New Jersey Supreme Court (PDF):
Because of the importance of maintaining the soundness of the pension funds, the loss of public trust due to the broken promises made through Chapter 78’s enactment is staggering. The Court recognizes that the present level of the pension systems’ funding is of increasing concern. But this is a constitutional controversy that has been brought to the Judiciary’s doorstep, and the Court’s obligation is to enforce the State Constitution’s limitations on legislative power. The State Constitution simply does not permit Chapter 78’s payment provisions to have any more binding effect than that of a contract that is subject to appropriation. To be clear, the Court emphasizes that it is not declaring Chapter 78 unconstitutional. Chapter 78 remains in effect, as interpreted, unless the Legislature chooses to modify it. There is therefore no need to address severability or the mutuality of obligations and the Court leaves those considerations for the political branches. The Court also emphasizes that its analysis does not conflate the issue of the State’s obligation to pay pension benefits with the issue whether Chapter 78 legally binds the State annually to make the scheduled payments into the pension systems. The Court’s holding is, simply, that Chapter 78 cannot constitutionally create a legally binding, enforceable obligation on the State to annually appropriate funds as Chapter 78 purports to require. (pp. 53-61)
10. That the State must get its financial house in order is plain. The need is compelling in respect of the State’s ability to honor its compensation commitment to retired employees. But the Court cannot resolve that need in place of the political branches. They will have to deal with one another to forge a solution to the tenuous financial status of New Jersey’s pension funding in a way that comports with the strictures of our Constitution. The Debt Limitation Clause and the Appropriations Clause envisioned no role for the Judiciary in the annual budget-making process and prevent it from having to perform the unseemly role of deciding in that process whether a failure to fully fund a statutory program, including one labeled a contract, was reasonable and necessary. A Contracts Clause analysis would require annual incursions by the Judiciary into second-guessing spending priorities and perhaps even revenue-raising considerations in recurring years. Under the Debt Limitation Clause and the Appropriations Clause, the responsibility for the budget process remains squarely with the Legislature and Executive, the branches accountable to the voters through the electoral process. This is not an occasion for the Judiciary to act on the other branches’ behalf. (pp. 61-68)
Via Laura Waters.
NJEA statement.