Bill > SCR57

Introduced Session

The purpose of this amendment to the State Constitution is to require the State to fund the pensions of public employees on a timely basis. Current law requires the State to do this under the provisions set forth in subsection c. of N.J.S.A.43:3C-9.5, as enacted by section 26 of P.L.2011, c.78, commonly referred to as Chapter 78. However, currently these provisions cannot be enforced by the courts of this State. Chapter 78 requires the State and local government employers to make annual contributions to the various pension systems administered by the State: Teachers' Pension and Annuity Fund; Judicial Retirement System; Prison Officers' Pension Fund; Public Employees' Retirement System; Consolidated Police and Firemen's Pension Fund; Police and Firemen's Retirement System; and State Police Retirement System. The pension funding provisions of Chapter 78 were part of a historic bipartisan compromise, endorsed by Governor Christie, to ensure the solvency of the public employee pension systems. Chapter 78 increased pension contributions by public employees and suspended the payment of cost of living adjustments (COLA) to retirees until certain funding threshold levels are achieved. Chapter 78 also established a constitutionally protected contractual right to the payment of the annual required contributions to the pension systems by the State and all other public employers. This amendment to the Constitution is necessary to address a 2015 decision of the New Jersey Supreme Court, Burgos v. State, 222 N.J. 175, which held the contractual obligation of the State to make its annual required contributions to the pension systems unenforceable because it was "subject to appropriation" and contravened the Debt Limitation Clause of the Constitution unless approved by the voters. This amendment addresses that holding and ensures that the commitment and requirement for annual funding to eventually reach full funding for the pension systems are protected by the New Jersey Constitution. In Burgos, the Supreme Court relied on certain provisions of the New Jersey Constitution, including the Debt Limitation and Appropriations Clauses, to declare unenforceable the contractual promise made in statute to public employees that the State will make its annual required contributions to the pension systems. Therefore, this amendment provides that its provisions will be given effect notwithstanding any other provision of the Constitution. As a result of the State's failure to fund the pension systems at levels determined to be necessary by the actuaries of the pension systems, the pension systems are approaching insolvency. Notwithstanding the enactment of Chapter 78, governors have made contributions to the pension systems that were less than that required of the State by law. The purpose of this amendment to the Constitution is to ensure full funding of the pension systems under generally accepted actuarial principles. The amendment requires the State to make its full pension contribution payment commencing July 1, 2023, and in each fiscal year thereafter. Quarterly payments are required to accelerate the return on investment of the pension systems. Under current law, State instrumentalities and local governments will continue to be obligated to make full payments. This amendment requires the pension payment to be included in the annual State budget law. However, the appropriation obligation would be subject to and subordinate to appropriations for State general obligation bonds heretofore authorized in accordance with Article VIII, Section II, paragraph 3 of the Constitution. This amendment to the Constitution also incorporates in the Constitution subsections a. and b. of N.J.S.A.43:3C-9.5 to protect the contractual right of vested members of pension systems hired prior to May 21, 2010, the effective date of P.L.2010, c.1, to the pension benefits in effect upon the attainment by a public employee of five years of service credit in a pension system. This means that the pension benefit program for any employee for whom the right has attached, inclusive of all pension service earned during their employment, cannot be reduced. The amendment also establishes the rights of all other employees, meaning that they will have vested contractual rights to earned pension benefits after ten years of service credit, and to the benefit earned each year thereafter; however, the benefit formula can be reduced prospectively. These provisions of the amendment are necessary because the Supreme Court in the Burgos case left unresolved the issue as to whether laws that create non-forfeitable and vested rights to pension benefits are enforceable. The amendment does not alter current law that authorizes pension service credit or benefits to be reduced or forfeited for an employee's crime or misconduct. This amendment does not impose any obligations on the State concerning post-retirement health care benefits, which will continue to be addressed through lawmaking and the State budget process. The substantive constitutional rights and obligations established by this amendment are enforceable by the courts of this State, which can issue declaratory, injunctive, or other orders appropriate to secure compliance with these rights and obligations. This too is a necessary part of the amendment because in the Burgos decision, the Court expressed concern that under the separation of powers doctrine it would be inappropriate for the courts to enmesh themselves in the enforcement of contractual rights to pension contributions and benefits. By providing for enforcement through the courts, the amendment allows State courts to issue necessary remedial orders to ensure compliance with the State's pension payment obligations.

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Shirley Turner (D)*, 

Introduced in the Senate, Referred to Senate State Government, Wagering, Tourism & Historic Preservation Committee (on 01/09/2024)

Official Document