The New Jersey Supreme Court is expected to decide on Thursday whether the state’s 2011 public pension reform improperly froze retirees’ cost-of-living increases, a ruling that could cost the state billions of dollars in new liabilities.
Governor Chris Christie’s administration suspended the so-called COLA payments, which are tied to inflation, in 2011 as part of bi-partisan reforms aimed at curtailing the ballooning cost of public pensions.
Retired prosecutors challenged the provision, saying they have a contractual right to the cost-of-living adjustments, just as they do to their base pension payments.
If the retirees prevail, New Jersey’s already underfunded pension system could be hit with another $17.5 billion of liabilities, according to The Record, a Bergen County newspaper, which cited a court filing.
New Jersey’s roughly $83 billion pension system is as poorly funded as it has ever been. The state’s aggregate funded ratio for all plans is 48.6 percent. [nL2N16Q1R2]
When including local government contributions to two of the bigger funds, the overall system appears somewhat better funded at 59.5 percent, which is still far below the baseline 80 percent level considered healthy.
The court is expected to release its decision in the case, called Berg v. Christie, on Thursday, according to the court system’s website.
(Reporting by Hilary Russ; Editing by Chris Reese and Paul Simao)