the timing of the actual receipt of state revenues."