Redefining A Jersey Contract

Once this was good enough:
.

.
But these days, after reviewing the pension disclosure information (starting on page I-52) from the Official Statement for the latest bond sale by the state of New Jersey, getting it in writing is not even good enough.

The fourth paragraph on page I-64 reads:


The 2011 Pension and Health Benefit Reform Legislation contains a provision stating that members of the Pension Plans now have a contractual right to the annual required contribution made by the State and local participating employers and failure by the State and local employers to make annual required contributions is deemed an impairment of the contractual right of each member. This language may limit the State’s ability to reduce or limit pension contributions in response to future budgetary constraints. Notwithstanding the foregoing, the State’s contributions are subject to annual appropriation by the State Legislature.

“may limit”!  New Jersey passes a law that incorporates a contractual obligation and here they are warning that there is a possibility they may have to obey that law?

Keep in mind that this is included in what is basically a loan application New Jersey is submitting.

If you apply for a mortgage and disclose that you have a car loan outstanding that you may have to pay back if you feel like it how would that bank judge your willingness to honor any contract you sign with them?

7 responses to this post.

  1. Posted by Tough Love on November 27, 2014 at 4:46 pm

    It’s pretty sad … for NJ TAXPAYERS* …. that the Public Sector Unions are so in control of our Union-bought-off Legislators, that such problematic (contractual) language must be added to agreements to in order to get approved eminently reasonable, necessary, and VERY minor (with the exception of the COLA suspension that looks like it will be reversed in the Courts) pension changes.

    * And in the end-game (only 3-5 years away), for retires and current actives when their promised pensions are materially reduced.

    .

    Reply

  2. Posted by Eric on November 27, 2014 at 7:26 pm

    Tough Love:
    John’s point has nothing to do with public sector unions. He is stating that NJ has become a Banana Republic in that it may choose not to follow its own laws with impunity and without any consequence. He states that whomever would loan this state any money is a fool. Any contract it signs is meaningless. It need only be followed if some politician deems it advantageous for him or herself.
    The state’s court system is broken beyond repair in fear of reprisals.
    I am merely stating the obvious to all who have a half of a brain or more.
    Eric

    Reply

    • Posted by Tough Love on November 28, 2014 at 12:26 am

      Quoting … ” He states that whomever would loan this state any money is a fool. ”

      I agree. Our elected Officials certainly NOT be trusted.

      Reply

  3. Executory contracts (promise made, not yet performed) are routinely thrown out by bankruptcy judges to give the debtor a “fresh start”. Why there is this perspective that a contract in which the state or a political subdivision is somehow entitled to a higher degree of protection, when a fresh start is sorely needed, is beyond me. Even under the state and federal constitution, both of which “forbid” the impairment of contracts by legislation, such action is permitted so long as it is in furtherance of a rational state interest (I.e,, continued economic viability).

    I can see why those with a vested interest in the old system would cling to the past, but why a pension specialist?

    Reply

  4. Posted by Javagold on November 29, 2014 at 6:20 pm

    When things get serious , it’s OK to lie. It’s the corrupt cesspool New Jersey way. (But its coming to an end very very soon.)

    Reply

  5. Posted by Tough Love on November 30, 2014 at 8:32 pm

    Anyone who seeks to see NJ’s future (quite close), can read about it here:

    http://online.wsj.com/articles/illinoiss-pension-absurdity-1417219755

    Be sure to read the comments as well as the article … quite enlightening

    Reply

    • Posted by Tough Love on November 30, 2014 at 10:37 pm

      Google the article’s title, then click on the 1-st item shown and you’ll get the FULL article w/o being a WSJ subscriber.

      Reply

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