New Jersey COLA War: (1) The State’s Case

Today in New Brunswick two cases were heard regarding the virtual elimination of cost-of-living-adjustments for New Jersey pensioners.  I would like to thank Judge Reisner and her staff for making it very convenient to tape the hearings.

The next few blogs will concern the first of those cases, Berg v. Christie (for those of you with billable hours to consider the last youtube in this blog is the entire hearing).

The five speakers for the pensioners presented familiar arguments and I will get to each individually but it was the first argument of the state, through Assistant Attorney General Robert Lougy, that was most interesting and novel to me:



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Below is the section of the law, Chapter 78, P.L. 2011, referred to (from page 57):

Section 5 of P.L.1997, c.113 (C.43:3C-9.5) is amended to read as follows:
5.

a.  For purposes of this section, a “non-forfeitable right to receive benefits” means that the benefits program, for any employee for whom the right has attached, cannot be reduced.  The provisions of this section shall not apply to post-retirement medical benefits which are provided pursuant to law.

b. Vested members of the Teachers’ Pension and Annuity Fund, the Judicial Retirement System, the Prison Officers’ Pension Fund, the Public Employees’ Retirement System, the Consolidated Police and Firemen’s Pension Fund, the Police and Firemen’s Retirement System, and the State Police Retirement System, upon the attainment of five years of service credit in the retirement system or fund or on the date of enactment of this bill, whichever is later, shall have a non-forfeitable right to receive benefits as provided under the laws governing the retirement system or fund upon the attainment of five years of service credit in the retirement system or fund or on the effective date of this act, whichever is later.  This  subsection shall not be applicable to a person who becomes a member of these systems or funds on or after the effective date of P.L.2010, c.1, except that such person shall not include a person who at the time of enrollment in the retirement system or fund on or after that effective date transfers service credit, as permitted, from another State-administered retirement system or fund of which the person was a member immediately prior to the effective date and continuously thereafter, but shall include a former member of the retirement system or fund who has been granted a retirement allowance and is reenrolled in the retirement system or fund on or after that effective date after becoming employed again in a position that makes the person eligible to be a member of the retirement system.

I don’t see it but perhaps with enough readings of sections (a) and (b) together it will be obvious to me also that the intention of the legislature in 2011 was to protect pensions but not future COLAs. The question then intrudes: why wouldn’t anyone have complained when the law was enacted? I know that were I a retiree who after twenty years could expect to see my pension payout double with a COLA I would be screaming if I woke up to this headline in June, 2011:

New Jersey adopts ironclad protections for retiree benefits (except for lifetime health benefits and pension cost-of-living-adjustments which can be stopped at any time)

The rest of the state’s argument got back to the debt limitation clause:
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Full Berg v. Christie hearing:
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30 responses to this post.

  1. Posted by impeachchristie on January 29, 2014 at 1:42 am

    Listening to all this (yes I listened to the LONG version) it sounds like the state doesn’t have a leg to stand on as far as the COLA goes and is hoping to have the previous decision (by a NON TENURED politically afraid judge) rubber stamped without any valid reason. I was half expecting the Asst Ag to say “pay no attention to that man behind the curtain”

    Reply

    • Posted by Tough Love on January 29, 2014 at 2:31 am

      Considering that your handle is “impeachChristie”,should we assume you are unbiased?

      And likely a Public Sector worker ?

