As part of NJTV’s coverage of the New Jersey Supreme Court decision in the pension payment case they interviewed former Supreme Court Justice Peter Verniero:
But there were two aspects of the ruling that nobody seems to have picked up on:
OK to create debt but not to pay it
If the Debt Limitation Clause applies and amounts in excess of 1% of the state budget need voter approval then why does it apply to those who have to make the payment and not to those creating the debt? That $1.6 billion that is not being deposited this year is theoretically a debt that future taxpayers will have to pay, with interest. But with this ruling those future taxpayers will also be able to renege on that payment. So who then IS going to pay it?
That $1.6 billion was a debt to the pension funds but it was also a debt to individuals which raises more questions:
- Would this ruling have been different if the plan were a Defined Contribution plan where each participant were promised an annual contribution of 5% of their salary which, for all participants, would total over the 1% threshold?
- What about salaries? If there is a pay period where total state payroll exceeds the 1% threshold then do all the payments become subject to either voter discretion or legislative appropriation if the checks are not physically cut in the year the service is provided?
- What about bonds and all other state expenses? Can they be bundled, delayed, and shirked? Could, for example, the state stop paying those Whitman Pension Obligation Bonds? If they did and bondholders went to court then can the state now cite Burgos?