I expect to comment on several aspects of the Burgos opinion (including a fairly obvious point that the lawyers for the union seem not to have made) but, for now, some raw excerpts for you to comment on:
Justice LaVecchia for the majority (5)
The individual members of the public pension systems, by their public service, earned this delayed part of their compensation. That those men and women must be paid their pension benefits when due is not in question in this matter.
Although plaintiffs correctly assert that a promise was made by the legislative and executive branches when enacting Chapter 78, and morally their argument is unassailable, we conclude that Chapter 78 could not create the type of legally enforceable contract that plaintiffs argue, and the trial court found, is entitled to protection under the Contracts Clauses of either the State or Federal Constitutions. The Debt Limitation Clause of the State Constitution interdicts the creation, in this manner, of a legally binding enforceable contract compelling multi-year financial payments in the sizable amounts called for by Chapter 78.
We therefore hold that the Legislature and Governor were without authority to enact an enforceable and legally binding long-term financial agreement through this statute.
We conclude that the Legislature and Governor clearly expressed an intent that Chapter 78 create a “contract right” to timely and recurring ARC payments to reduce the unfunded liability of the pension funds to safe levels. But, that conclusion does not address the question of authority to do so.
The decisions in Lonegan I and Lonegan II distilled the animating principle applied throughout those decisions: the State cannot by contract or statute create a binding and legally enforceable financial obligation above a certain amount that applies year to year without voter approval.
In light of the Debt Limitation Clause’s constitutional command, we hold that the contract rights set forth in Chapter 78 did not create a legally binding financial contract enforceable against the State.
Voter approval is required to render this a legally enforceable contractual agreement compelling appropriations of this size covering succeeding fiscal years; otherwise, this agreement is enforceable only as an agreement that is subject to appropriation, which under the Appropriations Clause renders it subject to the annual budgetary appropriations process. In that process, the payment may not be compelled by the Judiciary.
Because of the importance of maintaining the soundness of the pension funds, the loss of public trust due to the broken promises made though Chapter 78’s enactment is staggering. We recognize that the present level of the pension systems’ funding is of increasing concern, as does the dissent. But this constitutional controversy has been brought to the Judiciary’s doorstep, and our obligation is to enforce the State Constitution’s limitations on legislative power. The hyperbole of the dissent is no replacement for legal precedent, and it does not nullify state constitutional law interdicting the formation of the so-called binding contractual right asserted by plaintiffs. Our State Constitution compels the declaration that there is no valid contractual right under Chapter 78 that provides the basis for a contract impairment analysis under
either the State or Federal Constitutions.
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 this 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.
Justice Albin for the minority (him and Chief Justice Rabner)
Today, the majority strikes down a law — Chapter 78, L.2011, c. 78 — vaunted by the Governor and Legislature as the solution to the State’s pension crisis. The decision strikes down the promise made to hundreds of thousands of public workers by the political branches of government that deferred wages earned for years of service would be funded during their retirement. The decision unfairly requires public workers to uphold their end of the law’s bargain — increased weekly deductions from their paychecks to fund their future pensions — while allowing the State to slip from its binding commitment to make commensurate contributions. Thus, public workers continue to pay into a system on its way to insolvency.
Never before, until today, has the Debt Limitation Clause been applied to the ordinary operating expenses of government, such as deferred compensation earned by public workers and payable as pension benefits. Indeed, this Court previously held that a statute requiring the State to make annual contributions to a pension fund is not a debt within the intendment of the Debt Limitation Clause. Moreover, this Court has held that the Appropriations Clause cannot stand as a barrier to the enforcement of constitutional rights. In short, the majority’s contention that the Governor and Legislature’s contract with public workers is unenforceable under state law has no contemporary legal support.
Even if enforcement of the contractual rights embedded in Chapter 78 were barred by the majority’s interpretation of the New Jersey Constitution’s Debt Limitation and Appropriations Clauses, those rights would be enforceable under the Federal Constitution’s Contracts Clause, which was intended to prevent precisely what occurred here — a State destroying a contract of its own making. Rights protected by the Federal Constitution cannot be defeated by a novel interpretation or reconfiguration of state contract law.
The majority’s decision will have far-reaching, negative consequences. The majority has declared that it will not enforce a statute intended to stem decades of political dysfunction that has resulted in the balancing of budgets on the backs of public workers. The majority has concluded that it will not uphold any law that the Governor and Legislature pass that is intended to bind the political branches to funding a pension system on which public workers relied when entering public service. The majority states that the rights contractually promised by the Legislature require voter approval. However, the Federal Contracts Clause was expected to protect contractual rights from majority rule. The majority’s cheery assurance that “there is no question that individual members of the public pension systems are entitled to [the] delayed part of their compensation upon retirement,” runs counter to its constitutional analysis that the political branches cannot be compelled to fund the pension system. The dismal logic of the majority’s decision is that the political branches, in accordance with the State Constitution, can let the pension fund run dry and leave public service workers pauperized in their retirement. The public workers, now left without an enforceable legal right to funding of wages they have earned, are not strangers to us. They are the police officers who protect our citizens and neighborhoods from violent crime; the firefighters who enter burning homes to save lives and salvage property; the teachers who educate our children; the prosecutors, public defenders, and judges, and their staffs, who operate our system of justice; the crews who pave our roads and recycle our waste; and the myriad other workers who, in their unheralded ways, improve the quality of life for almost nine million people in New Jersey and allow State and local governments to operate. Unlike the majority, I believe public workers have protectable contractual rights under the United States Constitution — as the Legislature and Governor intended in enacting Chapter 78. Chapter 78 was not an aspirational or moral promise, but a solemn contract, which, once made, is binding on the State and cannot be nullified without offending the Federal Constitution’s Contracts Clause. I therefore respectfully dissent.
The “non-forfeitable right” to receive one’s deferred wages is a hollow right if there is insufficient money in the pension fund to pay those wages.
Even if the majority were correct about its interpretation of the Debt Limitation and Appropriations Clauses, state law must bow to rights, such as contractual rights, protected by the United States Constitution. Article VI, Clause 2 of the Federal Constitution, known as the Supremacy Clause, provides: “This Constitution, and the Laws of the United States . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” The Federal Contracts Clause forbids precisely what the State did in this case — legislatively impairing the contractual rights conferred on public workers by Chapter 78.
The majority’s novel and strained interpretation of our State Constitution cannot defeat the federal rights of public workers in this case. The United States Supreme Court has held that although it will “accord respectful consideration and great weight to the views of the State’s highest court,” it will not permit a statutory interpretation that renders a “constitutional mandate . . . a dead letter.” Thus, the Supreme Court will appraise for itself “the statutes of the State and the decisions of its courts” to determine “whether a contract was made, . . . its terms and conditions, and whether the State has, by later legislation, impaired its obligation.” “The question whether a contract was made is a federal question for purposes of Contract Clause analysis and whether it turns on issues of general or purely local law, we can not surrender the duty to exercise our own judgment.” stating that when court “is asked to invalidate a state statute” on ground that it violates Federal Contracts Clause, “the existence of the contract and the nature and extent of its obligation become federal questions . . . and for such purposes finality cannot be accorded to the views of a state court”.
The majority pretends that it is not “declaring Chapter 78 unconstitutional” and that “Chapter 78 remains in effect, as interpreted, unless the Legislature chooses to modify it.” Words, however, matter. As a result of the majority’s decision, the State’s contribution to the pension system is no longer binding, but merely optional.