      Reply

  2. Posted by Eric on January 29, 2014 at 9:53 am

    I did not listen to all of the arguments due to my grandchildren being at the house. However, the attorney with the beard and the glasses seemed to have the best argument. He said that those who have retired before the law had been changed not only have a legal contract that had been completed and then breached by the state, but also have independent grounds to prevail namely, equity. He told the court not to send the case back down for the people who have retired before the law had been changed since these people relied upon the law and acted accordingly. There are different classes of people that should not be “lumped together” and I agree. Somehow, and I am not a lawyer, what has happened to that group of people, meaning those that had retired before the law had been changed, seems to be unfair.
    For those who continued their service, they are on notice that there may not be a cost of living adjustment for them in the future and may plan accordingly. For example, they may stay on the job, seek other work, work until they desire to collect social security etc.
    A friend of mine is a retired Superior Court judge who pays for his medicals. He told me that he planned on using his cost of living adjustment to help defray this cost. It is not a fixed amount of money and does rise every year. Again, he was “blindsided” by the retroactivity as to what has happened. As I have stated a million time before we may be entering a banana republic where agreements and equity are meaningless.
    Eric

    Reply

    • Posted by Anonymous on January 29, 2014 at 1:38 pm

      I thought the argument was that COLAS are not vested rights therefore past present and future retirees are not eligible. There is no contract or constitutional law in NJ regarding pensions and COLAS seem to be even less eligible. Everyone wants reform but those receiving the most want someone else to take the hit

      Reply

    • Posted by Tough Love on January 29, 2014 at 4:41 pm

      Eric, If your Supreme Court justice friend is already retired, he was likely a NJ judge when NJ’s pension Plans were retroactively INCREASED around the year 2000.

      I’ll bet that your friend expressed no outrage at that time at how that retroactivity would NEGATIVELY impact the Taxpayers …. and how THEY were “blindsided”.

      Reply

    • Posted by Anonymous on January 30, 2014 at 11:41 am

      Members of a government retirement pension are not eligible for Social Security unless you work in the private sector long enough to qualify for the benefit. That’s tough to do given your already working 25 years or more to get your pension. And if you manage to get enough work credits the Social Security benefit is cut substantially even though you paid into it and earned it. My monthly SS payment works out to about $28.00.ZYou can kill yourself working to retirement in two jobs and then get told all the money you paid SS went for nothing.

      Reply

      • Posted by Tough Love on January 30, 2014 at 12:01 pm

        That’s the tried old argument that such Social Security reductions are unfair to Public Sector workers ….. no doubt, more Union BS..

        They are NOT unfair. They were specifically put in place to PREVENT certain workers from getting an unjust “windfall”.

        That’s why the SSA called that provision the “Windfall Elimination Provision”.

        You can read all about right from the SS website here:

        http://www.ssa.gov/pubs/EN-05-10045.pdf

        Reply

  3. Posted by Tough Love on January 29, 2014 at 11:07 am

    For anyone who believes that NJ has the financial option of reinstating the COLAs, I suggest you read the just-published report on the financial condition of NJ’s pension Plans (see link below):

    http://www.csinj.org/wp-content/uploads/CSI-NJ-Pension-Study-wCoverBleed-Rev.-1.20.14.pdf

    Reply

    • Posted by Maceo on January 29, 2014 at 12:15 pm

      The CSI-NJ is backed by the Koch Brothers and has no credibility. The fact that they laud the accomplishments of the legislature for the 2011 pension reform is laughable. They made things worse. The threat of the reforms scared a generation of workers into early retirement further straining the system. They took the increased contributions of the current employees and lowered the amount towns had to contribute. Then they gave themselves 7 years to come up to a full payment. Where would you be if you took seven years to make a full payment on your credit card? And they are surprised it’s not working?

      Reply

      • Posted by Tough Love on January 29, 2014 at 12:36 pm

        If you actually read the study, you would hardly call their commentary of the 2011 changes “laudable”.

        Sounds like you are riding the grossly excessive NJ pension gravy train. If so, I suggest you financially prepare for the pension reductions that are likely coming in future years.

        Reply

        • Posted by Maceo on January 29, 2014 at 1:05 pm

          I am not. I am also not a broken down old lady stock broker.

