Bringing NJ Pension Payment Case to SCOTUS

According to published reports it is now $4 billion that New Jersey would need to come up with:

6/30/14: .9 billion (1.6 due – .7 deposited)
6/30/15: 1.3 billion (2.2 due – .7 deposited + .2 bonus)
6/30/16: $1.8 billion (3.1 due – 1.3 budgeted)

were the Supreme Court of the United States to force the state to honor contracts.

The odds are long that the Court will even hear the case but the petition makes for some interesting reading:

This Court held in U.S. Trust Co. of New York v. New Jersey, 431 U.S. 1 (1977), and Anderson ex rel. Brand v. Indiana, 303 U.S. 95 (1938), that a statute constitutes a contract when the language and circumstances evince a legislative intent to create private rights of a contractual nature, and that the federal Contract Clause limits the power of the States to modify or disregard their own contracts. In New Jersey, the Legislature and Governor enacted a law that expressly created a contractual right in its public pension system participants to requisite annual payments to the pension funds from the State. After several years of compliance, the State reneged on its contractual obligation to make the requisite payment. Acceding to this failure to pay, the Supreme Court of New Jersey decided that the legislative and executive branches did not have the authority to create a contractual right even by clear and unmistakable language, thereby precluding the application and protection of the federal Contract Clause to the participants in the pension systems (page i)

The New Jersey Supreme Court, in an effort to avoid the political difficulty of enforcing the federal Contract Clause, has once again eviscerated that Clause as it applies to multi-year contracts entered into by the State. (page 2)

The New Jersey Supreme Court has interpreted its Constitution in a novel and unique fashion so as to prohibit its Legislature from forming any multi- year fiscal contracts binding under the federal Contract Clause, even when the Legislature unmistakably intended to form a contract. Grounding its decision on two constitutional provisions common to most state constitutions, this interpretation strips the Legislature of the capacity to make con- tracts, which this Court has “held to be ‘of the essence of sovereignty’ itself.” Under the New Jersey Supreme Court’s decision, even an unmistakable contract from the State of New Jersey becomes a hollow promise with no rights of enforcement. (page 14)

Despite two centuries of precedent, the New Jersey Supreme Court opined that common provisions found in most state constitutions since the mid-19th century, the Debt Limitation and Appropriations Clauses, supersede and prevent the application and enforcement of the federal Contract Clause. Because of these common state constitutional provisions, the court below held that “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.” App. 24a. This singular construction of common constitutional clauses precludes the State from exercising its sovereign authority to create or enter into enforceable multi-year contracts that require or expressly promise a State appropriation—even common contracts such as leases or purchases of supplies. As a result of the decision of the New Jersey Supreme Court, there are now no enforceable contracts requiring appropriations to which the State of New Jersey is a party absent voter approval, and any that were purportedly created are void ab initio.  Accordingly, there is no judicial enforcement of any clear commitment by the political branches to the creation of a contract right (pages 16 – 17)

Not surprisingly, the New Jersey Supreme Court decision stands alone in allowing these common constitutional provisions to bar the formation of any contractual rights. Review and reversal of the decision of the New Jersey Supreme Court is required in order to prevent other states from following the lead of New Jersey’s highest court by relying on the debt limitation and fiscal clauses in their respective constitutions to repudiate their contracts, and to protect the contract rights of the hundreds of thousands of participants in the state pension systems who reasonably relied upon a contract that even the decision below does not dispute was unmistakably intended to grant them contractual rights. (page 17)

This Court should grant certiorari because the decision below renders the Contract Clause a nullity in New Jersey, a result that this Court has never allowed in so sweeping a fashion, and to avoid the New Jersey Supreme Court decision becoming a road map for other states to interpret the parallel provisions of their constitutions to render the Contract Clause a dead letter. (page 19)

The New Jersey Supreme Court has made clear that the State has long exceeded the amount of debt permissible without voter approval. See Bulman v. Mc- Crane, 312 A.2d 857, 869 (N.J. 1973). Thus, any and all fiscal “contracts” create a “debt” subject to the strictures of the Debt Limitation Clause, and voter approval is a necessary prerequisite to enter into any binding multi-year contract requiring an appropriation— whether to lease a building, order pencils for state offices, or pay off previously existing pension obligations incurred for services rendered by public employees.3 It is no exaggeration to say, and indeed the Supreme Court of New Jersey acknowledges, that under the decision below, the Legislature lacks the au- thority to create any multi-year fiscal contractual right. There are now no enforceable contracts requiring annual appropriations to which the State of New Jersey is a party absent voter approval, and any that were purportedly created are void ab initio. (pages 24-5)

 

 

24 responses to this post.

  1. Posted by Tough Love on September 9, 2015 at 10:26 am

    While Public Sector pension plan assets shortfalls CAUSED BY grossly excessive “generosity”, the CONSEQUENCE of which has been the impossibility to fully fund these “promises” is distressing enough (likely leaving taxpayers having to fund at least PART of this unjust PAST Service excess), what bother me MORE (and which is the primary reason for my strong advocacy to reform Public Sector pensions), is the difficulty (be it Constitutional, contractual, Regulatory, case law, or simply a lack of Political guts & will) in ENDING (i.e. freezing) these undeniably unnecessary, unjust, unfair (to Taxpayers), unaffordable, and grossly excessive (by any reasonable metric when compared to those of similarly situated Private Sector workers) Defined Benefit Plans for the FUTURE Service of all CURRENT Public Sector workers.

