on Wed May 30 04:41:39 2012
Judge upholds suspension of pension increases for N.J. public employees
Published: Tuesday, May 29, 2012, 8:14 PM | Updated: Tuesday, May 29, 2012, 10:23 PMTRENTON — In a victory for Gov. Chris Christie’s pension revisions, a Superior Court judge has ruled that about 800,000 retired public employees are not entitled to increases based on the cost of living.
By MaryAnn Spoto/The Star-Ledger
The ruling by Superior Court Judge Douglas Hurd in Mercer County affects all current and future retirees in pension systems funded by the state, including state workers and judges as well as local police, firefighters and teachers.
The pension law the governor signed last June says current and future retirees will not get any cost of living adjustments — better known as COLAS — until the pension funds become stable, which is not expected until at least 2040.
The adjustments are not annual, but the new legislation canceled a 2.2 percent increase scheduled for February.
Many of the unions representing retirees in those pension systems challenged this part of the new law, first in federal court, where the case was dismissed in March because the court did not have jurisdiction.
They claimed the new law denies them a portion of their pension for which they have already paid.
But in a ruling issued Friday, Hurd decided that although the retirees have a statutory guarantee that there won’t be any reduction in their pension benefit, the state cannot be required to pay for the cost-of-living adjustment.
"Its impact is not only on these existing retirees... but also on a huge number of future employees," said David Fox, an attorney representing the Probation Association of New Jersey, the Newark Firemen’s Union and other unions,
Fox said one of his clients, a retired Newark firefighter, was collecting a pension of nearly $23,000 when he ended his career with the department about 25 years ago. With cost-of-living adjustments, the retiree now collects nearly $48,000 annually.
"The salaries they were making way back then were a lot lower," Fox said.
The unions say they will appeal the judge’s ruling.
"The various public sector unions and their members were disappointed that the judge ruled that the COLA for retirees — even if part of the non-forfeitable contractual rights — will not be paid," said Kenneth Nowak, a Newark attorney who argued the case on behalf of 30 employee unions.
Christie’s office hailed the decision.
"We are gratified that our common-sense position has been upheld in Superior Court and we are confident it will be upheld upon appeal," said Christie spokesman Michael Drewniak. "Our goal remains to reform, protect and sustain the state pension system so it will be there for all current, retired and future employees. At the same time, our bipartisan reform, including the COLA provision, stands to save New Jersey taxpayers tens of billions of dollars over the long term."
The COLA suspension was part of a broader law requiring public employees to pay more into their pension and health benefits plans. Separate legal challenges to those increased contributions brought by the unions and by a Superior Court judge are still pending.
Throughout the country, 83 of 85 statewide pension plans for teachers and public employees give some kind of cost of living adjustment, said Ron Snell, senior fellow at the National Conference of State Legislatures. He said there are a few hundred more plans across the nation offering COLAs for municipal police officers, troopers, firefighters and other public employees.
Over the past two years, 18 states have either reduced or temporarily suspended those COLAs, he said. The federal government is looking at COLA suspensions but has not made any decision yet, Snell said.
The New Jesey law affects current and retired employees in the Teachers Pension and Annuity Fund, the Judicial Retirement System, Public Employees Retirement System, Police and Firemen’s Retirement System and State Police Retirement System.