          Reply

          • Posted by Tough Love on January 29, 2014 at 1:17 pm

            Well, as long as you’re being nasty, I’ll give a fuller commentary on how stupid your earlier comments were:

            (1) you said…. “The threat of the reforms scared a generation of workers into early retirement further straining the system.”

            shifted payouts to earlier years…yes, but a real strain… NO. What we owe them we owe them and their retiring early did not change that. In fact, their retiring early HELPED the Plans because it ended FURTHER accruals which would ALSO have been excessive and unaffordable.

            (2) you said…”hey took the increased contributions of the current employees and lowered the amount towns had to contribute. ”

            The towns were offered the option of “deferring” payment with re-payment (with interest) in future years. Your statement that it …”lowered the amount towns had to contribute”….is clearly misleading.

          • Posted by Anonymous on January 30, 2014 at 11:52 am

            The towns you refer to have had a furlough for more than ten years. They have not made any payments into the PFRS pension and that sir is what is wrong with the pension. The people you want to cut payments to are the ones who put the money into it. The contract that was worked under forced them into this plan and required both the employer and employee to contribute. Then a politician decides the plan is so well funded that the employer could skip the payments. When things got tight the employers cried they didn’t have the money so the State raised the employees contribution and cut the retirees payments instead. If this was a private sector pension someone would be going to jail. Remember the pension can’t be costing the taxpayer to much when they are not paying into it!

          • Posted by Tough Love on January 30, 2014 at 12:13 pm

            Anonymous, Taxpayers should indeed fund “fair and appropriate” Public Sector pensions and not shirk that responsibility.

            However, under any reasonable comparative metric, Public Sector pensions are not “fair and appropriate”. While Public Sector workers rarely earn less in “cash pay”, their pensions are ROUTINELY multiples (2-6 times) greater than those of comparable Private Sector workers ….,there is no justification for this and THAT’s the ROOT CAUSE of the problem,

            Sure, the State can’t find sufficient money to fully fund these promised pensions ….BECAUSE… they are WAY too generous, and THEREFORE very very costly and hard to fully “fund”

  4. Posted by Anonymous on January 30, 2014 at 12:44 pm

    I am a law enforcement pensioner (’79 – 05″) who started out making $10,500 while my friends were in the mid to high $30’s. All that was offered was security to raise my family. Medical benefits were a common option for most public agencies and private companies. A house cost $60,000 and the mortgage interest rate was 21%.

    My Father, Fire Fighter 1950 – 1970’s, was on food stamps for 3 yrs because his salary $6300 / yr was below the poverty level for the family size (10). City, County,and State employees do the work others won’t or can’t do themselves. “Gravy train”?

    US Bureau of Labor Statistics:

    In every community in the United States, law enforcement personnel and
    firefighters regularly put their lives in harm’s way to protect the
    public. The risk of a fatal incident for law enforcement personnel and
    firefighters is three times greater than for all workers.(1)
    During 1992-97, over 1,100 law enforcement personnel and firefighters
    were killed in the line of duty, according to the Bureau of Labor
    Statistics’ Census of Fatal Occupational Injuries (CFOI).

    If you live through the career, your body is battered by the stress related issues of “Fight or Flight” syndrome, irregular meals, crisis management, shift work, constitutional decisions causing administrative changes which stress the administrative tasks, hybrid chemicals for self medicating addicts, chemical storage plant fires, carbon monoxide poisoning, sudden death incidents, “You Never Know What’s Going to Walk Through That Door” or be asked of you to do. You’re the 24 hour problem solver, life saver, and agency representative for any disaster which befalls the community.

    – We have an accident at WTC, can you help with evacuation? An hour later, we have a building collapse, 2700 were killed, can you take care of that?

    – You want us to pick up the passengers of flight 1549….no problem. What airport did they land at? The Hudson River? Ok, let me get the boat out there.

    Reply

    • Posted by Anonymous on February 25, 2015 at 2:52 pm

      Excellent post. I too retired FDJC 68— 94. We had the most solvent pension system in the country. Until, all the bottom-feeding politicians raided our system. They robbed from Peter to pay Paul. Never replacing what they STOLE. Even to-day ther is incompatant people running our system. No mention of the 300 million they used to bail out the Revell in A.C., that went bankrupt twice in 13 months.

