New Jersey unions sue over Gov. Christie's pension funding plan

June 9 Mon Jun 9, 2014 2:45pm EDT

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June 9 (Reuters) - Teachers, police and firefighters in New Jersey have gone to court in an attempt to block Governor Chris Christie's plan to slash the state's contributions to its public retirement system.

Christie proposed the cuts on May 20 as a solution to the $2.7 billion state revenue shortfall projected through fiscal 2015. Now Christie, a possible 2016 Republican presidential nominee, is facing a potential budget crisis and a legal battle at the same time.

In the lawsuit filed in New Jersey Superior Court in Mercer County late on Friday, the unions said that Christie's move to reduce pension contributions to $1.38 billion from $3.85 billion through fiscal 2015 is a violation of employees' contract rights under both the state and federal constitutions.

Through lead plaintiff the New Jersey Education Association, the unions want the court to force Christie to restore the originally budgeted $1.6 billion contribution for this fiscal year, and to prevent cuts in future years.

The employees also said that the reductions violate a 2011 bi-partisan pension reform law that Christie ushered in with the Democrat-led legislature.

That reform required the state to make stepped-up pension contributions every year until reaching $4.8 billion in fiscal 2018, in order to make up for years of underfunding in the past.

Under the new law, employees began paying more toward their pensions and cost of living adjustments were suspended.

Christie began pushing for additional reforms in February, but he has yet to outline any specific proposals. He slashed pension contributions in lieu of cutting funding for education, hospitals, and social service programs, he said.

New Jersey is fast approaching its budget deadline on June 30, the last day of the fiscal year, when legislators and the governor have to agree on a budget for next year.

The gaping revenue shortfall is due in part to the state's slow recovery since the recession, to residents shifting income into previous years to offset federal rate increases that hit in 2013, and to revenue estimates from Christie's office that were too optimistic for three consecutive years.

The budget crunch, among other factors, has helped drop New Jersey's credit rating to among the lowest of all U.S. states, while exposing the fragile state of the economic rebound Christie hoped to make his legacy.

Friday's lawsuit, which was also joined by municipal employees and retirees, is the second legal challenge to Christie's proposal after state troopers sued on June 4. A hearing in that case is scheduled for June 25, just days before the budget deadline. The cases could be heard together.

The case is New Jersey Education Association, et al v State of New Jersey, et al in New Jersey Superior Court, Mercer County (case number not yet available) (Reporting by Hilary Russ in New York; Editing by Grant McCool)

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