    THAT must be the focus of pension reformers, because without THAT, we have really accomplished nothing.

    Reply

  2. Posted by Anonymous on September 9, 2015 at 10:33 am

    No TL…. You were in fact correct. They are necessary.

    Reply

  3. Posted by S Moderation Douglas is Wrong Again on September 9, 2015 at 1:39 pm

    Stick a fork in both NJ and IL, because they are finished. Done.

    We are heading into a bear market where investment returns will be in the negative to 5% range, and that will seal the deal for these public pension scams.

    Public pensions MUST be paid as you go. Making someone today pay for a pension for work rendered 30 years ago is a crime, morally and ethically.

    Reply

    • Posted by skip3house on September 9, 2015 at 2:36 pm

      Agree, said many times before.

      Reply

    • Posted by Tough Love on September 9, 2015 at 2:38 pm

      Quoting …”Public pensions MUST be paid as you go.”

      Yes, via Defined Contribution, NOT Defined Benefit Plans which ALWAYS wind up screwing the Taxpayers.

      Reply

      • Posted by lukeu on September 9, 2015 at 2:56 pm

        Wah, wah, wah, wah. Just keep up the whining. You are wasting your breath. It doesn’t matter what you think or say. whatever will be will be. whether the courts decide to act as protectors of justice or merely pawns of the politicians there is nothing you or I say that is going to change it. whether you demand changes or not it will not matter at all what you think.

        Reply

        • Posted by Tough Love on September 9, 2015 at 3:51 pm

          Quoting ….”It doesn’t matter what you think or say. whatever will be will be. ”

          That’s likely correct ….. but YOU (likely being a Public Sector worker or retiree) certainly will NOT like the end-game.

          Reply

          • Posted by lukeu on September 9, 2015 at 3:58 pm

            We will see when it is all said and done. I am a patient person. I believe the ruling will favor the pensioners if it is based solely on law and not politics.

        • I have read with great interest the petition filed with the SCOTUS. It is very well-written and compelling. I believe the Justices will hear the case and decide in favor of the PWs. (:

          Reply

          • Posted by lukeu on September 9, 2015 at 3:59 pm

            I agree. it is well thought out.

          • Posted by Tough Love on September 9, 2015 at 3:59 pm

            Too bad we cannot make a wager on that while keeping my anonymity.

          • Posted by PatB on September 9, 2015 at 4:23 pm

            Come out of the pension closet TL! People might actually respect you for doing it.

          • Posted by Tough Love on September 9, 2015 at 4:29 pm

            So what’s your full name Pat, and where do you live and who is your emplyer?

          • Posted by PatB on September 9, 2015 at 11:14 pm

            Good challenge. I told you my name in a previous post where my arguments went nowhere, so I wont repeat it again here. I will honor you desire to be anonymous, and you can enjoy the respect of the six-odd members here that support you. Many of the rest of us find your arguments repetitive and pitiful, and you do a disservice to your cause by being so spiteful that you lose credibility.

          • Posted by Tough Love on September 9, 2015 at 11:28 pm

            PatB,

            Repetitive …. perhaps.

            Pitiful …. certainly the opposite (enlightening comes to mind).
            —————————-

            Spiteful only in the minds of the greedy. I ALWAYS advocate for EQUAL “Total Compensation” (pay + pensions + benefits) in reasonably comparable Public/Private Sector jobs. You are confusing spite with strong advocacy and little tolerance for intention BS.

          • Posted by S Moderation Douglas on September 10, 2015 at 7:28 am

            Quoting Tough Love:

            ” I ALWAYS advocate for EQUAL “Total Compensation”

            You never answered the question yesterday:

            One….of several, reasons for the aggregate compensation “advantage” (the infamous 23%) is the much higher representation of women and blacks in the public sector, cohorts that are notoriously “under”paid in the private sector. In search of “equal”, are we to lower the pay/benefits for the women and blacks in public work? Or keep compensation the same, but reduce the relative numbers of these public workers?

            http://newamericamedia.org/2011/03/who-are-those-evil-public-workers-blacks-and-women.php
            ————————————————————–
            Got a problem with EQUAL?

          • Posted by S Moderation Douglas on September 10, 2015 at 7:49 am

            According to the American Enterprise Institute,

            Characteristics of private sector and state government employee:

            Female private sector: 41% …..public sector: 58%
            Black private sector: 9% …..public sector: 14%

            The public sector is also older, on average, and more likely to be married. It’s just not fair.

          • Posted by PatB on September 10, 2015 at 10:20 am

            For the record, 2013 NJ workforce profile: women 56.2%, men 43.7%; white 55.4%, other 44.6% (black 30.4%). 43% have college degrees. Interesting reading http://www.state.nj.us/csc/about/publications/workforce/

          • Posted by PatB on September 10, 2015 at 10:27 am

            Above link is for nj state worker stats, not general population.

  4. Posted by george on September 12, 2015 at 6:01 pm

    “Legislature lacks the au- thority to create any multi-year fiscal contractual right.”

    So why weren’t multi year contracts challenged in the past?

    Reply

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