      Reply

  5. Posted by Michael Rogers on January 30, 2014 at 2:03 pm

    Amen my Brother! Thank you for that post in response to the post by Tough Love. I understand his/her frustrations BUT, if the politicians never raided our PFRS, our system would not be in this situation. Thanks again for a well stated post!

    Reply

    • Posted by Tough Love on January 30, 2014 at 8:19 pm

      While contributions were not made (zero in a few years) sufficient to fully fund your promised (extraordinarily generous and therefore extraordinarily COSTLY) pension, not one dollar has even been taken from Plan assets other than for Plan purposes ….so check your “facts”.

      Reply

      • Posted by Michael Rogers on January 31, 2014 at 2:45 pm

        I don’t claim to know all of the facts but I based my comment from this article…

        Editor’s note: The writer, Michael Poquat, is a police officer in Mount Olive Township.

        As a police officer in the state of New Jersey, I find myself unable to sit by while the current climate of public employee bashing continues under the misinformation fed to the public by the media and our current governor.

        While I can not comment on the teacher’s retirement system, I can speak about the Police and Fire Retirement Fund (PFRS), and more specifically, how it has been mishandled by some of our elected officials. The truth should come out, and the public has a right to know how we got to where we are today.

        Long before I became a police officer, the state of New Jersey enacted a law which required police officers and firemen to contribute a certain percentage of their salary into the state’s “secure” pension fund. Throughout my 22 year career, I have paid 8.5 percent of my salary, as mandated by law, into this fund every pay period.

        I was not given the option to place my 8.5 percent in an IRA or other investment fund. Every pay check since I was 25 years old had the 8.5 percent taken out of my pay and placed into the PFRS with the promise that the money would be there when I retired. By law, towns and municipalities were required to match that 8.5 percent.

        By the time Gov. Christine Todd Whitman took office, there was over $100 billion in the fund. This meant that at the current rate of retirements, pension costs for police officers and firemen were funded at 104 percent, well into the future. This was a prudent and financially responsible plan that worked, and it provided security for the families of these men and woman who risked their lives every day serving and protecting the citizens of New Jersey.

        In no way was it heavily over funded or excessive. It covered the costs of promised retirements with a small cushion left over. It was at this time that Whitman stepped in. Gov. Whitman recognized the billions of dollars in our “secure” and “separate” pension fund, and she proceeded to raid that fund. Unknown and unannounced to the public, monies were indiscriminately withdrawn from the PFRS and used to pay for Whitman’s tax cuts and to balance the state budget.

        Billions of dollars were taken, and to make matters worse, the Whitman administration passed a law allowing towns and municipalities to no longer contribute to the fund. Over $3 billion in contributions were skipped over the next eight years, while the individual police officers and firefighters continued to have their 8.5 percent contribution taken from them and placed into the PFRS.

        The state gambled for years, relying heavily on the returns from the stock market to cover the missing funds. Politicians misspoke on the campaign trail, touting the virtues of how their financial genius was able to balance their state and local budgets, and the public was lulled into a sense of false financial security.

        But the small print in Whitman’s bill was ignored. The funds they failed to contribute would have to be made up at a later date. The pension reprieve was temporary and their contributions would have to be paid back, just like any other loan. It was quietly suggested by the Whitman administration that towns set these contributions aside for when the state called to make good on them. It appears most towns and municipalities failed to heed this advice.

        Governors (Donald) DiFrancesco, (James) McGreevy, and (Richard) Codey continued this trend, and all failed to call the towns and municipalities on their “loan” while the PFRS fund continued to dwindle down close to $66 billion. They remained silent. To bring this to light at this point would certainly mean political suicide, knowing that towns and municipalities would have to raise taxes to make up for their error in financial judgment and planning.

        It wasn’t until Gov. Jon Corzine took office that this trend was stopped, but unfortunately, the damage was done. Gov. Corzine made the call the governors before him were afraid to make. He advised the towns and municipalities that it was time to pay back the monies the towns had been given a temporary reprieve on. And the media jumped on this, printing bold headlines “Towns going broke over police and fire pensions.”

        This attention grabbing and misleading headline made it appear that your police and firemen were bilking the taxpayers dry, when the truth is totally the opposite. The politicians bilked your police officers and firemen dry and in the long run, the tax payers of New Jersey.

        Towns and municipalities knew they were going to have to pay this money back and for them to insinuate otherwise is simply not true. Realizing the gravity of the situation, a new bill was introduced and passed into law. This allowed the towns to pay back the loan given to them by their public employees in increments; starting at 20 percent, 40 percent, 60 percent, 80 percent, and finally 100 percent each proceeding year.

        Towns and municipalities continue to act as if they have been caught unaware and shocked by this entire process. The public is being told that payments for police and fire pensions are doubling, tripling and quadrupling and that the public employee system is out of control. What the public needs to know is that they are the victims of a mounting debt that was created by the Whitman administration and compounded by those following her tenure.

        To blame your public employees for the abuses of the pension system is ludicrous at best, especially when our elected officials are the ones responsible for raiding the fund and then enacting the legislation on how and when to pay it back.

        Gov. Jim Florio recognized the financial hardship facing the state of New Jersey and proceeded to raise the state sales tax to 7 percent. This helped spell political suicide for him, and Gov. Whitman was not going to make the same mistake. She repealed the 7 percent, dropping it back down to the 6 percent, knowing full well this money would have to come from somewhere.

        Her solution was to raid the Police and Fire Pension System, allowing her to balance the state budget and give the false appearance that all was fiscally sound under her watch.

        Our current governor, facing the same financial crisis of those going before him, has chosen a similar route, but one with a more vilifying tone. He has again found the same victim: Your public employees. When asked about the pension situation in the state of New Jersey, Gov. Chris Christie replied “I wasn’t going to put $3 billion into a failing pension system. We need pension reform. I passed some already for new hirees, and this fall we are going after the current employees and pension reform and benefits because we are broke.”

        Nowhere does he mention how the public employees had already bailed out this state years before, and now he is focused on “going after” the current employees to fix a mess created and compounded by politicians. To say otherwise for him would be political suicide should he aspire to higher political office, and as most of those before him, he is not about to risk his future. Rather, he would gamble on the future of those men and woman and their families who have served this state with honor and integrity.

        The principals of the pension system are not broken Mr. Governor. What is broken is the manner in which the politicians have treated and abused it. Yes, the system is failing now, but not because of your police officers and firemen. As of 2009, the pension fund should have assets of $112 billion to meet its obligations, yet it is currently sitting at $66 billion.

        It is the largest unfunded liability in the country. New Jersey is the first state ever to be charged with fraud by the Securities and Exchange Commission, and Gov. Christie, strangely, has no comment on this. Yet he continues his rhetoric on the evils done to us by our police officers and firemen, ignoring the truth and lambasting and vilifying us at every turn.

        As the saying goes, “Politics has no shame when it comes to preserving your place in office. Why let the truth get in between a good, attention grabbing headline?”

        The system is on the brink of collapse and continued arrogance and mudslinging will not fix it. The truth is what it is Mr. Governor, and there is no getting around that. Politicians put us in this mess for their own political gain, not our public employees, as you would like the public to believe. You know this and need to stop ignoring the facts. How we deal with it from here is the measure of each of our character and integrity. I know the public is smart enough to recognize this and I hope that you are too. Long after you are gone, we will still be here, protecting and serving as we always have. In the end, all we have left is our name. Let’s hope yours is remembered for you’re integrity and not for what you have slung so far in your race for political aspiration. I challenge you to do the right thing, as so many police officers and firemen strive to do every day for their families and the citizens of New Jersey.

        Reply

  6. Posted by Frank on January 30, 2014 at 2:39 pm

    We all have to consider those who have retired and became disabled or retired due to a disability. My wife and I are both retired and disabled, she a school teacher for 20 years and I was a police officer and retired after almost 28 years due to an illness that prevented me from doing my job. Retiring was not an option for us but rather that of no choice. I served my country with 3 tours in Vietnam and was awarded the Purple Heart and the Bronze Star with a combat V. Many retirees are in the same position as us and relied on this COLA. To take this away from those who paid their dues and served their communities and country is beyond reason.

    Reply

  7. Posted by BroadwayDanny on January 30, 2014 at 7:09 pm

    The pensions for Police Officers and Firefighters were designed in such a way as to allow for a basic 25 year career. These positions are for young men and women, and I am sure no one would want police officers or firefighters in their late 50s, 60s or 70s responding to the types of calls for service required of these members.

    Teachers and the rest of the public employees do not receive the same pensions as these folks and rightly so. The Police and Fire Pension system was more than 100% fully funded for years with members paying 8.5 % contributions and retirees receiving COLA increases, until the politicians started stealing our pension money and refusing to pay it back. After they did all that damage, they claimed the system was in trouble and who paid for it? The police officers and firefighters.

    Many folks made the decision to retire based upon the COLA provision, only to have the game changed after they left. In NJ, police and fire retirees CANNOT reverse their decision to retire after the fact. It is PERMANENT.

    Also, we always hear about the huge six figure pensions being earned by some retired officers and firefighters. This is the exception and not the rule. Most rank and file line officers make a modest pension, and while they are still young, MAY be able to find another career or additional employment in the private sector. Maybe.

    So, when these men and women are older and cannot work at all, through inflation, the pensions they receive today with be a pittance in their old age, with NO social security to speak of either. The COLA, while not a king’s ransom, was something to help the officers and firefighters who were lucky enough to live to a ripe old age, (not common in those professions).

    Now this is gone, and we have jealous citizens who cry about our “generous” pensions.

    Some day we will have senior citizen police officers and firefighters on welfare or food stamps, having been publicly slapped in the face for a life of service to their community.

    Shame on you all.

    Reply

    • Posted by Tough Love on January 30, 2014 at 11:44 pm

      John, I’m sure you spotted the incorrect “facts”. in the above comment …….

      I’m tired. You decide if it’s worth letting your less informed readers walk away believing they are true or perhaps give those readers a more truthful picture..

      Have you noticed that your Blog has become inundated with Public Sector workers and distortions of fact bordering on the absurd ?

      Reply

      • Today looks like a record day for views and I’ve got another blog with more youtubes and my prediction coming in a couple of hours that could bring more people tomorrow.

        I spoke to a group of police & fire retirees in Kenilworth this month so there could be buzz coming from their connections plus I met a lot of people at the court taping this week.

        I think it’s commendable that these retired police & firemen are proud of their profession and what they have done for society. It’s all good and a positive but irrelevant to what I’m trying to get across here and to them: you are being lied to about the health of this pension and it’s a much bigger problem than you have been led to believe.

        Once that gets across maybe we can set to fixing it and having an honest discussion about fairness.

        Reply

        • Posted by Tough Love on January 31, 2014 at 12:28 am

          John, Thank you… You are much more diplomatic than I and clearly have greater tolerance for the nonsense coming from this self-interested (and in the long run, self-defeating) group.

          Reply

  8. […] is about to overturned (though they wouldn’t know that since they didn’t cover the recent hearing) and their rationale for seeing progress is not some detailed examination of the changes but rather […]

    Reply

  9. […] January 28, 2014 a three-judge panel held a hearing in Berg v. Christie (Berg) which challenged whether the state had the right to summarily eliminate cost-of-living […]

    Reply

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